Amid the current economic recession, school fundraising events are generating a bit of controversy. Is it insensitive to hold the annual live auction seeking large bids for fancy international vacations and Super Bowl tickets? Is it even realistic to think parents and other friends of a school will step up to spend a lot of money in this environment?

Unfortunately, the financial model of many independent day schools doesn’t offer many alternatives. Tuition may cover only 75% to 80% of the true cost of educating a child in a top-flight program with a low student-teacher ratio. Investment income can help to close the gap, but only if your school has a sizable endowment fund. (And schools that depend heavily on endowment income are of course facing their own problems after the stock market decline.) This leaves annual operating support – primarily from a school’s “annual fund” and major fundraising events – to plug the hole in the budget. And this means that a successful live auction each year may be a necessity to avoid a deficit.

Even worse for independent schools, when the economy turns down, the budget gap grows bigger. Requests for financial aid rise as families are increasingly unable to afford the high tuition. Meanwhile, schools may raise tuition by less than they would in a good economic environment.

In the longer term, schools can take a number of steps to address economic issues such as affordability. They must focus on endowment-building, which requires discipline and a long time horizon. They must also find ways to manage costs more efficiently. The objective is to make cuts that don’t hurt the academic or overall student experience, but ultimately schools may need to make difficult decisions that eliminate programs or alter student-teacher ratios. And schools need to develop innovative fundraising ideas to complement or replace their traditional methods.

But for now, we get ready for the big auction, with the recognition that many families are suffering and that some may find the notion of a live auction insensitive, and yet with the conviction that this is still the right way to go. The school truly needs the support of those who are able to give it. We need it as always to maintain excellence, and we need it especially this year to help out those families who have had a change in fortune and require assistance to stay in the school. With no small amount of trepidation, we offer up seven nights in Tuscany.

Today’s post is by guest poster Charlie Gofen, who works with Don as board chair at the school he runs. Charlie is hoping to put in the winning bid at the upcoming auction on the “Dinner with Mike Ditka” item. Fair warning!