Leading Our Schools Through Uncertain Economic Times Mid-Atlantic Christian School Association (MACSA) April 2009 Dr. Barrett Mosbacker All Rights Reserved
8.5% March Yearly Job Loss Worst Since 1945
Aprox. $71 Billion in housing wealth will be directly destroyed through the process of foreclosures. More than $32 Billion in housing wealth will be indirectly destroyed by the spillover effect of foreclosures, which reduce the value of neighboring properties. States and local governments will lose more than $917 Million in property tax revenue. There will be approximately 1.3 million foreclosures and a loss of housing wealth of more than $103 billion through the end of 2009.
Many of our families will experience job losses for one or both spouses • Many families will receive little or no pay increases, some will experience reductions • Employers are shifting health insurance premiums to employees and increasing co-pays thus reducing disposable income • Families have lost wealth making paying for college more difficult or impossible • Families are worried about retirement • Grandparents may have less disposable income to assist with tuition • Many families will focus on reducing debt and saving money Impact on Our Families Families Await Sharpest Tuition Increases in Years While families are finalizing college plans, they know it's probably going to cost more than they had planned. Even in good economic times, states and colleges have largely failed to hold tuition increases in line with inflation. Now as the slumping economy forces states to slash spending, students can expect the sharpest increases in years.
A bitter brew for Starbucks: As American consumers rein in spending on non-essentials, coffee-shop operator posts weaker-than-expected earnings
The “law of demand”: the higher the price of a good, the less consumers will purchase … Goods that are more essential to everyday living, and that have fewer substitutes, typically have lower elasticities … Goods with many substitutes, or that are not essential, have higher elasticities. Patrick L. Anderson, Richard McLellan, Joseph P. Overton, & Wolfram, G. (1997). The universal tuition tax credit: a proposal to advance parental choice in education, Midland, MI: Mackinac Center for Public Policy. P. 65-66
Let’s Walk Through This • Point Elasticity = (% change in Quantity) / (% change in Price) • Point Elasticity = (∆Q/Q)/(∆P/P) • Point Elasticity = (P ∆Q) / (Q ∆P) • Point Elasticity = (P/Q)(∆Q/∆P) • Note: In the limit (or "at the margin"), "(∆Q/∆P)" is the derivative of the demand function with respect to P. "Q" means 'Quantity' and "P" means Price
Variables Affecting Elasticity • Substitutes: Themore substitutes, the higher the elasticity, as people can easily switch from one good to another if a minor price change is made (How many good options for education do parents have in your local community?) What about distance learning? • Percentage of income: The higher the percentage that the product's price is of the consumer’s income, the higher the elasticity, as people will be careful with purchasing the good because of its cost What percentage of NET DESPOSAL income is the TOTAL COST for your school for two children for your average family? • Duration: The longer a price change holds, the higher the elasticity, as more and more people will stop demanding the goods (i.e. if you go to the supermarket and find that blueberries have doubled in price, you'll buy it because you need it this time, but next time you won't, unless the price drops back down again) Tuition and Fees never go down. This increases elasticity • Breadth of definition: The broader the definition, the lower the elasticity. For example, Company X's fried dumplings will have a relatively high elasticity, where as food in general will have an extremely low elasticity (see Substitutes, Necessity above) Presbyterian and Reformed Education (higher elasticity) Christian Education (high elasticity) Education (lower elasticity) • Necessity: The more necessary a good is, the lower the elasticity, as people will attempt to buy it no matter the price, such as the case of insulin for those that need it. Unfortunately, few consider a Christian education a necessity—it is a COMMODITY.
Remember, if your community (market place) is blessed with a large number of high quality public and private schools—and increasingly virtual schools--parents have a smorgasbord of quality educational options. If parents perceive the alternative educational options to be safe, high quality learning environments, they are more likely to consider enrollment in the Christian school to be a discretionary “luxury” purchase. THIS IS PARTICULARLY TRUE DURING AN ECONOMIC DOWNTURN. Only the most diehard adherents to a Christian philosophy of education will consider enrollment in the Christian school a necessity.
The “Christian” in Christian School Not Worth the $$ The Archdiocese of Chicago provides a compelling example of this principle. Faced with declining enrollments and a school deficit of $20 million, the Archdiocese commissioned a study to determine how to boost school enrollment. Boffetti (n.d.) reports that researchers discovered that: • Struggling schools, at the very least, needed to fill every available seat with tuition-paying students. Surprisingly, many inner-city parents, both Catholic and non-Catholic alike, did not know that Catholic education would only cost them $1,000 a year, with the diocese picking up the rest of the tab. When they learned the facts, many said they would eagerly pay to get their children out of the awful and dangerous public schools they were in. • Suburban parents were more sanguine. Parents who believed in the importance of Catholic education already sent their children to Catholic schools. The rest of the parents did not think it would be worth the added expense because they felt that their suburban public school system was at least equal to, if not better than, the Catholic schools in terms of academics and amenities[emphasis added]. In other words, the “Catholic” in Catholic education was not worth an extra $1,000 per year to them.
Impact on Private Schools … Trinity Episcopal School is one of many kindergarten-through-12th-grade private schools caught in the middle of an economic tempest: anemic endowments, dwindling donations, financially strapped parents slashing tuition from the family budget, and an exodus to suburbs with more appealing public schools where costs are lower. "The discourse has shifting from sustainability to survivability," says Myra McGovern, a spokeswoman for the National Association of Independent Schools. The association also has seen more applications from families seeking financial aid… http://online.wsj.com/article/SB123301904801417967.html
A New Competitor / A New Opportunity • Alabama, not historically known for innovation or high quality education, is leading the nation in connecting every public school in the state to onlineasynchronouscourses and synchronouscourses offered through video conferencing and other interactive technologies. • According to Drs. Horn and Christensen (authors of Disrupting Class) of the Harvard Business School, public education enrollments in online classes have skyrocketed from 45,000 in 2000 to roughly 1 million today. It is projected that by 2020 over 50% of high school classes will be available online. • The Florida Virtual School(FLVS) reflects this explosion in D.L. Founded in 1997, FLVS currently enrolls 63,675 students in grades 6-12. Enrollment is open to public, private, and home school students. FLVS offers more than 90 courses—including core subjects, world languages, electives, honors, and over 10 Advanced Placement courses.
Projected Growth • Drs. Horn and Christensen outline four reasons why distance learning will continue to grow: • Distance learning technologies will keep improving. • Distance learning provides the ability of teachers, students, and parents to select right learning pathways for differentiated learning thus customizing the education to the learning preferences and needs of each child. • The looming teacher shortage caused by the retirement of baby boomers will propel schools to move to distance learning to gain access to hard to hire teachers in math, science, and other subjects. • The cost of distance learning will fall significantly.
Projected Growth • The Sloan Consortium has issued its fifth annual state of online learning in U.S. higher education report based on responses from over 2,500 colleges and universities. Titled Online Nation: Five Years of Growth in Online Learning, some of the study’s key findings include: • Almost 3.5 million students were taking at least one online course during the fall 2006 term • Nearly twenty percent of all U.S. higher education students were taking at least one online course in the fall of 2006. • Virtually all (83 percent) institutions with online offerings expect their online enrollments to increase over the coming year.
Many of the problems faced by our schools are systemic and have existed for some time. The recession highlights and exasperates the weaknesses. The recession can be a “refining fire” for our schools. We should respond aggressively and proactively but not overreact. We must guard against being Christian fatalists using God’s sovereignty as a pretext for poor decisions , inaction, or mediocrity.
Example Source: http://blogs.edweek.org/edweek/DigitalEducation/2009/01/teacher_education_program_trie_1.html