From the Director: Our Financial Realities—Simple, Not Easy

What is USN considering as it faces the possible economic consequences of COVID-19?
This surreal season for USN brings tests of all kinds for us. We’ve created an alternate, remote modality for providing academic program resources for students K-12. We’ve found new ways to preserve and strengthen social networks, to look out for one another absent familiar campus surroundings. The rhythm of our calendar events stands disrupted, as we reinvent routines. And to make it all work, we need the budget to sustain the whole enterprise.
Even a cursory look at our financial model yields two foundational insights—we’re people-centric and we rely on tuition as a primary driver. Doubtless neither of those comes as a surprise to you, but what special relevance might they carry right now? The answers provide a source of challenge and solace. Having just read a thoughtful piece from Johns Hopkins about the budget impact of losses from their massive endowment, their philanthropic channels, their residential program, and their hospital operations, it’s good for right now not to rely on those revenue streams. Our model benefits from a modest but growing endowment, combined with generous annual giving, and still it’s grounded roughly 90% in tuition payments. The strength of our enrollment provides continuity in our finances. We’re a full school with inspiringly financially responsible families.
On the expenditure side, the picture is similarly basic. Roughly 70% of every dollar that comes our way funds compensation for people who deliver programs here. Add to that 12% funding need-based aid to broaden access to USN for talented young people from lower-income families, with roughly 10% to pay for basic operations of our hardworking campus, and there’s little left to allocate. You’ve likely seen these numbers in prior pieces, in prior years, and the truth is that our model is “sticky” that way. Cutting costs means directly affecting people, almost axiomatically.
We run lean as a nonprofit at USN, budgeting to a margin of less than 2%, so if we spend $1.03 when we expected $1.00, there’s no big cushion. We have built reserves for unexpected physical plant repairs or short-term cashflow needs, but we manage to tight tolerances. Years of taking care of our facilities and eschewing debt mean that there are no urgent capital necessities at hand. We are, though, making great progress on the energy loop project connecting us with Vanderbilt University as a heating source, given the access contractors have had to our busy corner on 19th Avenue.
So what are we watching to guide our expectations for coming school year? On the student count side, we’re seeing enthusiastic attendance at events for new families in kindergarten and ninth grade. Numbers for returning families’ contracts look very similar to a year ago, and at the same time we’re taking nothing for granted, making sure every call is returned, every inquiry answered. While we’ve paused wholesale Annual Fund appeals to reframe in ways that recognize the difficulties faced by many households, we’re nearly 90% to our goal in gifts and pledges, and we’re not done yet.
Where would we look if we faced a massive shock to our durable model? My strong sense is that we’d ask faculty to sacrifice last. We’d freeze other lines to the extent we could, postpone expenditures that could possibly wait, look to reserve accounts, and stretch every nickel, communicating with the breadth of our constituencies to help us weather the storm. Managing budgets at USN provides a lesson in humility, with no easy answers. We’re working hard to understand the daily details of our situation, to identify every potential avenue of response for any possible eventuality, and avoid asking anyone to carry an undue burden.
From all I can glean, USN’s in a very strong position for a host of reasons, facing the test of a complex and unsettling time in our city and nation. Ours is a financial model with limited levers to pull or clever alternatives, especially in the short term. My commitment is to continued transparency, frequent communication—thanks for reading this one, and appreciation for any unintended consequences to any well-intended decision we might make.
Always game for a follow-up conversation, and more grateful than ever for the good people of the University School community.
We’re getting there on the mitigation front—stay well,
    • Director Vince Durnan

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