A policy that simply is not working
If you are a Lubavitcher, today is a really bad Wednesday. Articles pertaining to the financial crisis of two different Lubavitch schools in two different locations appears on my Google Alerts this morning. The same issues that are causing financial collapse of these schools are certainly not unique to Lubavitch, so read on.
The Canadian Jewish News is reporting that the 68 year old Rabbinical College of Canada (RCC) needs $600,000 to get out of their current cash crunch. Of course $600,000 won't actually solve the issue. The issue is that the school has expanded with a high birthrate to 400 students, but revenue hasn't expanded along with it. The policy of the school is to accept all applicants, regardless of whether or not they can pay. Most, of course, can't pay. Naturally, a growing student body needs a larger building. Two years ago a $1,000,000 was given for the purpose of expanding the building. But construction cost $2,500,000 and the additional amount was borrowed.
So the situation now is that the revenue stream from tuition has not increased, donors affected by the economy are not donating, and a larger student body means more staff costs and more overhead costs in the form of utilities and maintenance. [Something to consider: The hidden costs when accepting a donation].
The campaign to get out of the current cash crunch has been described as "tepid." The solution certainly must include a tuition raise. In a previous post we learned that in (at least some) Centrist/Modern Orthodox schools tuition includes a premium to cover those on scholarship. Yeshiva, Bais Yaakov, Lubavitch, and Chassidish schools generally set tuition lower than the average per student cost. The Canadian Jewish News reports the tuition is set at $5,200, while the average cost per student is $8,000. Of course, the larger problem is that the average family is only paying between $2,000 and $3,000 per student.
I know minimum tuitions are considered abhorrent by many. Part of the reason I support minimum tuitions is because I believe that when parents know that they must be responsible for pulling a certain amount of weight, that they will make decisions that make that possible (simple economic theory).
Meanwhile, down in Flordia, another school, the Lubavitch Educational Center, is being sued by Regents Bank in a foreclosure lawsuit to the tune of $8,000,000. In 2004, the eight million was borrowed to finance three buildings. There is a main campus, another campus, and and an apartment building. The school itself is over 40 years old.
Here too, donations have tapered off in the economic crisis, the school has expanded to serve 800 students, and 90% (!!!!) of them are reported to be on some sort of scholarship. It doesn't surprise me that a school where nearly ever student is on scholarship can't pay its mortgage, just like it doesn't surprise me that families that decided to take out mortgages many times their incomes can't pay their mortgages.
Sadly, the head of the school, is clearly out of touch with the reality. It seems that he believe all should be in the tzedakah business. His response to being sued is reported by CBS4 was: "It's even more difficult and astonishing when you hear a lender say callously to you 'just give us the building and close down.' What happens with all those student that were serving that have no where to go?"
What happens to those students? I'm not sure, but I figure the parents will figure something out and the community will assist in those decisions. But to expect Regents Bank to "be understanding" is quite frankly ludicrous. They also are living during the "seven bad years" and likely won't be bailing anyone out.
Lest non-Lubavitchers think that they share little in common, this article in the Jewish Week demonstrates that when it comes to finances, there is plenty of commonality. All should take note before the new school year begins.
Reed College has discovered that "no matter what your financial circumstances are" doesn't pay the bills. Now is the time to make peace with this and concentrate on trying to serve the most students and their families, even if serving all is impossible.