Is there a tax or legal reason some preschools have mandatory fundraising targets in addition to tuition?
October 20, 2011 11:30 AM   Subscribe

Is there a tax or legal reason some preschools have mandatory fundraising targets in addition to tuition?

Where my family lives, almost all preschools seem to have fundraising expectations from the families who attend. These aren't fundraisers for things like a tornado taking the roof off or other unforeseen events, or even "help us restock our library", they're regular, frequent events, the income from which is clearly built into the budget expectations of the school administrators. And these aren't public schools trying to bridge the gap between what they get from the state and what it costs to educate a kid. The preschools are private businesses funded by tuition paid by the families, so I find this kind of standard fundraising perplexing: if you know in advance that every year you have a $X shortfall in your budget, why don't you just raise your rates?

I am especially baffled by the multiple preschools that explicitly state that families who attend will be responsible for bringing in X dollars in fundraising each year (I assume that if you don't sell enough candy/raffle tickets/other junk you are expected to write a check.) The number I've seen, if it matters, is $300 per family per year. Which is not no money, but these are preschools that run about $1,000/month in tuition per child; is there a reason they don't just amortize the additional $300 over a year? The LA preschool scene is weird and competitive - I find it hard to believe that the extra $25/month would drive parents to another school.

My only two theories are:

1. Schools know from experience that people actually prefer to donate inefficiently "in kind", using their time to sell popcorn at work or what have you, rather than giving money directly.

2. There's some kind of tax loophole for money brought in through fundraisers.

Any preschool experts know what's up with this stuff? Also... longshot, but is there serious writing out there about the economics of school fundraisers? I would love to see it. Thanks!
posted by thehmsbeagle to Education (9 answers total) 3 users marked this as a favorite
If they raised the tuition to $1025, what possible reason would there be to stop with the fundraisers?
posted by 256 at 12:21 PM on October 20, 2011

The private elementary school that my son went to didn't have such explicit requirements to raise funds, but there were numerous fundraising events and an annual fund drive where there was strong emphasis on participation. The folks that directed the annual fund drive explained that the board decided to go that direction rather than raise tuition because it gave families the chance to take a clear tax deduction for the contribution, which tuition doesn't necessarily count as.
posted by pappy at 12:32 PM on October 20, 2011

I think part of the reason they do this is that raising $300 isn't actually all that tough, so any effort at all is likely to net more than that.

IAAL, though not in California, which is notoriously weird about stuff. And don't get me started on their municipal codes. But other than the fact that donations are tax deductible while tuition generally isn't, I'm not aware of any legal reasons which might explain this.

It's also possible that this is either in their charter or a condition on a large monetary gift that they received. Weirder things have definitely happened. But those aren't strictly legal reasons, other than the general principles that corporations have to obey their charters and contracts, including strings on donations, are enforceable.
posted by valkyryn at 12:33 PM on October 20, 2011

Best answer: They might be fixing tuition to some specific dollar amount (there are various programs for matching funds, dependent care credits, pre-tax child care FSAs, etc.) And donations are tax-deductible (though that can be a pain.) And "fundraisers" build a sense of community and ownership in a way that writing a check doesn't. Fundraisers may also be going to a foundation or something that is itself exempt when the preschool might not be. You also have to keep in mind the simple value of doing things exactly like everyone else does.

There's a little bit of number-crunching in this NAESP report from a few years ago. Don't know how useful you'll find it.
posted by SMPA at 12:53 PM on October 20, 2011

I'm the treasurer for my preschool.

- Having a cushion is important in case stuff comes up (because it will).
- It allows for some families to get financial aid to come.
posted by k8t at 1:02 PM on October 20, 2011

When you raise money for an organization, it really helps bind you psychologically to that organization. I don't mean that in a negative way - asking for money makes you articulate why the organization is great, what it does, how it does it, etc. When you think through these issues, and share them with someone else, it really helps you fully understand and embody the beliefs.

From the schools perspective, it's also very easy to advance someone from just working on fundraising to doing other things in the organization - volunteering, mentoring, etc.
posted by NotMyselfRightNow at 1:51 PM on October 20, 2011 [1 favorite]

Best answer: I used to be on the board of a very small private preschool/elementary school. We never had mandatory fundraising targets per family, but we did have a school-wide fundraising target each year.

First off, there is incredible pressure to keep tuition as low as possible. I know you think $1025 is not a big deal compared to $1000, but it really is. We had parents threaten to leave our school over a similar scale increase.

Second, the school is going to keep a line item in its budget for fundraising, because there is going to be at least some fundraising income every year, so it makes sense to shift some of each family's burden to that category, just for the psychological effect. In addition, there will be some families who will raise significantly more than the required amount, and a simple tuition increase will miss out on all of that income.

Finally, the fundraising line item is usually a small portion of the school's overall income, so even though it is a moving target, a deficit in that area can fairly easily be accounted for elsewhere (one less field trip next year, cut back landscaping services, deferring equipment purchases,etc). The tuition line item must be stable to pay for salaries and utilities, etc.

There is a GREAT deal written about small private school management, administration and fundraising, but it has been a while since I did that, and I can't recall any of the authors you might want to look into off the top of my head. There are about three or four leading names in the field, and if you ask the administration at your school I bet they would know (heck, they really should know).
posted by Rock Steady at 2:09 PM on October 20, 2011

> The number I've seen, if it matters, is $300 per family per year. Which is not no money, but these are preschools that run about $1,000/month in tuition per child; is there a reason they don't just amortize the additional $300 over a year?

Instead of paying an additional $300 outright, you can contribute a tax-deductible $300. Or get other people in your community to contribute the $300, who get the tax deduction AND have invested in The Education Of Children.
posted by desuetude at 10:12 PM on October 20, 2011

Response by poster: Thanks, all. I was thinking of preschools as businesses being run as businesses (ie the indie bakery doesn't fundraise to achieve a financial cushion, it builds that goal into its pricing structure) but I now see that that that's probably not really, for a variety of reasons, how preschools operate.
posted by thehmsbeagle at 7:58 PM on October 26, 2011

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