Thursday, September 18, 2008

The Big Donors are Going Broke

I have so many topics to revisit and write more on. In the meantime, dare we speculate about what the troubles in our economy mean for the Orthodox world at the Macro an Mircro levels?

Frequent commentor Mark writes, "I want to mention something that really ought to become the subject of another blog entry. This year (and the next few) in particular is going to be very difficult. With all the upheaval going on at Wall Street, and knowing that so many of our wealthy school benefactors earn their money there, I have little doubt that fund raising is going to suffer. And it may suffer a lot. Especially in New York!" I concur.

And an anonymous reader pointed out an article on Hamercaz titled "Jewish Charities Fear Wall Street Chaos Will Hurt Donations." It should come as no surprise that major donations are essential to the budget of non-profit organizations and that these major donations are often cut from investment earnings (passive income) rather than from actively earned income.

One can't but wonder how the Orthodox world is going to fair during this economic downturn. We might not be able to rely on donors who are underwriting large portions of non-profit budgets. Less availability of credit means that families who have been paying tuition "on the house" aren't going to have this source of cash (not that I think home equity lines of credit are a good idea. . . but let's not kid ourselves about how much of this lifestyle is being funded by credit rather than cash). Job loss in the financial sector from executives to the kollel man turned mortgage agent is sure to hurt numerous pocketbooks of tuition paying parents.

And what about those who were already on the edge? Our own local tzedakah organization that helps with utility bills and food has had an increase of requests lately. Another commentor L writes: "The turn in the economy will probably also impact many families as it has already severely impacted the fixed-income elderly. Those who are trying to raise large families might also be asked to give their tzedukah to their own grandparents rather than to yeshivas." L points to an AARP magazine article regarding a trend of the elderly becoming increasingly reliant on their own family to help made ends meet. In the frum world, as we know, there are a number of parents, even middle age parents, who are reliant upon small and large gifts. What happens if those gifts have to start going the other direction because investments are down and prices are up, up, up?

L also asks, regarding tzedakah agencies, "Do the recipients outnumber the donors?" I have no idea. But I do know that tzedakah agencies often have to pick up the pieces after families pay tuition and we already know that schools offer some sort of discount to 1/3 to 75% of students. Therefore, I think we can safely make a guess that recipients outnumber donors, which of course is a problematic factor when we ask what the economy might do to Orthodox community in the next couple of years.

Just some rough comments. I'm not an economist, although I enjoy reading articles dealing with economics. Let's hear your own comments. I'm especially hoping to hear from those involved with tzedakah organizations that help with household bills and those who sit on tuition committees.


DAG said...

It is going to be a very rough year or two (3?) in Orthodox Non Profits...I hope we all realize that this is the sign that we MUST reform the Jewish organizational structure.

News Flash: You do NOT have the right to run your own multi million dollar non profit organization because you knew how to learn in Yeshiva.

Time to combine forces and share infrastructure.

Dave said...

One more thing to consider is that as people or organizations resort to bankruptcy, the rules change drastically.

ProfK said...

A local tzedaka with which I am active already started feeling the economic pinch last spring, for all the reasons you mention. It is now almost the sole support of 4 families in the neighborhood, 3 because the primary earner lost his job and couldn't find another one, one because of illness. And there are other, less well known about families that are being helped out as well. Funds that usually come in voluntarily at this time of year aren't coming in in the same amounts as last year. Some of the larger contributers worked in the financial industries that recently went under and they are just not giving or not giving to the same degree as last year. The tzedaka is in the position of having to cut down on some of its programs, even the essential ones. One answer to what to do is that the community is being asked to keep its tzedaka dollars local. Many community members have signified that they will do so. The appeals in all the shuls for yom tov are going to be for local tzedakas. But then the national or non-local tzedaka organizations are going to be low on funds also.

Ahavah said...

This is exactly the point I've been trying to make for two years now, since the mortgage mess and housing market decline first starting rearing its ugly head - this resulting credit crunch could be seen a mile away, that and the increase in gas/diesel and home heating oil due to peak oil production, as well as the increase in electric bills due to growing demand and aging infrastructure. The long and short of it is that we cannot rely any longer on home equity, credit cards, or loans to finance everyday living expenses - much less tuition/s, marriages, bar/bat mitzvot, and other simchas.

We are going to have to live within our means - and that means we can't do everything we want to do on the scale we want to do it. Some people have been preparing for the obviously coming downturn in the business cycle (which could last until the late 20-teens, they're now saying). But, many people have not been planning for this reality. It's going to get ugly, IMO, because people who have been receiving tuition breaks and charity are going to be very surprised when those things are no longer fully available - if available for them at all. The standards for receiving tuition breaks and charity are going to have to tighten up considerably - and people are going to be caught off guard. Regrettably, the vast majority of us cannot increase our charitable giving to make up for the shortfall.

So, as a community, we will have no choice but to find other ways of doing things than we have been doing them in the past. We should have been in the starting stages already toward self-sufficiency, but better late than never, I guess.

Dave said...

This isn't limited to the frum community. For years financial advisors have wondered what it would take for people to adjust their spending habits.

The answer turned out to be $4 gas. Most people change their habits only when they have no choice.

Anonymous said...

how about just having husbands work
and cut back on the kollel

Anonymous said...

Another way that NFP's are going to take a huge hit is end of the year charitable donations that many people have made in the past to offset taxes. Fewer bonuses, higher write-off's due to losses in the market will not require many people to donate as they have in the past.
In addition, many NFP's work off of pledges and make their commitments based on pledges. After the dot com bust in 2000 many NFP's took hits because donors could not come through on their pledges.

I think consolidation of NFP's, and potetnially schools, could be a huge step forward. I think they are all doing a great job, but their administrative overhead is unnecessary in many situations. The biggest question is what do the people who are currently working for NFP's that get combined? This is the very reason that you almost never see mergers in the Jewish community, while this happens a lot outside of the Jewish community even secular NFP's.

Anonymous said...

as a physician in northern jersey who sees lots of patient in the frum community, i am suprised and shocked by the numbers of families who are on medicaid policies while the husbands, who are able bodied, are sitting in kollel employed by "talmudical research", collecting 'salaries' low enough to qualify for medicaid.
as far as i am concerned this is a chillul hashem (even thought learning is desirable), because we are asking the non jewish and jewish taxpayer to foot the bill for able bodied people who want to sit on learn while living on the dole.
in some communities (chassidish) it seems that all of the patients i have seen are on medicaid.
(actually the insurance card looks like real insurance and says healthnet but when you submit it pays medicaid rates.
it one thing if you cant earn a living because of lack of skills intelligence etc, but another thing when you are capable and smart enough to get a real paying job, support your family and your community but instead you conscioulsy decide to make the us goverment (or state) pay instead.
i for one am embarrased.
while it may not really be illegal to call it talmidical research and pay soemeone to be in kollel as their 'job', i think it is disingenenous

Orthonomics said...

Regrettably, the vast majority of us cannot increase our charitable giving to make up for the shortfall.

I don't know if we are representative or not, but we are having to cut back on charitable giving because that is just the reality.

how about just having husbands work
and cut back on the kollel

Less kollel is just a reality I suspect we are seeing. But this is very simplistic unless you believe all financial issues stem from kollel, which I do not.

Dave said...

We're fortunate enough to be able to increase our charitable giving this year.

We will be giving more to the National Center for Jewish Film and the National Yiddish Book Center. Almost all of the rest of our giving is in the local community, which is about as far "out of town" as you can get without falling into the Pacific.

Anonymous said...

The OU webcast taking place this Monday Sept 22, called Credit Meltdown, is aimed at reducing debt in all families. I am happy to see some recognition that Jews (and others since anyone can log on) need to protect themselves from chronic debt.
I wonder what percentage of people who end up needing help from tzedukah organizations or who solicit tzedukah door to door are simply in debt from overspending rather than from some disaster such as an illness.

Orthonomics said...

Thanks Anon. I have to remind my readers.

Anonymous said...

I would strongly suggest that organizations start cutting back NOW rather than waiting for the inevitable budget shortfall. Especially schools!


A Living Nadneyda said...

We've definitely started feeling the pinch here in Israel; we felt it the moment the dollar dropped in value and donation commitments made in dollars suddenly translated to only 2/3 their shekel value when originally promised. Now it's just getting worse.

Why do the least fortunate always bear the greatest burden when the rich play around with other people's money? It's a major injustice.

rosie said...

Yad Eliezer in Israel, a food bank recently closed due to running out of food. American food banks have seen a 30%increase in requests for assistance but the donations are down. There are canned good drives but people often donate old canned goods that have been sitting in their cupboards and the nutrition decreases with the age of the canned good. If is questionable if canned goods that are more than 3 years old are worthwhile at all. Some canned goods such as pie filling are totally non-nutritious but are usually given away at canned good drives. Sloppy joe sauce also does little for nutrition. It is really sad to see that the hungry are given food from the back of other people's cupboards. Children thrive best on fresh food. Children who are deprived of fresh food often look malnourished.

ProfK said...

In the US at least all canned and bottled goods have a use by date stamped on them. Food drives need to be checking the dates on the donated cans and chucking any that are past their use by date. Anything before that date the government says is fine to use.

The community food pantries here have a united drive before Thanksgiving time. All the local supermarkets cooperate by having extra special sales on canned and bottled goods and packaged foods at that time. Everybody wins that way.

rosie said...

The local food pantry here gives about a week's worth of groceries, which usually is when the food stamps run out- the last week of the month. For the unemployed, it appears that they need a combination of WIC, food stamps and food banks. It also helps if they know how to budget the food and food stamps. I have seen food pantries give out food that needs to be cooked, to individuals who lack the means, ability, or motivation to cook. Staples such as dried beans can ward off starvation, but only if someone can or will cook them. Obviously canned beans are a better choice for someone who will either eat them cold or reheat them but no other prep is required. It is sad to think of those who have to live that way but Boruch Hashem, there is that bit of safety net. It is apparently easier to obtain food for the poor by asking people to donate cans than by asking them to donate money.