Opinion: The Jewish charities crisis, a perfect storm

In My View

By Azriel Ganz

Issue of Dec. 26, 2008 / 29 Kislev 5769

The devastating impact of Bernard Madoff’s Ponzi scheme on Jewish charities is hard to even fathom. Hundreds of millions of dollars have gone up in smoke. Yet, long before the Madoff scandal came to light, many Jewish charities, particularly those run by Orthodox institutions, were already beginning to suffer. A perfect storm of factors coming out of the financial meltdown has combined to create tremendous pressures on schools, shuls and other organizations both here in the U.S. and, especially, in Israel. Regrettably, it is likely to get much worse before it gets better.

Ironically, the crisis started in Israel, mainly as a result of the devaluation of the dollar relative to the shekel. Meshulachim would complain of returning from a visit to the States with the same amount of dollars as they had in previous years, only to find that the value of those dollars had gone down by 25 percent or more. Because so much of their budget was raised in dollars, they suddenly found themselves with big holes to fill.

Today, of course, although the dollar has strengthened somewhat, these same meshulachim are returning with far fewer dollars because of the increasing impact the financial crisis is having on their donors. Domestic meshulachim, too, are finding the going rough.

No doubt, this will severely test the current Chareidi paradigm, where a large percentage of men learn full time. In all likelihood, the financial crisis will be an agent of change in that world (but that topic is beyond the scope of this article).

It is abundantly clear that these same pressures are being felt by virtually all Jewish mosdos, from Modern Orthodox to Chareidi and to all social-needs related institutions regardless of hashkafah.

Under halacha, Jews are required to give maiser (10 percent) of their income. So, based solely on simple math, there will likely be much less maiser money available as many people lose their jobs, others, particularly in the financial sector, receive much smaller bonuses, and many businesses, especially but not exclusively those that are high-end, are likely to suffer as a consequence.

But I think it will be even worse than that. Many people, especially those who have previously given generous amounts of tzedakah, donate not on a straight line basis but on the basis of how much discretionary income they have available after they take care of their sizable personal “nuts.” Many give a much higher percentage of their income once they have covered their not insubstantial living expenses (think tuition, mortgage, car payments, real estate taxes). With compensation being down so much, many people will have far less discretionary income.

Of course, others are in much worse shape and have lost their jobs altogether. They may struggle mightily just to pay their basic bills. Tuition and shul memberships, to say nothing of other more “discretionary” charities, may be beyond their reach.

What are the implications?

When people start to feel financial pressure, the monthly payment that goes first is almost invariably tuition. This is not surprising. As among missing mortgage payments, real estate taxes, car payments and tuition, the one with the fewest consequences is tuition. Schools will not toss a kid out for failure to pay tuition, particularly under current circumstances. Sadly, what will happen (and, I am told by reliable sources, is already happening in a number of schools), is that many schools will fall behind in paying teachers.

Behind even tuition in the hierarchy is shul membership. Most people who are in financial distress will not even consider paying shul membership. And, of course, the shuls are even less inclined (and have far less leverage) than schools to do anything about it.

Since many shuls and schools (with some notable exceptions) live hand to mouth even during the best of times and do not have much in the way of reserves, they are likely to suffer extensively.

Exacerbating the situation is that in addition to the loss of jobs and the diminished incomes, many people have also lost a considerable amount of wealth because of the general decline of their investment portfolios. Even those who were once generous givers may not feel comfortable or be in a position to bridge the deficits that are sure to arise.

Certainly the situation for other Jewish organizations is at least as ominous. If there is less money available for the two primary Jewish institutions, where does that leave organizations that are farther down the priority list and rely much more on discretionary income?

Interestingly, many of these organizations may be better able to weather the storm. Many are better run than most schools and shuls and have modest reserves to call upon. Whereas the highest expense for schools by far are their teachers, many less well run outfits also have much more fat to cut than schools. While the only way to really save significant money in a school is by reducing the number of teachers (not a realistic option), many large charitable organizations have become bureaucratic over time and tend to over hire, like any bureaucracy. They are going to have to make some hard decisions and cut out the fat. Some, of course, will have to cut into muscle and reduce some of the services they offer.

The current environment is likely to cause much distress in the Jewish charitable world, just as many of the services they offer are going to be needed more than ever. And, the pressure is certain to last a while, even after the economy begins to rebound.

Consequently, it is incumbent on all of us to spend our tzedakah money wisely, focusing on those institutions who use their money wisely, keep expenses as low as possible and are the most important to us and our community.