Single copies of Seek and Find? are available free from Auburn Seminary at (212)662-4315. Multiple copies are $5.00 each, and larger orders are available at a discount. The full text of the report is available at http://auburnseminary.org/seek-and-find/.

In 2005 the Center for the Study of Theological Education at Auburn Seminary released another in its series of research reports. Seek and Find? Revenues in Theological Education, by Anthony Ruger, follows up on earlier studies of U.S. seminary revenues published in 1971, 1981, and 1991. Like the earlier reports, the new one shows that church support for theological education has not been growing, but seminaries are making up the difference with increased reliance on individual donors.

The good news for theological schools is that revenues have been growing dramatically since the early 1990s. More than 90 percent of U.S. theological schools saw their revenues grow faster than the consumer price index during the period. The sources of that revenue vary considerably, but in general both Catholic and evangelical Protestant schools rely more heavily on tuition, while mainline Protestant schools rely more on investment returns. In all three groups, gifts from individuals comprise at least one fifth of revenue.

The study delineates many of the creative efforts theological schools have made to increase student enrollment over the last decade — for example, adding new extension sites, new degrees, and new part-time programs. Nevertheless, overall full-time-equivalent enrollment remained flat during the 1990s. Steady tuition rate increases over the decade helped to increase overall tuition revenues, but the study suggests that in a low-enrollment-growth environment, large tuition increases may be impossible.

What about other sources of revenue? Theological schools are less reliant on tuition than are independent colleges, but they are much more reliant on gifts and grants. Increasingly, these gifts are coming not from church bodies like conferences, dioceses, religious orders, and congregations, but from foundations and major individual donors.

Investment income continues to be a significant source of theological school revenue as well — especially (but not exclusively) at mainline Protestant schools. The roller-coaster stock market of the last decade has demonstrated both the delights and the horrors of reliance on investments. Market returns between 1994 and 1999 were almost unprecedented, but the period from March 2000 to March 2003 was the worst three-year period for the market since the start of the Great Depression.

The report cites the wisdom of the "banded" or "snake-in-the-tunnel" investment policy (explained in the New Year 2005 issue of In Trust). Like the standard multiyear averaging that most schools use, the "snake-in-the-tunnel" policy relies on average returns over the last three years to determine payout. But rather than setting the payout at 4.5 percent or 5 percent, the snake-in-the-tunnel sets a floor and ceiling for payout (say, 3.5 percent and 5.5 percent) and then allows the annual payout to move upward only at the annual inflation rate, as long as that annual inflation rate is higher than the floor and lower than the ceiling. Schools that followed this policy during the last decade found that they were able to continue increasing their payout during the lean years because they had been paying out only 3.5 percent during the fat years.

Questions boards should be asking

In Trust's editor, Jay Blossom, recently spoke with Anthony Ruger about Seek and Find?, the Auburn Center report he authored on theological school revenues.

What are the lessons boards can learn from this report?

The comprehensive question trustees should be asking is, "How can we secure additional resources for our seminary?" In general, seminaries have access to three categories of revenue: tuition, gifts and grants, and investments.

Enrollment and tuition

Under the category of enrollment and tuition, a frequent question is, "Can my theological school raise tuition aggressively?" The study implies "maybe not." Even though seminary tuition is much lower than tuition at other graduate schools, there are constraints on raising tuition based on what students can afford and what the market will bear. Demand for theological education has not been growing, so we're not seeing a market in which prices can rise rapidly.

Those schools where enrollment has been growing have been using three strategies:

• They have differentiated themselves from their competitors.
• They've overcome barriers to enrollment. Sometimes distance is a barrier, and so some seminaries have set up extension sites in other cities. Sometimes opportunity cost is a barrier -- the lost income a seminarian is not receiving while attending school full-time. Some seminaries are overcoming that barrier by holding night and weekend classes.
• They've also developed new products. The D.Min. degree and specialized master's degrees are examples of this. As with an extension center, you want to make a careful projection of expenses and revenues so that you don't accidentally start losing a lot of money on a new program.

Gifts and grants

In the area of development, the big question for trustees is, "What is our gift strategy?" More and more, schools are relying on the philanthropic marketplace.

This has already been happening, right?

Yes, the share of support that seminaries receive from individuals has grown much more rapidly than the share of support from churches.

A question presidents and development officers should be asking is, "Given an array of development resources, how much are we spending to pursue major gifts and bequests?" You go into a school and you see a desk for church relations and gifts and a desk for alumni relations and gifts. But where are the desks for major gifts and bequests?

In the pie chart below, you can see that smaller gifts provide only 17 percent of the individual gifts to theological schools.

Now, alumni and churches are strategically important for development — they open the doors to other people who are mission-minded and generous. It's very important to reach out to them, but you need a strategy to cultivate major givers and especially bequests.

Our earlier study, In Whose Hands?, showed that only a third of seminary trustees had named the seminary in their estate plans. When I visit a school, sometimes I'll ask trustees, "Has anyone at the seminary ever asked you to put the seminary in your will? "Often the answer is no. Trustees who are reading this should get up from the computer and say,"We need to develop a board committee that will have lunch with every trustee and former trustee and ask them to consider making a bequest to the school." It's very simple and enjoyable and has enormous potential benefit.

Investments

Do schools with large endowments have any special concerns?

If your school is dependent on endowment for as much as 25 percent or more of revenue, you really need to have the very best endowment policies. That means excellent investment policies, excellent spending rate formulas, and — crucially — an appropriate spending rate. Otherwise you are spending money that should be invested for the future. It's money that doesn't belong to you — it belongs to the next generation.