Light Collection Plates

The financial climate is prompting many theological schools -- small, endowment-dependent institutions, many of them -- to consider mergers and other new ways of doing business.
July 27, 2009

Seminaries have always operated on thin margins. Unlike business or engineering colleges, or universities broadly, these are of course institutions that have never assumed that many of their successful graduates would someday be giving 7-figure gifts. “What this economy has done,” says Daniel Aleshire, executive director of the Association of Theological Schools, “is pressure already-pressured schools.”

Seminaries are typically small in size -- unable to enjoy economies of scale -- and more endowment-dependent than other types of higher education institutions. Across the sector, there's wide-ranging concern about student debt and a sense that seminaries should only raise tuition so much. All this shows in the numbers: Across the range of ATS-accredited schools, median enrollment in fall 2008 was 174, median budget was $4.1 million, and median endowment $8 million (that was pre-crash; by January, Aleshire estimates, median endowment values had fallen to about $6 million).

On average, across the seminaries, 36 percent of revenue comes from tuition, and 25 percent from the endowment (the rest comes from gifts and other sources).

“So the market goes down and it takes their endowment down by a third, you do the math….” Aleshire says.

What it equals to is, in this environment: The status quo is under scrutiny. Business as usual may, for many institutions, make less and less business sense.

Among the likely outcomes, “I think we’re going to see some more mergers,” says Aleshire, who at ATS is spearheading a Lilly Endowment-funded project, "Institutional Viability and Financially Stressed Schools." Over the course of 18 months, ATS hope to work with 15 theological schools, representing a diverse range of economic models, to identify new approaches.

“Is there some thinking outside of the box that we haven't done?" asks Aleshire. "We’ve done the in-the-box thinking as much as we can. Are there models that these schools can move to, that would make them, long-term, more financially viable?”

Surviving, But With an Aim of Thriving

The Great Recession seems to be raising variations of this question of financial viability at seminaries across the country.

Take Andover Newton Theological School, in Massachusetts, and Colgate Rochester Crozer Divinity School (CRCDS), in New York, which have opened talks about combining resources. What's currently being discussed is that a merged entity would continue to offer theological education at both sites, according to CRCDS's president. “The financial crisis precipitated or moved us to do what we should have been doing in any case,” says Gene Bay, president of CRCDS, itself the product of multiple mergers over the course of its history (hence its mouthful of a name).

“Seminaries depend so much on endowments and we’ve obviously been somewhat devastated with the financial business that’s been going on,” says Bay. CRCDS’s two endowments (the separate investment streams are a relic of a past merger) together declined about 26 percent last year, to a total of around $19 million. The institution relies on its endowment for about 50 percent of its budget (more than the median for ATS schools, but not as much as some -- keep reading).

That said, Bay continues, "We really see this not so much as a response to the financial crisis as it is an opportunity to put something together that would really be innovative and a strong institution for the 21st century. Neither one of us are just interested in a collaboration that is about survival.”

Andover Newton is a seminary of the United Church of Christ, but serves students from a diverse range of denominations; CRCDS likewise prepares students for ministry in the mainline Protestant denominations, and also has a focus on African-American congregations. "We have a lot of things that we think are common to the two schools,” says Bay, who agrees, looking across the range of theological schools, “I think there will be more mergers. I think there will be closures as well.”

“I think you’re going to see all forms of collaboration. There will be some mergers, but I think you’ll see more consolidations and consortia and affiliations that are designed so that shared programming and so on will become a common approach to address the economic downturn,” says Robert E. Cooley, president emeritus of Gordon-Conwell Theological Seminary.

Cooley advises theological institutions on possible mergers and affiliations (and other topics) as a governance mentor for the nonprofit organization, In Trust. He maintains a certain hesitancy about joint ventures, however, a hesitancy born out of the birth of the theological schools themselves -- founded as they were with distinct and well-defined missions and core values. "It's not a matter of just putting theological schools together in joint ventures, but it has to engage schools that have complementary missions and values," he says.

Indeed, while financial exigency is typically the driver, a collaboration based only on financial considerations is unlikely to succeed, he says. “Unless there is compatibility in mission and the educational system that grows out of that mission, all the financial manipulation that a board or president can develop will not guarantee success,” he says.

To take one example of a recent merger, in 2008, the Weston Jesuit School of Theology, then a free-standing institution in Cambridge, Mass., folded its assets into Boston College, becoming part of the Jesuit university's new School of Theology and Ministry. “We brought everything with us. We brought a faculty of 17, about 180 students, and an endowment of approximately $40 million. That simply became part of Boston College," says the Rev. Richard J. Clifford, the school’s dean and professor of the Old Testament

“It wasn’t primarily money that drove it, although probably we’re going to realize some economies of scale,” Father Clifford says. Instead, he says, it was Boston College President, the Rev. William P. Leahy's, conviction -- “which I share myself -- that this is just good education and it helps to locate Boston College as distinct and unique and therefore attractive for a lot of people," Father Clifford explains.

Weston, meanwhile, gained access to Boston College’s philosophy, theology and other academic departments, its library, and, generally, its more abundant resources (allowing for better health benefits, for one, and advertising for the school, for another). Plus the use of Boston College's name: "We like to think we were a pretty good school, but we weren't very well-known. But when Boston College's name was used, it's got currency in a way that Weston Jesuit School of Theology did not."

“We could have continued the way we were … but I don’t think we would have continued with as much vitality as we now have,” continues Father Clifford, who further adds that the situation for seminaries in Boston is instructive. Among the nine theological schools that comprise the Boston Theological Institute, three have entered into or are discussing affiliations – Weston, Andover Newton, and the Episcopal Divinity School, which last year sold seven of the buildings on its eight-acre campus to Lesley University, and entered into an arrangement to share certain facilities, including the library. (In another case of threes, Episcopal Divinity School was also one of three Episcopal seminaries that made significant structural changes in early 2008.)

“It shows you that you have three schools out of nine here in Boston which are all well-established schools that are all moving towards affiliations with other schools. It gives you a pretty good snapshot of what schools are doing in order to survive,” Father Clifford says.

A Separation

While many seminaries seek out new partners, in Chicago, one partnership has come apart. McCormick Theological Seminary, a Presbyterian institution, recently announced plans to begin extricating itself from a real estate arrangement with the Lutheran School of Theology at Chicago (LSTC). McCormick has shared LSTC's classroom space since 1975 and, just in 2003, McCormick completed construction of an administration building on LSTC’s campus (the land for the building obtained on a long-term lease from LSTC).

In a June message, President Cynthia M. Campbell outlined McCormick's challenges, including an especially high level of endowment dependence. McCormick relies on its endowment to fund more than 70 percent of its budget; like at many institutions, the endowment value fell 30 percent this past year (to about $70 million). The seminary also has about $30 million in debt from construction of the administration building and renovation of residential facilities. “The 5460 [administration] Building is a beautiful, architectural-award winning building that was built with more than enough room to accommodate faculty and staff offices, student lounge and conference spaces. It has been a blessing to have this abundance of space. But as we look to the future, this is, in fact, more space than we need,” wrote Campbell.

"The other challenge we face," Campbell wrote, "is that the classroom building that we share with LSTC is both more space than we need and is extremely expensive to occupy due to the age and condition of the building systems. For some years, we anticipated sharing the cost of much-needed renovations in the classroom and library wings of the shared campus with LSTC, but it is now clear that doing so would put an intolerable burden on each school's finances," her message continued.

“Institutions have to make choices. You have to decide do you want to devote higher percentages of your resources over time to your real estate or your physical plant and operation, or do you want to devote those resources to your core mission,” says David Crawford, vice president for administration and finance.

McCormick's not moving right away, however. Realistically, says Crawford, it’ll likely be at least two years before the seminary sells its administration building. McCormick has renewed its agreement to share classroom space with LSTC for one more academic year, and has begun looking at less expensive real estate options -- with less square footage -- in Hyde Park (its current neighborhood).

Needless to say, LSTC is bracing for a financial hit once McCormick does move. In anticipation, the seminary cut its annual budget from $9.8 million to about $8.5 million. Without getting into specific figures, with McCormick gone, “We would essentially have to pick up twice the amount that we are currently contributing to this shared operating expense arrangement. It's not apparent to me that their departure would necessarily lead us to operate these two wings in any fundamentally different ways that would have consequences for a reduction in the cost,” says James Kenneth Echols, LSTC’s president.

“We’re looking at a whole series of different options, which involve potential partners. The partnerships may not be on the same order as the partnership we’ve had with McCormick," says Echols.

“We have been grateful for the partnership that we’ve had with McCormick. We are certainly disappointed in their decision to engage in this process of orderly disengagement [from LSTC's campus].

"But we are very much focused on LSTC’s future and recognize that our future is not going to be determined by what McCormick decides.”

Present Pain, Future Gain?

Nazarene Theological Seminary, in Missouri, is another theological school in transition. The institution has relied on funding from its denomination, the Church of the Nazarene, to a greater extent than most seminaries. And, as Aleshire, from the Association of Theological Schools points out, just as public universities have experienced steady declines in relative state appropriations, so have seminaries generally seen reductions in direct funding from denominations.

“We’re just under 50 percent of our operating budget, currently,” says Ron Benefiel, the president. “It’s declining, the actual amount from our denomination. Everything taken into consideration, it was off by about 10 percent for this last year. And we're budgeting on an additional 10 percent [reduction] next year.”

Enrollment also dipped last fall – from 322 in fall 2007 to 280 in fall 2008. It rebounded a bit to 288 in the spring and should, Benefiel says, be stable this coming fall.

“In some ways we were impacted both with decreases in denominational support, lower enrollments, plus lower earnings on the endowment, which then meant we didn’t have as much for scholarships, which also then affects enrollment,” says Benefiel.

Amidst this, however, the institution received the largest grants in its history -- $500,000 from the Kern Family foundation and $400,000 from the Henry Luce Foundation, to “re-envision” the seminary.

“What’s interesting to us is we’ve had to make some pretty good cutbacks in our operational budget, but all of those are lined up with the kind of seminary we’re becoming and we have these two grants to help us make the transition to what you might consider a more mobile, a leaner, a more flexible kind of seminary.”

What would that look like? Benefiel describes developing “teaching congregations,” akin to teaching hospitals but for seminary students, establishing extensions of the seminary on the coasts, and developing more global collaborations (the Luce grant is "to develop collaborative programming with a consortium of seminaries in Asia, Africa and South America").

He expects online enrollments to continue growing (last year, 16 percent of the seminary’s course hours were taken online, up from 9 percent the year before, and 4 percent the year before that). “Our first choice is still to invite students to Kansas City and immerse themselves in the community here, but an increasing number are preferring to take courses online at least in a way that supplements what they take in the classroom on campus,” Benefiel says. (The seminary doesn't offer any degree programs fully online, however -- "We continue to affirm the value of at least a portion of a degree being in residence, which can be just coming for two-week modular courses.")

Yet, how to expand outward, nationally and internationally – a common discussion point at many seminaries -- but also be leaner, financially?

“In some senses, you’re exactly right. It is a little precarious here to try to move in these directions,” Benefiel says.

He adds: “We think we can do this.”


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