Federal Policy and Private Schools: 5 Steps to Navigate Change
While most private and independent schools are not heavily reliant on federal funding, the ever-shifting landscape of federal policies and priorities can create significant uncertainty for any organization.
Due to the current ambiguity around government funding—including the recent cuts to the Department of Education and impoundment of Elementary and Secondary Education Act (ESEA) Title funds—schools are looking for strategies to navigate shifting tides. Here we hope to offer an action plan for approaching the uncertainty and practical steps to move forward.
Step 1: Stay Up to Date on Policy Changes
Funding uncertainty is not new to private and independent schools. Many already struggle to bridge the gap between net tuition revenue and the cost to educate students. But changes in government policies can directly and indirectly impact your programs, operations, and financial sustainability.
Why this is important
In a survey conducted by the National Association of Independent Schools (NAIS) earlier this year, 29% of CFOs reported families at their schools had a change in employment status due to federal actions. That meant more requests for financial aid and potentially lower enrollment numbers for the coming fall.
Additionally, many private schools use federal funds for free and reduced lunch programs, accessibility initiatives, after-school activities, professional development, and more. What will you do without that funding?
Understanding what is happening—as best you can—is crucial.
How to do it
To say that things are constantly changing is an understatement. Stay in contact with your legal counsel and public policy experts to help identify areas at risk. Lean into your industry resources and associations, many of which are tracking policy changes as they happen. Here are some examples:
- EducationCounsel
- National Council of Nonprofits
- The Council for Advancement and Support of Education (CASE)
- National Catholic Educational Association (NCEA)
- National Association of Independent Schools (NAIS)
- Prizmah: Center for Jewish Day Schools
Track both state and federal policy shifts.
Some federal and state policies and programs are interconnected. If you participate in a publicly funded school choice program, be sure you fully understand the requirements and monitor any changes to ensure they do not compromise your school’s mission and operations.
Step 2: Inform Stakeholders and Drive Support
To navigate changes to federal and state funding, you need to not only understand what’s happening and how it will affect your school, but also how to reassure stakeholders of your ongoing commitment to your mission.
Why this is important
Public funding may only constitute a small portion of your budget, but it could mean the difference between having programs and accommodations or not. Were you counting on ESEA funds to pay for learning specialist training? For an English-learner program? How will you offer those services without those funds?
Keeping your community informed through frequent updates can make it easier to ask for additional support. The updates can be as basic as, “We’re closely watching the news cycle,” or as direct as “Critical funding for xxxx program is in jeopardy and we need your help.”
How to do it
- Identify what federal and state funds your school accepts and how they are used. Look at all financial support you get through your local education agency (LEA), school choice funds, any government grants, and all Title funding. Assess how critical those funds are to school operations.
- Understand which school programs could pose risk. Funding and policy changes have had significant impact in other sectors, particularly those with programs focused on international students, English learners, and Diversity, Equity, and Inclusion (DEI)—initiatives also important to many K–12 schools and their students.
- Evaluate how those programs align with your school’s mission. For example, if international student enrollment and DEI are an important part of your school’s core mission, start by creating clear outcomes reporting on those initiatives. Highlight who they serve, how many people they reach, and the impact over time. Draw a direct line to the community and your mission.
- Mobilize your stakeholders. Share information with donors, alums, current families, and key community members about what’s happening and the potential impact on your programs. Work with your communications team to develop a proactive messaging framework and talking points to help everyone focus on the facts. Ask your network for their support, both financial and as advocates within your community and with your elected officials.
Step 3: Assess and Protect Existing Funding
This is the time to assess any current federal and state grants, review your grant reporting, and confirm your internal controls. Do the same for any grants, scholarships, endowments, or other restricted funds you receive from private foundations, community organizations, and other entities. They may be adjusting their practices to accommodate government policy changes, too.
Why is this important
When you are crystal clear on the status of your current revenue sources, you can more accurately pinpoint risks, forecast challenges, identify possible program changes, and take steps to mitigate the risks to your school.
How to do it
- Assess your grant or contract language to identify which programs could be impacted. For each source, estimate how much of the total grant or contract might be affected and work with your advancement and business office teams to document the impact on school operations. Understand the terms and any termination clauses. Go over every criterion to verify your reports mirror the requirements exactly. Optimize drawdowns.
- Provide detailed impact data and reporting to your funders. Be in regular contact with them to ensure they understand how the funds are used and how you comply with their requirements. If you are a subrecipient, be in close contact with the pass-through organization to understand their timing, priorities, and challenges.
- Consult with your legal counsel to understand your school’s rights and applicable appeals processes should your funding be terminated.
Step 4: Prepare for Financial Challenges
Funding and policy priorities can change. Enrollment shifts have even greater impact since tuition is the primary revenue source in private and independent schools. It’s important to be prepared with a data-driven plan to address both short-term and long-term financial sustainability.
Why is this important
By doing as much as you can to get in front of cash flow challenges, you mitigate how much outside factors will affect your long-term strategy.
How to do it
- Run and review your monthly reports to understand cash flow and burn rates. Analyze your operating reserves and operating reserve policy to think through what can be used for short-term operations and gap funding.
- Run budget scenarios to understand your short and long-term challenges. Once you know what your needs are, explore short-term funding strategies, such as loans, lines of credit, or renting out school facilities when they aren’t in use.
- Review all your accounts receivable and payable to find opportunities to lower costs and streamline processes.
- Optimize your billing process and tuition collection to receive and process income quickly
- Streamline bill-pay and automation strategies and secure purchasing and expense approval processes so there are no surprise invoices.
- Work with your fundraising team to bring in outstanding pledges.
- Eliminate vendor redundancies. If two departments are using two different tools for the same purpose or if your teams are adding to your tech stack without making the most of existing software, consolidate.
- Where applicable, institute or review spending limits for purchase types. Consider using purchase cards to get immediate information on what’s spent and to have the ability to set limits per card holder. Incorporate AP automation and digital payments to reduce the costs of paper checks.
- Document everything for audits. Make sure you update your internal controls and processes to reflect staff changes, program shifts, and process updates.
- Update forecasts and budgets to reflect any changes. Share information with your board and across school offices so everyone is clear on the path forward.
Step 5: Explore Non-Traditional Revenue Sources
Revenue diversity is key to financial sustainability. From geopolitical uncertainty to rising operating costs and increased demand for tuition discounting, schools must explore new ways to drive revenue. Now is the time to rekindle relationships, dust off your CRM, and prepare your school to think beyond the traditional tuition-based model.
Why is this important
It’s time to flex your diversification muscles. The federal policy shifts are just another indicator of how truly independent private schools need to be. Look for other income opportunities in addition to enrollment and fundraising. Even with small budgets and limited staff, you can get started with a few small changes.
How to do it
- Reexamine your tuition structure. Is it inadvertently shrinking your applicant pool? Some schools have found that decreasing tuition drives more applications and thus grows revenue. Read more about that in this white paper.
- Conduct market research to determine demand for programs and services. Does your target demographic enjoy mountain biking or horseback riding? Is there demand for skills-based training for auto technicians or software engineers? Could you offer these as auxiliary programs or partner with an organization that does?
- Leave no stone unturned looking for diversification options. Consider renting out space when your students aren’t using it or selling equipment you don’t need. Implement an on-demand merchandise option to encourage students, families, alums, and other supporters to purchase school swag. This also eliminates the need to purchase and store inventory at the school!
- Use prospect insights within your fundraising CRM to identify current donors who have the potential to provide additional support. Reach out to local institutions, private grant funders, and corporate partners—especially those with employees’ children attending your school.
- Build crowdfunding capacity. Understand what it takes to run a successful peer-to-peer fundraising campaign and find the influencers on your campus, including staff and students.
- Look to other schools in your network for new ideas to support your students.
Before embarking on new initiatives, ensure you have all the data you need to make informed decisions. First, evaluate your existing resources. Then consider conducting market studies, student and alum surveys, and in-depth process analysis to identify opportunities for growth and improvement.
Mitigating Risk and Staying Resilient
As we navigate the uncertainties of federal funding, it is crucial for K–12 institutions to remain proactive and adaptive. By leveraging community support, exploring alternative funding sources, and optimizing financial processes, private and independent schools can continue to provide high-quality education to all students.
