Heart to heart …….

What About the Budget?                                              Glenn Slater, Administrator
February 26, 2010

Every year in the month of December, the MCS finance committee begins looking at the budget for the coming school year. A lot of work is done to make projections and try to anticipate all that will be facing our school from a financial standpoint in the months ahead. Occasionally, I get questions about our budget and so, with this edition of “Heart to Heart,” I felt it might be good to address some of the more common questions people ask me.  Hopefully, this will clarify any ambiguity that may exist in regard to this very important component of our school. 

How is the budget put together?  Every December, a finance committee meets to begin preliminary work on the budget.  This work consists of looking at the budget from the standpoint of income and expenses.

In terms of income we do the following things:   

·        Estimate enrollment. This allows us to be able to project our tuition income. This is done by moving every student up a grade and then making estimates on pre-school and kindergarten based on previous years’ history with these particular classes.  In other words, we really plan for no enrollment growth from the previous year.

·        Consider the unpredictable aspects of the income side. Here we carefully analyze tuition income, contributions, and fund raising. These three lines are potentially unstable based upon enrollment fluctuations and the overall economy.  In recent years, we have been conservative in estimating these numbers and as the months proceed toward the start of a new academic year, these categories are re-evaluated quite frequently.  In addition, we have taken into consideration the amount of money we generate by allowing a church to use our facility.  As of this writing, they are planning on staying for a while, but we do recognize that has the potential to change.

In terms of the expense side of the budget we do the following things:

·        We examine every line item to see how it has performed over the past year and then project our expense for the year ahead. 

·        We consider what type of salary increase (if any) we will be having for the faculty and staff for the coming school year. In addition, we examine the overall personnel needs (do we need more teachers or less based upon enrollment projections?) Unfortunately, all MCS employees have not had a salary increase in the past two years. 

What line items most drive the budget?  On the income side it’s always tuition (84% of total income) and that is based upon enrollment projections. On the expense side it’s always salaries and benefits (72% of total expenses).  Another very critical line item is our debt service (11.84% of total expenses).  

What is the timeline for adoption?  Once the finance committee has put together the preliminary figures, the board is given the budget sometime in January.  The board usually meets multiple times to consider this budget. A preliminary budget must be adopted before February 1 in order to have new tuition numbers available for re-enrollment.  After the June 1 deadline for payment of all fees, the budget is evaluated again over the summer. This can be adjusted several times depending on enrollment numbers.  At the August board meeting the budget is given final approval since we now have solid enrollment numbers.  

What is the most difficult part of preparing the budget?  Projecting enrollment and subsequent tuition revenue is the most difficult part of the income side of the budget. From the expense side, it is faculty salaries and benefits. All of us want to pay the teachers more, but this always has implications in terms of tuition rates.  The budget often requires several meetings in December and January which are extremely time consuming.  Also, cutting the budget is extremely difficult because there is very little excess to consider.

What is your highest priority when putting together the budget?  I am really impressed each year by how much the board always considers a very important priority.  This priority is the fact that we want to be good stewards of this money that comes from God and the parents of MCS students. Frequently we hear statements to that effect in our budget meetings and we are always asking ourselves if we are being as responsible as we possibly can be in terms of the choices we are making.

What are the greatest budget challenges we are facing in the years ahead?  The challenge year in and year out remains how to keep MCS affordable for families while at the same time maintaining a high quality program. Beyond this ongoing challenge, there are other important issues that would include:

·        Debt.  This is the greatest financial challenge we presently face. Currently MCS has a debt load of approximately $1.7 million and this costs the school approximately $17,000 per month. This obviously restricts the ability we have to do more things here at the school and hence should remain an important matter for prayer.  Imagine what we could do with the extra $200,000 we spend each year on debt service!

·        Maintenance.  As our facility ages (it’s now 10 years old) our maintenance issues will increase and we will need to plan accordingly.

·        Technology.  We have made tremendous strides in this area over the last two years, but will need to keep it up in the years ahead.  We need more Promethean boards and we need to constantly update our software and hardware in our classrooms and labs.