STATS ARTICLES 2009

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Making the grade in Memphis

In troubled inner-city neighborhoods, Catholic schools fulfill the public mandate of providing a quality education for all children. Tragically these schools have been closing at an alarming rate in recent years. Over 2,100 parochial schools shut their doors between 1990 and 2009, displacing 428,000 students, some of whom found accommodation at remaining Catholic schools. Most students, however, had no alternative but failing public schools where low academic achievement and high dropout rates predominate.

Catholic school closings result from the ever-tightening squeeze of rising costs and falling enrollment. This scenario disproportionately affects parochial schools serving disadvantaged inner-city minorities since their families are less able to pay rising tuition. Likewise when these schools close, poor parents usually can’t afford the closest parochial school, which would be unable to offer financial aid to an influx of new students. Nor can these families afford to move to a neighborhood with a viable public school.

Dropping out becomes a likely scenario, and dropouts suffer dramatically worse life outcomes, with higher rates of incarceration, single parenthood, mental illness, disease and mortality. Almost 60 percent of recent black male dropouts spend time in jail. In metropolitan Memphis in 2007, dropouts earned only $11,185 per annum compared to $20,336 for graduates and $43,722 for those with a bachelor’s degree.

Keeping Catholic schools open in disadvantaged neighborhoods is clearly imperative, but the financial downturn afflicted struggling congregations with heavy job losses, putting their schools at greater risk. Nor have dioceses been able to step in since a significant portion of their income derives from investments, which were impacted negatively.

For decades, inner-city Catholic schools depended heavily on outside donations, which were also adversely affected in the economic downturn. “Philanthropy tracks along with Wall Street.” explained Frank Butler, the president of Foundations and Donors Interested in Catholic Activities, Inc., a consortium of fifty major Catholic philanthropic foundations, which disburse $1 billion a year. “Many of our members saw their investments shrink by 30 percent in a single month last year.”

As a result, there was a significant drop in individual donations at the end of 2008, termed the giving season (between Thanksgiving and Christmas) since most such contributions are made then. Total philanthropy in 2008, including foundation, corporate and individual giving, was $308 billion. After adjusting for inflation, this marks a 5.7 percent reduction from 2007, representing only the second decline since Giving USA (a publication written and researched at the Center on Philanthropy at Indiana University) began publishing annual reports in 1956.

Education giving dropped even more, by 9 percent (adjusted for inflation) to $41 billion. At the same time, demand increased significantly as more schools felt the financial pinch. University endowments were hard hit as well, with Harvard University suffering a 30-percent or $11 billion loss. Private and public universities and colleges across the country suffered significant endowment shrinkages and are turning to foundations and wealthy alumni for help. Competition for philanthropic resources will intensify, especially as once affluent families apply for financial aid level in increasing numbers.

Overall, 52 percent of charitable organizations reported a decline in donations, according to GuideStar, the nation’s leading source of nonprofit information, from October last year through February 2009. From March through May, the exact same proportion of non-profits reported decreased contributions in the latest GuideStar survey, released in July. This would seem to indicate, as the survey reported, “that things haven’t gotten dramatically worse for America’s charitable nonprofits…but in reading respondent comments, one senses that at many organizations where things were going badly earlier in the year, they are going worse now. Reserves are being burned up, and services that had already been cut have been cut further. A typical comment from these organizations was ‘We are hanging on, barely.’” This is true of many of the 20 percent of organizations that reported increased donations as well. Non-profits said that publicity about their financial crisis inspired generous contributions, but these were most likely “a one-time deal.”

Although economists agree the recession is over, the road back to prosperity is no freeway. Of particular import to private schools is the continued increase in the unemployment rate, which rose to 10.2 percent in September. The broad measure of unemployment, which includes the officially unemployed, discouraged workers no longer receiving benefits and millions of part-time workers seeking full-time jobs, rose to 17.5 percent, the highest level since the Great Depression. The 1930s saw a 30-percent broad measure of joblessness, according to a New York Times estimate. This exceeds the present rate considerably, but economists expect unemployment to keep rising well into 2010 before a slow recovery begins. Some scenarios estimate that it will be 2014-15, at the earliest before the the U.S. will return to  the pre-recession, 5-percent unemployment rate.

Consumer spending, which accounts for 70 percent of the economy, fell 1.5 percent in September from the previous month, which saw a 2.7 percent increase due to the federal Car Allowance Rebate System (CARS) program. CARS has since been terminated, and the best that can be said is that retail sales are now decreasing at a slower pace in the past five months and remain well below 2008 levels. Job growth might also be retarded by corporate pessimism about the sustainability of the economic recovery as government stimulus programs wind down. Labor economists predict that many lost jobs will never return since businesses restructured, wiped out entire units and might increase outsourcing. Many new jobs will be lower-paying positions with no benefits, permanently crippling the capacity of many families to ever pay tuition and contribute to fundraising campaigns. In addition, the inevitability of higher taxes, not only for the rich but middle classes—Obama’s campaign promise notwithstanding—to address the huge gap between government revenue and spending will further burden families, slow job growth, spur outsourcing and drain resources that would otherwise be donated to philanthropy.

On July 15, at a forum focusing on the sustainability and performance of urban faith-based schools, hosted by the U.S. Department of Education in Washington, D.C., superintendents from several Catholic school systems reported that parents who until last year had six-figure incomes are now desperately seeking financial assistance to keep their children in school. Parochial schools draw over 60 percent of their revenue from tuition and most institutions have been teetering for decades. The persistent weakness in the jobs market and philanthropy could precipitate school closings at epidemic proportions in the next few years said Karen Ristau, president of the National Catholic Education Association. “Unless urban Catholic schools become much more innovative, they’re facing extinction,” Butler said

This warning came with a recommendation: Catholic educators should look to Memphis for a lesson in how to sustain schools in some of the poorest zip codes in the country. The city was an improbable success story. In 1993, when J. Terry Steib was installed as Memphis’ first African American bishop, the diocese was a symbol of the fall of urban Catholic education in America: Eight of ten inner-city schools had closed as ethnic white Catholics had moved to the suburbs, and the two remaining downtown schools had few students. In some ways, urban Catholic education in Memphis and cities across the country has become a victim of its own success, having facilitating the departure of its graduates to more affluent neighborhoods.

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