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Roger Guzowski

May 30, 2014

Roger Guzowski


Education, Operations, Planning

Know Your Campus, Part 2

Missed Part One? Catch up here!

For this part 2, I am focusing on some of the differences between public and private schools. Every school has a complicated mix of funding sources, a lot of which I am going to gloss over (consider this the intro 100-level version). For those of you who are recent students making the transition to coordinator or who are folks new to working with schools, I am hoping this overview helps.

To understand the difference between how public and private schools operate, it helps to understand basics of how they are financed. For private schools, their primary funding, other than student tuition is their endowment. Essentially think of this as having a savings account and living off the interest. Public schools are funded primarily via an annual expenditure from the state budget, or for large enough capital projects, via public bonds.

One major difference between public and private schools is how expenditures are made. At public schools, because annual funding is level (revenue comes in via annual taxes and other than a few reserve accounts, there is no large savings account backstopping the annual budget), things work best when expenditures are also level. In my experience, public schools typically really struggle with expenditures that require a large initial investment, even if that initial expenditure then provides large annual savings for years thereafter. Unless the initial investment is so large that it can be bond funded, there is no pool of money from which to draw the initial investment. Because there is nowhere to bank the savings, there is also little incentive for managers to make such investments. If they make an investment that leads to annual savings, those savings don’t typically mean more money is available for that manager’s other initiatives. Rather, it means their future annual budget is reduced accordingly. As a result, solutions typically work best within a public budget if they have a much smaller initial investment even if they have a more moderate annual payback. Despite what I have heard critics say (and by critics I typically mean the person whose idea didn’t get adopted or sales rep whose product didn’t get purchased), it is not that schools are inherently wasteful or don’t care about saving money, or that they “just don’t get it.” It’s that they need solutions that best fit their basic business model.

One other facet of public spending to be aware of is end-of-fiscal-year spending. Because public schools do not have a savings account as a backstop, they tend to be cautious with money throughout much of the fiscal year to ensure they have enough money for potentially higher than budgeted expenses like snow removal or overtime expenses. Then, as the end of the year approaches, when they see how much of their budget remains, they make a decision about which of the purchases they have been deferring throughout the year they can finally make, and which expenses have to be deferred until future years. This leads to a flurry of end of year spending. It is also an opportunity for purchases such as recycling bins or other low-cost recycling or sustainability-related capital equipment. Here’s how: Sometimes there is not enough money left in that end-of-year budget to complete a higher-priority already-budgeted project in whole. Because there is nowhere to “bank” that partial project funding for future use, if that higher-priority project cannot viably be completed in part, that leaves some additional money available for small capital expenditures like recycling bins, even if they were not the top priority in the budget. You never know what can happen in this flurry of end of year spending so make sure your projects are somewhere on your budget manager’s radar screen and somewhere in this end-of-budget year mix.

Conversely, for private schools, because the budget is backstopped by a savings account, they typically can more-readily adopt solutions that require a higher initial investment (i.e. dipping into their savings), provided that investment yields substantial enough savings to justify that investment. They also typically are more-readily able to reinvest savings in other projects, provided the goal is always future savings to the endowment. However because their funding is essentially a savings account, and the interest thereon, when the principal is gone, it’s gone (i.e. they cannot raise taxes as needed to cover their costs). As a result, in my experience, private schools tend to be more cautious and need solutions with proven results (results with a fairly certain payback) as opposed to experimental solutions.

The other major difference between public and private schools is customer focus. In business, we are taught that the customer is always right. The question is: who is your customer? At a private school, the answer is clearer. Your customers are the students who are paying tuition now and who will hopefully later in life, as alums, remember the impact that the school had on their lives and careers and will contribute to the endowment.

At a public school, the answer is less clear. Is it the students who are paying tuition, even though a significant portion of campus expenses are subsidized via tax funding? Is it the politicians who are voting to spend public money on education over other priorities? Is it the taxpayers who are ultimately paying a large chunk of the school’s costs? Is it the group funding a particular research project on campus? On a large campus in a populous state with a research program, that adds up to a lot of customers, many of whom have competing and often conflicting needs. Navigating that quagmire involves walking a confusing tightrope to balance all of those disparate and frequently conflicting needs. When people don’t understand or accept how complicated a balancing act that is, it leads to individual customers feeling that more could or should have been done to meet their needs, it leads to people frustrated that the pace of decision-making is not faster, and until they can adjust to that world, it leaves some service providers and employees confused and frustrated about who their customers are.

Understanding and accepting yourself and the things that make you special can go a long way toward avoiding frustration and confusion. It also goes a long way toward helping you find the best solutions to fit your unique needs and your unique logistics. Have you taken the time to get to know yourself?