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The Webb School in Bell Buckle is one of the oldest and most expensive private schools in the state. Tuition for a boarding school student approaches $30,000 a year, while tuition for a day school student hovers near $12,000. Lou Randall, director of development for Webb, says the majority of the school’s $20 million endowment came from bequests and wills.

“We specifically approach families, alumni and parents,” Randall says. “Primarily, we cultivate relationships and get people to put us in their wills or other financial instruments like trusts, insurance and gifts. It has grown because it is invested.”

In the 1990s, Webb established The Burkhead Society to recognize alumni, parents and friends who have made provisions for Webb in their estate plans. The school named this society in honor of Commander Lingurn Burkhead, a 1921 graduate of the school, who bequeathed more than $1 million dollars. Randall says 668 people belong to the Burkhead society.

“The long-term goal of the Burkhead Society is to double the endowment,” Randall says, noting that he’d like to see that occur in five years, an objective he admits is lofty. In addition, but less frequently, people make sizeable donations apart from estate plans. “Just in May, we received a gift of $500,000 from a family of a student not to be named,” Randall says. “That will be provided over the next three years.”

Janet Jobe, director of development for Chattanooga Christian School, says “just a few major donors” initially funded that school’s $6 million endowment. “Through investments, it is growing on its own,” she says. “Then also, any time we have a capital campaign, we include endowment money in that.”

Chattanooga Christian also is in the middle of a campaign to double its endowment. Jobe says she believes donors are inspired to support the school because its leaders demonstrate responsible money management.

“We are very frugal on campus,” Jobe says. “We have no debt, and we think that has helped build endowment dollars for us, because we are such careful managers of the resources that we have. Even though we have a good-sized endowment for a school our size, we don’t acquire debt against that endowment. We don’t build anything until we have the money. We have major donors and many people who give monthly. Our stewardship appeals to all of them.”

At All Saints Episcopal School in Morristown, school leaders are in the very beginning stages of building an endowment. “The board has approved, in concept, an endowment,” says Steve Cash, the head of the school. “The very next step is to establish guidelines and parameters. That includes guidelines about how the money will be invested, even who will be responsible for the investment management. Often, it’s an investment management company. Part of this will include expectations for the productivity of the endowment. For example, we’d like the endowment to perform higher than the national average.”

Cash, who helped establish an endowment during his first year as headmaster at a private school in Indiana, says people are more likely to give to an endowment because it keeps giving.

“Once it’s invested, the original principal is never touched, so it can provide funding for years to come,” Cash says. “Of course, we still have annual fundraising and capital campaigns. Now, we’ll let people know we have an endowment.”

Once the endowment is established, the question is how to use the income it generates. Anne Westfall, development director for University School of Nashville, says people are sometimes confused by the concept of an endowment “for good reason.” “When you make a gift to the endowment, you’re not going to see a building out of it,” Westfall says. “You’re going to see people. You’ll see a teacher whose salary is paid by it or a student enabled to go there.”

According to a 2003 Cato Institute study, the national average for private elementary school tuition is less than $3,500. The average secondary school tuition is $6,052. In Tennessee, parents can expect the bill for a private education to start below $3,000 a year for a Catholic elementary education and rise to roughly $30,000 for boarding school. “In most schools, an endowment is what funds any kind of financial aid a school provides,” Cash says. “For our endowment, certainly one of the main purposes will be for financial aid. Last year, Cash says All Saints provided financial aid to less than 10% of its students. He’s hopeful a larger endowment will allow the school to subsidize more students.

In May, University School of Nashville received the largest gift in its history. The Malone Family Foundation of Englewood, Colo., awarded $2 million to the school’s endowment. The money provides scholarships to high-achieving students in the top 5% of their classes who would otherwise lack funding to receive a private education. The gift brings the school’s endowment to $7 million.

Westfall says the school just built two facilities and is in the process of completing a new fitness center. One of the school’s main priorities now is building its endowment. She says schools are going to increase tuition yearly because operating costs are always increasing, but an endowment helps relieve the strain on the operating budget. “Our endowment supports everything from financial aid and scholarships to faculty salaries and enrichment, to general operating expenses,” Westfall says. “We don’t segregate the funds; it’s all based on how the donor makes the gift. If they set up a scholarship, it can only be used for that. Our endowment is probably weighted a little more toward scholarships than the other categories I mentioned.”

In the 2004-2005 school year, 946 National Association of Independent Schools (NAIS) members awarded $815.7 million in financial aid. These same schools reported that 18% of their students received some financial aid. The average award for boarding schools was $14,430 and for day schools, $8,449.

“Having scholarships provides for more socioeconomic diversity,” says Westfall, who notes that those students in turn give back. “You read those stories all the time about alumni who are grateful that someone allowed them to go to a particular school on a scholarship, so they want to give back to that school.”

Faculty positions are also popular designations for endowment money. Attracting and retaining top teachers at private schools is a challenge, considering the average salary for a teacher at a non-Catholic private school is about $10,000 less than at a public school. “People will donate money to keep a math teacher at the school permanently, for example,” Cash says.

Westfall says she also often sees endowment money given in honor of teachers. “An alum will want to make a gift in honor or memory of a teacher who changed their life. So, when they set up an endowment fund, they’ll do it in that teacher’s name instead of their own,” Westfall says. “Teachers are really significant when people look back on their lives and think about who they attribute their success to.”

Jobe says Chattanooga Christian School’s endowment was mainly set up to provide benefits to teachers. “Our tuition covers 100% of the cost of education,” Jobe says. “Our financial aid and scholarship benefits are partially funded by our endowment earnings. Then, earnings are also used to fund chairs of excellence in different fields and specialties, where donors have specifically set aside money to fund programs for our teachers. But it mainly supports teachers’ benefits because we have a good benefit package.”

For donors to private school endowments, the benefits are very personal and non-tangible. “You get your name listed as a member—that’s the perk,” Randall says of the benefit in becoming a member of Webb School’s Burkhead Society. Then, of course, gifts made to a nonprofit school with a 501(c)3 designation are tax deductible.

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