On the “Costs” of Private Schooling

Most often, private school costs are addressed in popular media and think tank reports in the context of policy debates over tuition tax credit and voucher proposals. The typical argument is that public school students may be tuitioned out of the public system at lower cost than the operating cost of the public system to private schools which provide greater benefit. In the best of cases, authors of such reports provide reasonable publicly reported estimates of public school expenditures – because such data are readily available – and then choose estimates of private school “costs” from a handful of sources or simply propose a ballpark estimate.
In one recent example, Podgursky, Brodsky and Hauke (2008) explain how Missouri might use a tuition tax credit program to provide opportunities for children in failing urban public schools to attend private schools. The authors explain that public school spending in the urban core districts is on the order of $10,000 to $12,000 per pupil and that tuition tax credits could be used to raise funds to provide vouchers to urban public school students at a level of $5,000, yielding a 50% savings rate for each child who opts out of the public schools and takes the voucher. To support their argument that the $5,000 voucher is sufficient subsidy for private schooling, Podgursky and colleagues note: “we assume that average private school tuition is $4,000 per year, in line with estimates of the national average” (Podgursky et al., Jan 2008) The authors footnote this assertion as follows:

• For example, the U.S. Department of Education’s National Center for Education Statistics reports in Table 59 of the 2005 Digest of Education Statistics that the average national cost of elementary/secondary private school tuition is $4,689 per year. In addition, a well-cited 2003 Cato Institute study found that the average elementary tuition cost was less than $3,500 per year by looking at private schools in several major U.S. metropolitan areas. See Salisbury, David F. “What Does a Voucher Buy? A Closer Look at the Cost of Private Schools,” The Cato Institute, Policy Analysis, No. 486, August 2003

That is, the authors posit that the average private school tuition in Missouri major metropolitan areas 2008 is somewhat less than the average impartially (NCES) reported average national tuition in 2004, and similar to the average tuition reported in a Cato Institute survey of 2002-03 tuition levels in select cities nationally.
Indeed there are no easily accessible estimates of actual private school costs in St. Louis or Kansas City, Missouri. That said, the choice to recognize a voucher level of $4,000 to $5,000 as sufficient subsidy, based on the cited information is problematic at best. The use in a 2008 policy brief in Missouri of the $3,500 (Cato, 2002-03) and $4,000 (NCES, 2005) figures assumes these figures to be both (a) timeless, not subject to inflation and (b) and spaceless, insensitive to regional price variation. These are two deeply flawed assumptions.
Note that the only reference to a national average tuition of $3,500 in the Cato report comes from the report’s abstract, which cites NCES data from 1999-00 rather than the report’s own survey findings from 2002-03: “Government figures indicate that the average private elementary school tuition in the United States is less than $3,500 and the average private secondary school tuition is $6,052.” (p. 1) The $3,500 average national tuition figure has taken on almost mythical status in political and media circles and think tank reports, as evidenced by results of a Google search of the terms “private school cost” and “$3,500.” Notably, the higher secondary tuition level is rarely mentioned.
At the time of the Podgursky brief, even if the $3,500 Cato (2003) figure had been representative of Missouri urban private school tuition, that figure was already 9 years old. Beyond inflation, the National Center for Education Statistics Education Comparable Wage Index reflects that both the Kansas City and St. Louis labor markets have higher than national average labor costs, which may affect private school tuition. Indeed, the labor markets identified in the Cato report may be even higher wage labor markets, but no attempt is made to correct for regional variation or identify tuition levels in Missouri urban private schools. In simple terms, dollar values are neither spaceless nor timeless.
Cato’s own summary of city median tuition levels for primary/elementary schools and secondary schools shows considerable variation and shows that the 1999-00 NCES national average figure of $3,500 is insufficient in 2002-03 at the secondary level to meet full tuition in any city, and is only sufficient at the elementary level to meet tuition in 2 of 6 cities.

Table 1
Findings from Cato Tuition Survey
City    Median 2002-03
Tuition
New Orleans    $3,895
Houston    $4,325 primary
$6,150 secondary
Denver    $3,528 primary
$5,995 secondary
Charleston, SC    $3,153 primary
$4,056 secondary
Washington DC    $4,500 primary
$16,075 secondary
Philadelphia    $2,504 primary
$4,310 secondary
Cato, p. 5

Perhaps the best available national resource for understanding private school tuition rates and how they very by school type and location, is the Private School Survey component of the National Center for Education Statistics Schools and Staffing Survey. SASS is the source from which private school tuition averages are generated for the NCES Digest of Education Statistics. SASS is based on a sample of private schools, not all private schools, but that sample may be weighted such that calculations of mean tuition rates and teacher salaries, or other variables are representative of national or regional populations of all private schools. That said, these data do not get the level of public exposure they perhaps deserve, given the thirst for private school financial comparisons. SASS tuition data do play a role in a number of empirically rigorous analyses of the private school enrollment behavior. For example, Epple, Figlio and Romano (2004) use the SASS tuition data to evaluate income related stratification of students in private schools in metropolitan areas into “elite” (highest tuition) private schools.
Central to the analysis herein is the point that tuition levels do not indicate operating cost levels. I am far from the first author to make this acknowledgement. For example, in a cost-benefit analysis of education reform strategies, Yeh (2007) explains:

• The real social cost of educating large numbers of students in private schools (who are currently educated in public schools) is difficult to estimate for several reasons: Private school tuition figures exclude costs that are offset by corporate and noncorporate subsidies (U.S. General Accounting Office, 2001), as well as the cost of services that would be required by many students (and, by law, are currently provided by public schools, but not private schools), including transportation, free and reduced-price meals, special education, vocational education, and services for students with disabilities and limited English proficiency (Belfield, 2006; Levin, 1998; Levin & Driver, 1997).

Similarly, in an analysis of the effects of private and charter school competition on the teaching profession, Hoxby (2002) notes:

• For instance, in some metropolitan areas, up to 15 percent of the elementary student population is enrolled in private schools where tuition is about two-thirds of the schools’ per-pupil expenditure. (Typical amounts for schools with religious affiliation would be tuition of about $1,600 and expenditure of about $2,300 dollars). (Hoxby, 2002, p. 861)

Interestingly, however, Hoxby provides no citation for the ballpark figures she chooses. Yet, others stand stubbornly in denial that there exists any problem in using tuition data to represent operating costs for private schooling:

• One can also get some additional insight on the comparative costs of private and public schools by looking at the quoted tuition charged by private schools. For obvious reasons, quoted private school tuitions necessarily have a somewhat loose connection with costs. They are usually supplemented by endowments, contributions, fundraising events, in-kind contributions by parents, and below-cost wages for religious teachers and other staff. Yet, clearly these do not account for much of the observed difference between private tuition and public school costs. (Wenders, 2005, p. 223)

While unfounded and in conflict with the previous two statements, Wenders (2005) assertion is neither easily supported nor refuted with existing literature.
Why does it matter whether tuition is representative of cost or whether the size of margin between tuition and costs is 1% or 20%? Assume that a group of church subsidized private schools charges $3,500 per child in tuition, but those schools operate at a cost of $7,000 per pupil. When serving the children of the church community, parents sending their children to the school pay their tuition per child and likely also offer a tithing, perhaps equal to or greater than the difference between tuition and cost. Assuming that on average, the parent tithing is less than the margin of difference, other parishioners’ tithing and other contributions to the church and school make up the difference.
Now, assume we wish to send, on public voucher, 100 additional children to the private school, from the public system, at a voucher level that matches the full tuition level, $3,500. But, if operating costs remain at $7,000 per pupil, someone must contribute an additional $350,000 to the school to cover costs of the additional 100 students. If the students tuitioned to the school through the voucher system are both poor and non-parishioners it is unlikely that they will provide the additional resources themselves. The larger the desired voucher system – more extensive participation rates – the larger the additional philanthropy requirement becomes. This is potentially even more constraining under tuition tax credit programs which rely on philanthropy to generate the initial tuition vouchers.
To their credit, the Cato (2003) report is one of the only sources available that attempts to compile information on private school tuition rates for a multitude of schools  in specific metropolitan areas, including New Orleans; Houston; Denver; Charleston, S.C.; Washington, D.C.; and Philadelphia. Cato surveyed several hundred, primarily Catholic and other religious private schools, gathering 2002-03 tuition data, and concluded that a voucher level of $5,000 would give students access to most private schools in the cities surveyed and that “Since average per pupil spending for public schools is now $8,830, most states could offer a voucher amount even greater than $5,000 and still realize substantial savings.”  (Cato, p. 1)
The Cato report, however, suffers the central problem of asserting that private schools can take on additional students at these tuition levels and subsidize the difference via philanthropy. A select review of financial statements (IRS 990) for 2006 spending per pupil, compared with tuition levels listed in the Cato report appendix reveals the following:

• Riverside Academy in New Orleans reported tuition of $2,385 to $2,790 to Cato. Riverside Academy spent in 2006, $3,857,985 on 528 students, or $7,307 per pupil.

• Northland Christian reported tuition of $8,300 and spends $8,467. Here, tuition is closer to spending, but relatively high on the Cato list for Houston. (Houston)

• Galloway school reported tuition of $5960, but spends $8,431. (Houston)

• Westbury Christian reported $4,450 but spends about $7,059. (Houston)

• Friends Select reported $14,255 to $16,070 but spends $20,161. (Philadelphia)

• City Center Academy (a Presbyterian school) reported tuition of 3,800 but spends over $10,000, serving only about 75 students.

Private school vouchers are commonly recommended or applied at levels ranging from under $3,000 to just over $6,000, rarely higher. Podgursky (2008) and Aud (2007) each discuss Arizona tuition tax credit programs offering $4,200 to $5,000 vouchers, Florida’s A+ voucher at $4,063, Cleveland’s well-known voucher program offering $2,686 vouchers in 2004-05 and the Milwaukee voucher program offering vouchers of $6,351 per pupil in 2005-06. Invariably these voucher levels are argued by pundits to be sufficient on the basis that it is well documented and well understood that private school tuition is approximately $3,500 to $4,000 per child.
A recent policy brief on saving Catholic schooling in urban American highlights problems with undersubsidized vouchers. Hamilton, Finn and Petrilli (2008) note that:

• In Milwaukee, the city with the nation’s largest publicly funded school voucher program, enrollment is still declining in many inner-city Catholic schools. In Washington, D.C., despite federally funded vouchers for the tuition of poor, mostly non-Catholic inner city children, the Church is turning seven schools into public charters – which will be well funded, but non-religious. (p. 6)

Recall that the voucher level in Milwaukee is actually much higher than other existing publicly financed voucher policies ($6,351). Yet even at this level the voucher is insufficient for propping up the urban catholic schools.
Belfield, Levin and Schwartz (2006) elaborate on the sufficiency of voucher levels in Milwaukee. The authors note that by 2001, 40% of voucher receiving schools had more than 80% of their students on vouchers, and that the supply of providers had increased since implementation of the voucher program. But, the authors note that explanations for the increase in supply are not found by exploring the relationship between voucher revenue and costs because “Many schools report costs above the value of the voucher, and costs only weakly converge to the voucher amount” (p. 1). Again, this scenario occurs under one of the higher funded voucher models.
The primary strategy proposed by Hamilton, Finn and Petrilli (2008) for saving urban catholic schools – short of converting them to charter schools – is to scale up dramatically philanthropy among church parishioners and to refocus catholic schooling on catholic children of parishioners. Where subsidies fail to cover costs, philanthropy must fill the gap. Costs may not be reduced sufficiently to match the voucher subsidy. The authors point to recent efforts in Wichita, KS as a model:

• Catholic schooling would be free to all parishioners. To make the financials work, the bishop asked all Church members to tithe a significant portion of their salaries, which largely went into the school operations fund. Parishioners responded enthusiastically. Today, all Wichita Catholics can send their children to parochial school. Tuition is no barrier. (p. 9)

The authors point out, that among other issues in raising financial support, church members are reluctant to take on the additional public service mission of funding the non-catholic poor.

• Catholic parishioners have been willing to help to a point, but our survey shows that about six in ten Catholics now view “working with economically disadvantaged students” as the domain of public schools. (p. 8)

Stepping back somewhat from traditional voucher arguments that public taxpayer dollars should be used to partially subsidize the catholic school education of non-catholic poor urban children, Hamilton, Finn and Petrilli (2008) suggest instead that urban catholic schooling might better survive under a heavily subsidized parish tax system (strong-armed and substantial tithing) coupled with emphasis on serving burgeoning Hispanic, catholic low income populations (rather than non-catholic urban blacks, historically served in urban voucher systems like Milwaukee).

• The Church should heed Wichita’s example and embark on a serious campaign to make Catholic education affordable – even free – for all Catholics. Such an effort will be particularly significant for America’s recent Hispanic immigrants, many of whom live near urban Catholic schools with a rich history of educating children new to our shores. This means asking parishioners to dig deep. It also means being aggressive about revitalizing rundown, ill-managed parish schools with an eye to making the system as a whole as efficient and effective as possible.

The bottom line is that when vouchers cover only tuition rates or portions of tuition rates, someone must dig deep to ensure that service providers can be sustained.  Alternatively, to reduce the requirement of additional philanthropy, policymakers must have more accurate information regarding the actual costs of providing private schooling rather than average tuition rates.

(this draft excerpt is taken from forthcoming work in which I evaluate IRS tax filings of over 1,500 private schools nationally in order to provide a more thorough understanding of private school costs and how those costs vary by school type and location)