Got Orthonomics in your Email Box?

Friday, October 15, 2010

"We Come to this Gift in a Position of Financial Strength"

Note: I just edited the posts as I didn't convey the content of the article correctly. Note to self, don't blog under the influence of lack of sleep.

Thank you to my reader (feel free to self-identify) who pointed out an article to me on a $15 million gift and added some point to ponder. The Solomon Schechter School of Essex and Union, New Jersey has received this gift from a alumni (a portion of the gift is dependent on bringing in matching funds, as is common with large gifts), the son of a founder of the school. The endowment funds are intended to ease tuition costs for middle-income families, enhance academic excellence, and improve the “bricks and mortar” facilities, school officials said. The fund (grant + matching funds) is eventually expected to spin off 1.25 million yearly for tuition assistance for 230 students.

Some interesting notes: The school has no debt! Their buildings are paid for. Hence the comment, "so we come to this gift in a position of financial strength." There has been a lot of talk of Endowment Funds in the Orthodox community, but (sorry for the gloom and doom), when we have mortgaged schools, Endowment Funds simply can't make a sizable dent in operating costs and tuition fees because the debt load is eating us alive. On a more micro level, imagine a scenario of two children each receiving a very large gift or inheritance from a parent, say in the $100K range. At the end of the year, the financial situation of the two siblings looks quite different. Why? Because one sibling used the funds to keep their family afloat, while the other didn't "need" the funds, but has now created additional income to enhance investments, education, and more.

Another interesting note is the tuition assistance method:

The school currently offers two kinds of tuition assistance — flat dollar amounts for middle-class grants (i.e., $5,000 for all middle-school students), which do not require full financial disclosure, and tuition assistance for those families requiring more significant aid. That process is more detailed and requires more disclosure.

Like the commentor who wrote me, I too have never heard a two-tiered method of dealing with tuition assistance. Certainly a method like this requires a great deal of trust in the parent body, but it is certainly a "kinder and gentler" way of providing more minimal levels of assistance. Interesting.

[Just a note to readers: I pulled yesterday's post off my blog, not because I had second thoughts about the discussion of Jewish philosophy as prompted by comments on VIN and a contrasting news story and an article on Cross-Currents, but because I received a comment for which I realized that the post and some of the underlying details would not being fully comprehended. As such, because of the emotional subject, I decided to pull the post down. I have so many interesting posts I'd like to make on financial issues, as well as a back log of guest posts, that I figured I'd just poll the post].


Abba's Rantings said...

i think kushner is nearby. i wonder how the tuition compares.

"Certainly a method like this requires a great deal of trust in the parent body, but it is certainly a "kinder and gentler" way of providing more minimal levels of assistance."

YNJ tried something similar, but in reverse (and on a smaller monetary scale). they had an optional "torah fund" (maybe $1,500) on the tuition bill that would go to tuition assistance. of course response was weak, the torah fund was scrapped, and the $1,500 charge was factored back into the standard tuition as a requirement.

the 2-tier might work in the solomon schechter because the money is coming from a grant partially earmarked for this purpose. but i'm sure this wouldn't work as standard policy in a non-endowed school.

no one wants to pay more than they have to

Anonymous said...

Two interesting points from the article - a portion of the $15 million is subject to raising matching funds, which I think is a good way to get people to donate. Second, in the past they have given $2 million in scholarships to a student body of 600. That's about $3300 per student. I wonder how that compares with the average MO yeshiva? Also, the school didn't get debt free overnight. It was founded 40 years ago, although its current buildings are newer.

Avital said...

Thank you.

Anonymous said...

What I found interesting is that this is a K-12 school, yet the middle class flat grant is only for the middle school, not the other divisions. This could simply be an attempt to keep those kids in school a few extra years, since in the independent school world there are many schools that start in middle school and might draw off those kids from SSDS. Better to get $10,000 per kid no questions asked rather than potentially not getting anything.

JS said...

A few points:

1) I'll self-identify as the person to sent the article to SL. I saw it while perusing the paper.

2) The $2 million was a previous gift and was used for endowment purposes as well. That round raised $5 million for an endowment in other gifts - see the article.

3) The flat dollar amount scholarship grant isn't JUST for middle school. The middle school was an example. Read the article.

4) Yes, Kushner is in the town over from Schechter. I believe part of the Schechter campus is on grounds that Kushner rejected for the location of its new campus. Wish someone could confirm. Also, Schechter's buildings are relatively new. Regardless though, they get the job done. I'd rather have an older building and no debt than a track and field and other fancy amenities and a huge mortgage.

Here are some selected comments I wrote to SL when I sent her the article:

Also interesting is that the school has no debt whatsoever. They don't even have a mortgage on their buildings. Every major Modern Orthodox yeshiva in the area is drowning in gigantic mortgages they used to build brand new start of the art campuses. I believe Frisch's 990 says the mortgage is around $40 million, for example. All these schools have large building fund requirements (usually $5-$6 thousand per family). I would imagine Schechter has no such requirement.

I find it amazing that with all the "machers" in the Orthodox world there has not been similarly large donations made to an Orthodox school. It's even more amazing how the Orthodox schools refuse to follow a sound financial model. It's not like these schools don't talk. The Orthodox schools all know about and communicate with Schechter. I'm sure they attend all the same conferences. Yet, the Orthodox schools go on a spending spree and rack up tons of debt and Schechter is fiscally sound and now is building a huge endowment. Go figure.

Dave said...

Of course, you can be Conservative and send your children to public school (or to a secular private school) and not be ostracized.

Or, more to the point, fear ostracization for it.

That gives Shechter a much less captive audience.

Miami Al said...


And, while the people running the Shechter schools no doubt believe that every Jewish child SHOULD receive a Jewish education, they don't believe that every Jewish child is ENTITLED to one regardless of circumstances.

Can't afford it because you make too little money, financial aid is available.

Can't afford it because you bought the biggest house you could and leased two expensive cars right before Kindergarten, no, you aren't entitled to attend for free while living beyond your means.

That's a HUGE difference.

And the families sending their children there WANT them their, and sacrifice to make that happen.

The entitlement aspect of Day School/Yeshiva has done more damage to the system than the leaders can imagine.

Anonymous said...

My kids go to a "community" Jewish day school and used to work at a MO Yeshiva. My experience is that my kids' school has well paid professionals who manage the finances. On the other hand, the school I worked at had a older man who was a friend of the board president. I don't think that he had a business degree and often lost pay checks that were in his care. I have heard from Orthodox friend that their kids' schools are often very disorganized, and that this disorganization has come to be seen as part of the Yeshiva culture.

Ariella said...

Anonymous, when you see the back end of anything, you are apt to see the disorganization. Yes, a lot of yeshivas are disorganized, but so are a lot of colleges run by degreed professional. I recently had dealings with someone who would regard herself as very well-educated and professional (and she is if you look at degree and work experience) but who has proved very disorganized. She just does not live up to deadlines and then breaks the later deadline and the one after that.

Anonymous said...

Ariella: Not so. I've been involved with some small non-profits and other organizations and have seen meticulous accounting, budgeting, planning and management. Of course that is not universal but its why I don't buy the every organization is disorganized/problematic if you get the insiders view argument.

JS said...

I can't speak for every MO yeshiva, but the one that I am familiar with has a professional staff of accountants and business managers (CPA's and MBA's). Things appeared to be well-organized and run well. Granted, I'm not on the inside of what they do, but things appeared to be on the up and up.

That said, the school is still in lousy financial shape. Just because you're run well on a day to day basis, doesn't mean that your long-term outlook is all that good. That brings me to the point of the post, the MO schools are all drowning in debt and have made bad decision after bad decision financially (e.g., building very expensive new facilities with amenities that require expensive maintenance and upkeep).

The point about not having a captive audience is a very interesting one and one I hadn't really thought about before. I don't think the MO schools actually use that rationale in their decision-making (why not build a huge facility and charge everyone a gigantic building find assessment, they have no other options, they'll have to pay it!). But, I do think it creates a warped sense of reality in that you have a really bad feedback loop in which both the admins and parents keep demanding more - there's no shutoff valve (through people leaving due to costs), so to speak, to keep things in line.

Miami Al said...


It IS in their thought process... as in, they never think, if costs go up, parents will send their children to public school.

The Yeshiva is focused on outcompeting with other Yeshivot for students, by offering more amenities. They are focused on body count (meaning, families on scholarship), or donors, so the squeezed people are ignored.

There isn't a concern about holding costs down to attract students. It's implicit in the system. The leadership of non Yeshiva schools, Jewish and otherwise, is well aware that they are competing with the public school system, whose cost is zero, and it plays out in how they structure themselves.

Anonymous said...

Miami Al made some good points. The school I worked at was actually located in a good public school district where the kids could have gotten a superior education for free. They had a captive audience, however, and no incentive to hire a professional office manager. Checks were literally lost in the managers office and we sent hours looking through his file cabinets for them.

Ariella said...

Anonymous, I never said all. I said "a lot." I've witnessed the back end of several colleges as an instructor, so I do know what I'm talking about.

sethg-prime said...

I send my kids to a nondenominational Jewish school (Jewish Community Day School, in Watertown, Massachusetts), and their application package includes a “short form” financial-aid form: if your family income and the value of your house are below certain (fairly high) thresholds, you get something like a 10% discount on the tuition.

(I don’t remember the details because, nebboch, my family uses the long form.)

Ezzie said...

(Just catching up on old posts)

From what I've learned about the frum community's economics so far, a two-tiered system would actually probably work quite well, though differently: Flat-rate tuitions for those who don't wish to disclose, vs. full disclosure for those who want a reduction.