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JewishJournal.com

November 19, 2008

Perfect storm for charities— contributions go down and requests go up

http://www.jewishjournal.com/philanthropy/article/perfect_storm_for_charities_contributions_go_down_and_requests_go_up_200811

Rachel Bookstein didn't realize just how anxious she'd become wondering whether Beach Hillel in Long Beach would be able to raise the funds it needs this year.

Contributions had declined -- $500 here, $100 there. Folks had been hard hit by the economic crisis and were paring down their philanthropy; many Bookstein spoke with said they intended to give their limited support to cultural and scientific organizations instead right now.

"For us," said Bookstein, the Hillel executive director, "losing those small donations makes a big difference."

The big question was how generous Beach Hillel's three biggest supporting families -- Barbara and Ray Alpert, Diana and Alan Alevy, Jim and Liz Breslauer -- would be this year. Bookstein didn't consciously consider the question -- she believed they would at least maintain their giving, maybe even increase a bit.

Still, in such a tough economic climate, she knew deep down that nothing was certain.

But her instincts were correct. "They've all pledged to not reduce it through the [school] year," Bookstein said. "When I was told by them, an unconscious concern was relieved. I didn't realize I was so very tense. I had pushed out of my mind the fact that it may have been out of their hands."

Indeed, there has been a direct trickle down to nonprofits from the current crisis in the global economy. Even as American automakers Ford and GM are burning through millions a day just to keep the lights on and Wall Street investment firms are disappearing, the endowments of nonprofits are shrinking as well, along with the disposable income of donors who might otherwise support those organizations.

Daily swings in the stock market have been so violent that on a single day the Dow has been down 700 points before lunch, only to close up 300. More often, it's gone the other way, falling about 40 percent from its peak in October 2007. Even last summer, as fuel and food prices surged, unemployment climbed among Jews along with the larger population. But few foresaw a crisis this severe coming.

Today's economic reality is so dismal and its expected recovery so far down the line, that a person could be forgiven for being nostalgic about summer 2008.

ALTTEXTSomething needed to be done. Something maybe only God could do. So the leaders of Israel's largest seminaries designated Nov. 13 a day of prayer for Jewish philanthropists -- "a united effort to storm the gates of heaven and plead for the financial health of Jewish philanthropists, so that they can continue to support Torah institutions in Israel."

No one has gone unscathed by the convulsions of the global economy. Even the wealthy are losing money -- and if they cut their charitable giving, it is likely to ripple across the Jewish nonprofit sector.

Birthright Israel appears to be an early victim.

The charity, which sends Jews between the ages of 18 and 26 on all-expenses-paid 10-day pilgrimages to the Jewish state, had a sugar daddy in casino mogul Sheldon Adelson, who gave a combined $60 million in 2006 and 2007 -- about a third of the program's operating budget. Since October 2007, the value of Adelson's company, Las Vegas Sands, has plummeted from a stock price of $138 to just above $5 on Nov. 12. Adelson personally has lost more than $30 billion.

Not coincidentally, Birthright announced this month that it is slashing its budget by $35 million, down from $110 million. Next year, the organization plans to send only 25,000 young Jews to Israel, compared with 42,000 this year.

A weak -- though improving -- dollar has added to the decline in funds for organizations doing work overseas. The Jewish Agency for Israel, for example, announced last month that it would cut $45 million, or about 15 percent, of its 2009 budget. This followed the slashing in June of 60 jobs at the American Joint Distribution Committee (JDC), which was facing a $60 million budget deficit, and cuts in May of 32 jobs and $3.2 million in expenses at the United Jewish Communities, the umbrella organization for North American federations.

In past years, nonprofits have been expanding programs and operational budgets. Now leaders are worrying about how to maintain revenues and evaluating where they can cut corners, save on staff or draw back services.

Many local Jewish organizations say that so far donations are still on pace with last year -- but the last six weeks of the year typically account for a huge chunk, in some cases 20 percent, of the annual campaign. And these are tough times to be asking for money.

"People are looking at their wealth, their incomes, their holdings, and they are concerned. But it is sort of like gazing into a crystal ball," said John Fishel, president of the Jewish Federation of Greater Los Angeles. "We've had very, very good results on our phone squads. We've had very few people who said no. These are smaller donors; that makes us cautiously optimistic that we will finish well. But 2009 remains a question mark."

Even if donations are flat, nonprofits providing social services will have to struggle to keep up with growing demand for services.

The New York Times reported recently that in the past four months demand for food aid is up 40 percent in some of the hardest hit parts of the country and 20 percent even in the cities with the strongest economies. The three Los Angeles pantries run by SOVA Community Food & Resource Program have seen an increase of about 1,000 visits each month since July. Crowds waiting outside before doors open have come to resemble Depression-era breadlines.

"I don't know what is going to happen," said Paul Castro, executive director and CEO of SOVA's parent, Jewish Family Service (JFS). "I am hoping that people will continue to make the social needs of the community a priority, but I'm not sure. People are hurting."

That much is evident from the phone calls that have flooded into JFS' centralized intake center, where two staffers are responding to 350 requests a month for assistance. Many of the cases are beyond JFS' capabilities and have to be referred to other agencies.

"Though we can help with food vouchers and through SOVA, now the requests are increasingly from people who are newly unemployed or facing eviction and of a much larger nature that we don't have the ability to answer," said Margaret Avineri, director of clinical services.

For example, 16 people called JFS in May looking for financial help. The month's requests hit 50 in October.

And because 40 percent of JFS's $27-million budget comes from the government, the organization itself needs help.

JFS cut 8 percent of its staff -- 32 positions -- after losing $700,000 in California funding when the governor's budget cuts went into effect July 1. Its citizenship program, which primarily helps immigrants from Iran and the former Soviet Union go from nationalization to full citizenship, was lined-out. Castro worries that more state cuts are coming soon, with the Legislature called in for an emergency budget session. Next to go could be in-home support services for the elderly. And talk has picked up of trickle-down cuts from local government, as well.

"I suspect the next couple of years are going to be really difficult," Castro said. "The state has backed itself into a corner where raising taxes are not the answer and cutting services are not the answer. We're stuck in the fallout of that, and it's our clients who suffer. We're going to do the best we can to break the fall for many, but we're not going to be able to prop them up in the way they need."

At the Jewish Free Loan Association, the number of loans issued between January and September increased 17 percent over that period last year, for a total of 1,130. The agency received so many requests for student loans that about two dozen were delayed until the cash was available. The hold-up was only about a month, but it was a first for the organization.

Mark Meltzer, executive director and CEO, expects to dole out as much as 50 percent more in interest-free loans this fiscal year, which ends Aug. 31, for a total of $5 million to $6 million. That means Jewish Free Loan needs to raise more money; they increased their appeal this month with direct mailers. Real challenges remain.

"We are trying to make some proposals with staff and moving ahead in to the next year as the economic condition worsens, which it seems it will do," Meltzer said. "But we are not terminating any programs. The agency is still financially solvent. But our focus right now is on emergencies."

Frida Levi and her husband, Robi, recently benefited from an emergency loan.

Robi was in between jobs as a self-employed IT consultant. Frida was on maternity leave after giving birth to their first child. Their savings were zapped, and their parents were unable to help because of their own financial struggles. The Levis had secured a new rental in Pico-Robertson, but they didn't have the money for the security deposit. Then they heard about Jewish Free Loan.

"Thank God business is doing just fine, and it was just a temporary thing, and we are back on our feet now," said Frida Levi, 29. "It was good to have the Jewish Free Loan there as a lifesaver."

Jewish social service agencies, like JFS and Jewish Free Loan, cater to the entire community -- Jew and non-Jew. Synagogues, too, provide many different services, and they have been overwhelmed by needs from within. An informal survey of 25 congregations by the Board of Rabbis of Southern California found that membership and pledges are down, while requests for dues relief and scholarship assistance are up.

"There is a prevailing sense that worse times are ahead, and some synagogues are beginning to explore cutbacks in staffing and programming," said Rabbi Mark Diamond, the board's executive vice president. "And a few rabbis confided to me that they are worried about their own jobs."





ALTTEXTThe questions many nonprofits are asking aren't about the length of this economic downturn -- it's clear nobody knows the answer to that -- but rather what they should do now, and how should they prepare for a number of grimmer possible futures.

Even as organizations are re-evaluating expenses, trimming fat and making do with less, they also must seek ways to stand out, philanthropy experts say, and to excel at their stated mission.

"You have to make your case: Why now, why us?" said Steven Windmueller, dean of the Los Angeles campus of Hebrew Union College-Jewish Institute of Religion.

Paul Schervish, director of the Center on Wealth and Philanthropy at Boston College, said agencies need to be creative with donors and focus on long-term pledges that are heavier on the back end or contingent on stock market improvements.

Gary Tobin, president of the Institute for Jewish & Community Research, said there is no shortage of money in Jewish foundations.

"There are still tens upon tens of billions of dollars," he said, and many nonprofits are encouraged by research by the Giving USA Foundation that historically philanthropic giving has actually increased during hard times and even in recessions, to the tune of 6.2 percent in noninflation-adjusted dollars.

The explanation is that people who have the means will dig even deeper, because they know the needs are that much greater.

"It is also important to remember that even when they have lost 10, 20, 30 percent of their value, Jewish foundations still have a lot of money to give away," Tobin said.

To secure these dollars, Giving USA recommends nonprofit professionals and campaign volunteers start with board members to ensure they will continue support; develop and follow a fundraising plan; focus on renewing gifts from current donors, and expand the tactics in their fundraising portfolio.

It remains to be seen, though, how start-up nonprofits and Jewish innovators will weather the storm.

More than the citadels, these nonprofits are being talked of as expendable, or at least non-essential. And this has young Jews concerned that their programs will find once-available funding elusive. (See the Op-Ed on Page 8.)

JDub Records, one of many successful cutting-edge Jewish nonprofits, has been fortunate.

The New York-based organization encourages Jewish identity through music. Revenues from CD and event ticket sales finance half its budget; the other half comes from individual donors and foundations. The record company expected revenue to dry up down the line -- but then Steven Spielberg's Righteous Persons Foundation stepped up and offered a two-year grant to cover operations and build capacity. This followed a $45,000 grant from The Andrea and Charles Bronfman Philanthropies, JDub's second, and a $250,000 grant from the Jewish Community Foundation to expand its Los Angeles office and events.

"It's not business as usual. We are definitely taking everything into consideration as we plan things," said Jacob Harris, JDub vice president. "We've taken a look at all of our books and made sure we are being even more responsible than we had been. We're making sure we are able to keep producing music and serving our community. That is the good word."

Bronfman Philanthropies is, in particular, a good place for innovative nonprofits to turn. The foundation publishes "Slingshot," an annual guidebook on such organizations and is a "spend-down" philanthropy.

"We are going out of business for 2016, and our effort for the next seven years is to make sure the programs we've funded have a life long beyond ours," said Jeff Solomon, the foundation's president. "It would be great if everybody could be spending more at this time, but my sense is there are few foundations that are."

But foundation endowments, even those invested conservatively, are suffering under the decline of the stock market.

Even Harvard, which has a larger endowment than any other university and, according to the Boston Globe, earned 8.6 percent for the fiscal year ending June 30 while the Standard & Poor 500 lost 13.1 percent, reported last week that its endowment had plummeted by about 30 percent -- shedding $11 billion.

"The larger problem for nonprofits is not their giving, it is their endowment," Schervish said. "If you are a small nonprofit, you could hardly make up the loss of your endowment."

At this point, Jewish organizations are playing endowment losses close to the vest. Fishel said The Federation's $70 million endowment is "not ahead of the game for last year, but we didn't have major losses."

Jewish Community Foundation, which has assets of $797 million, including about half in donor-advised funds for 1,200 people, declined to provide information about how well its investment were doing.

"The foundation faithfully reports its financial results based on the calendar fiscal-year-end and to do so any other way, particularly during such wild fluctuations in the capital markets, does not allow for an accurate 'apples-to-apples' comparison," Marvin Schotland, president and CEO, said in a prepared statement.

"While we vigilantly monitor the economic climate," he added, "it is business as usual, consulting with our existing donors on a broad range of issues, while reaching out to prospective new donors, as well."

There are no signs of a speedy turnaround. Many economists believe the worst may be to come. Holiday spending will be one indication of whether the U.S. economy will skid from slow down to reverse.

"Have you been in a mall lately?" Schervish asked. "I was in one the other night buying a friend something. And it was empty. I mean: Nobody. There was nobody there, and it was in a wealthy area of Boston."

That's a bad indicator. But regardless of where the economy is headed, Jewish communal leaders are confident the Jewish community will respond to the needy, with those who can giving more and those who can't contributing when they're again able.

After all, no tribe is more accustomed to hard times than the Jews.

"We do crisis well," Diamond, of the Board of Rabbis, said. "I wish there were more lag periods between the crises. But we do crisis well in the Jewish community, and our organizations and synagogues know how to respond."

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