The Street Stops Here

City Journal Spring 2011

Making Urban Catholic Schools Viable: Here’s How
Patrick J. McCloskey

Catholic schools, particularly those serving the children of the poor, have been hemorrhaging students for 40 years. As a result, half of the nation’s Catholic schools have closed—and enrollment losses continue to outpace shutterings, imperiling most of the remaining schools.

We risk seeing the whole system collapse, perhaps leaving behind some elite schools in affluent areas and a few in disadvantaged ones.

The public should be deeply worried about that scenario. As research since the 1980s has shown, Catholic schools do a stellar job of educating the urban poor; in New York City, for instance, parochial students consistently outscore their public school counterparts on city and state tests. Most remarkably, the more disadvantaged the students, the better they perform relative to their public school peers. In New York’s inner-city Catholic high schools, over 80 percent of disadvantaged minority students graduate on time, almost doubling the public school rate. The schools accomplish all this despite spending just $10,000 per high schooler—a far cry from the New York public schools’ $21,500. Should the Catholic schools collapse, taxpayers would be liable for the consequences: the cost of educating New York State’s Catholic school students in the public system, estimates Archbishop Timothy Dolan, would be more than $3 billion per year. Nationwide, the cost would exceed $20 billion, according to the National Catholic Educational Association.

In recent years, urban dioceses across the country—for example, in Boston, Los Angeles, and Washington, D.C.—have belatedly concocted strategic plans, trying desperately to reverse the downward spiral. Others, such as Chicago’s, are beginning the planning process. But the most ambitious of all the efforts to date is Pathways to Excellence, which the Archdiocese of New York unveiled last October. The reforms that Pathways will execute—coupled with several that it hasn’t proposed—might just manage to save New York’s vital Catholic schools.

Beginning in the 1970s, the cost of Catholic education increased sharply as the teaching religious orders withdrew and were replaced by lay teachers and administrators. The parishes running the schools hoped to recoup these rising costs through tuition. But this turned out to be shortsighted because around the same time, suburbanization was relocating two-thirds of Catholics away from the neighborhoods where two-thirds of Catholic schools remained. Moving into these areas were poorer families, mostly African-American and Hispanic. Few could afford tuition, which now averages $3,500 for elementary school and $7,500 for high school in New York—well below the actual cost of educating each student.

Pathways’ most radical component is its proposal to replace this parish-run, tuition-dependent model with what it calls “regionalization.” Parochial schools will be divided into five or more geographic regions, each governed by an archdiocese-supervised board of education. The costs of running the schools will be spread among all 2.5 million Catholics in the archdiocese, even in parishes that don’t have schools. This is a controversial approach. Though regionalization relieves pastors of onerous administrative and financial responsibilities, many initially resisted ceding meaningful control of their schools. And though Dolan orchestrated considerable buy-in among affluent parishes, Pathways did bow to the wishes of some by allowing those still capable of supporting their own schools to opt out of regionalization.

With regionalization comes rationalization, which constitutes much of Pathways’ content. For instance, the schools’ bookkeeping and budgeting processes will be standardized and overseen by the archdiocese, rather than by each parish separately—a process that led to inefficient, idiosyncratic management procedures in the past. To improve leadership, the archdiocese has established a “principal academy” to train teachers interested in becoming administrators. Some of Pathways’ advisors also recommended consolidating various management functions, such as procurement, estimating that the move could save tens of millions of dollars a year, but that recommendation wasn’t adopted in the strategic plan. Even greater savings could be possible in the coming years, however, as Apollo Philanthropy Partners and the National Leadership Roundtable on Church Management (NLRCM) launch a national procurement initiative, using the immense purchasing power of the entire American Catholic Church. Once that happens, schools will certainly get better prices for office supplies, equipment, energy, and insurance.

Pathways will also speak with pastors about directing proceeds from the sale and lease of Church property into an archdiocese-wide education fund. Last year, for example, a charter school began renting a former parochial school building for several hundred thousand dollars per year. New York archdiocese superintendent Timothy McNiff will negotiate for a portion of such revenue, which otherwise would go entirely to the parish renting out the building, to be invested in the archdiocese’s schools. (It’s worth adding that Geoffrey Boisi, the founding chair of NLRCM, will launch a national investment fund for all Catholic entities later this year. By pooling resources, this fund will be large enough to attract highly talented financial managers; the hope is that it will eventually earn on par with top endowment funds, such as those run by Ivy League schools.)

It remains to be seen whether Pathways will encourage major donors, who have invested hundreds of millions of dollars over the last 20 years, to keep supporting the system. “Funders have been calling for a long time for a financial plan,” says Jane O’Connell, a member of Pathways’ planning committee and president of the Altman Foundation, which has made major donations to archdiocese schools. (In fact, some funders threatened to withhold their donations until Pathways was implemented.) “Now donors will wait to see whether Pathways is rolled out in an intelligent, orderly manner. If it’s working, they will want to invest.” But it may not be easy convincing them. About 10 percent of the archdiocese’s schools are being shuttered this June. Though the closings are part of Pathways’ strategy, some Catholic supporters may see them as a sign of deepening crisis, rather than as a pruning necessary to rejuvenation.

One way to nudge donors into opening their wallets: increased financial transparency for the archdiocese. Though most ethnic white Catholics would agree that the Church should uplift today’s poor, just as it once did their families, few parishioners will bump up donations without knowing where their money is going. It’s no secret that the Archdiocese of New York has a sizable investment portfolio and tens of billions of dollars’ worth of real-estate holdings. For the archdiocese to plead poverty and request extraordinary support, at minimum it needs to make its complete balance sheet available to major donors and advisors.

Another way to boost donations is to professionalize fund-raising. Recently, an organization called the Catholic Alumni Partnership (CAP) found that over 80 percent of the alumni of Catholic elementary schools whom it was able to locate were interested in making donations—even though many hadn’t heard from their schools in decades. CAP has already raised over $2.3 million for 300 schools in eight dioceses, including 50 schools in the New York archdiocese. Because of economies of scale, the organization provides the most cost-effective method available to build alumni databases and conduct wealth screening, both essential components of any fund-raising effort. If the archdiocese were to contract fund-raising for its other 164 elementary schools to CAP, it might well see outstanding results. In fact, the timing for a sophisticated planned-giving campaign is perfect, since large numbers of baby boomers are beginning to retire, with an asset pool valued in the trillions of dollars.

New York’s archdiocese should take a hard look at a promising new way to raise funds. Most states, including many with large numbers of Catholic schools, prevent faith-based schools from accessing low-cost tax-exempt financing, which would otherwise produce tremendous savings. But in early December, a public authority in Colorado began allowing tax-exempt bonds to be issued for Catholic schools and colleges across the country.

Such bonds can now fund construction, badly needed repairs and renovations, and new equipment, as well as refinance existing loans. The Archdiocese of New York might arrange for bond issues (totaling $1 billion, say) to fund capital projects, upgrades to academic programs, and recruiting, training, and retaining the most talented teachers and administrators. It could secure the bonds by offering property—of which it has plenty—as collateral. In fact, Dolan has frequently quoted a dictum of his nineteenth-century predecessor, John Hughes: “The school is more necessary than the church.” The money could be repaid through a professional planned-giving campaign and an appeal to the entire Catholic community. Jim Lundholm-Eades, director of parish services and planning for the Archdiocese of St. Paul and Minneapolis, points out that total operating deficits for schools in a diocese often amount to just 10 percent of parish contributions in that diocese. “Even a small proportional increase would make a significant difference,” he says.

The archdiocese might also imitate some of the innovative approaches that other dioceses are trying. For example, the Diocese of Paterson, New Jersey, has received many requests to accept affluent students from China, Japan, and South Korea, whose parents believe that a high-quality Catholic education will open doors to top universities. In response, the diocese’s superintendent is hiring an overseas agent to recruit students, who will pay enough in tuition to underwrite an equal number of poor local children. The international students will be housed in former convents. The diocese also plans to pursue top talent by offering teachers inexpensive housing—again, in Church-owned buildings—to supplement their salaries.

One recommendation considered for Pathways but not included was to increase average class size by a few students. Examining the archdiocese’s higher-performing schools, Pathways advisors were surprised to find that in many, the average class size was 28 to 30 students—six to eight students above the system’s average. Bigger classes would help schools balance their budgets. And bigger classes would create a smaller disciplinary problem at Catholic schools than at public ones, since Catholic schools are famously tough on discipline.

A recent University of Notre Dame study shows that when a Catholic elementary school closes, disorder in the surrounding neighborhood increases—not a surprise, when you consider how well Catholic schools have taught disadvantaged students for decades. Recognizing this correspondence, the city council president of Yonkers, New York, recently suggested public subsidies for the three parochial schools in his municipality that are on the archdiocese’s closure list.

But because no city is likely to embrace that solution, Catholic educators must look to strategic plans and other financial solutions. The crisis is at its peak: nationwide, more than 1,600 Catholic elementary and secondary schools have closed over the last two decades, mostly in urban neighborhoods. Whether that trend accelerates or reverses will depend on the effectiveness of plans like Pathways.

Patrick J. McCloskey is the author of The Street Stops Here and a faculty member at Loyola University Chicago.

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