"We are cautiously optimistic that it won't be what people think it might be, which is a total disaster."

Fiscal crisis dominates fundraisers' gathering

By JACOB BERKMAN

article created on: 2008-12-01T00:00:00

JERUSALEM (JTA)—When the United Jewish Communities began planning last year for its 2008 General Assembly in Israel, the goal was to highlight and strengthen the federation system’s support for philanthropic efforts in the Jewish state.

But as more than 3,000 federation lay and professional leaders from North America gathered last month at the Binyanei HaUma international convention center in Jerusalem, their attention seemed more focused on the economic gloom and doom back home.

On the face of it, this year’s G.A. was very much about highlighting the programs that the federations help finance in Israel, with a dual emphasis on attracting young, “Next Generation” donors and the upcoming election for Israeli prime minister.

The reality, however, is that many federation officials and lay leaders—like those at virtually every other American nonprofit organization—are worried about the financial crisis, one which is forcing serious concern about budget crunches at best and threatening their existence at worst.

The major fear is a drop in donations coinciding with a sharp rise in charitable need (see local story on page 11). Such a combination would pose significant challenges to a network of Jewish federations that collectively raised more than $2 billion last year for local and international Jewish causes—more than $900 million through their annual fund-raising campaigns, the rest from endowments and capital campaigns.

Hallway conversations at the G.A. revealed difficult times. The federation in Atlanta is $2 million off its pace; small federations are
in serious trouble; the federation in Washington has cut the salaries of its top employees and is facing layoffs; the Las Vegas federation is looking at hard times due to the collapse of both the real estate market and the gaming industry. The UJC, the system’s umbrella organization, is trying to remain optimistic while remaining realistic about the scope of the challenges.

Many of the system’s largest federations already have had their first major fund-raisers for the 2008-09 campaigns and done well, the UJC’s president and CEO Howard Rieger said at a news conference before the G.A.’s opening plenary Nov. 16.

In Chicago, he said, more than $20 million was raised at its opening dinner two weeks ago—a 13 percent increase from last year. And New York, which has the system’s largest campaign by far, raised $42 million in pledges at its opening fund-raising dinner six weeks ago. The gross total raised to date at such events is up from last year, Rieger said.

And the Lion of Judah Conference, a week before the G.A. and which unlike the G.A., includes a fund-raising component, raised $16 million, Rieger said, a 13 percent increase over the previous year.

It is encouraging, Rieger said, but all is not well.

“I am not Pollyannaish. We’re not kidding ourselves—there’s an economic crisis out there. Will it have an impact? We believe it will have an impact,” Rieger told reporters. “We are cautiously optimistic that it won’t be what people think it might be, which is a total disaster. I don’t think that is what we are confronting.”

Still, even the story behind the positive numbers contains cause for concern. While initial total numbers for pledges may have increased, the number of donors has dropped significantly, Rieger acknowledged.

Those who have made pledges are pledging more money, but a number of major donors have told federations that they cannot give right now and that their local federation should ask again later in the year.

There is optimism that large federations most likely will come through 2008 reasonably well because their fiscal years ended in late summer or early fall. Small federations with campaigns of $3 million or less, however, may be in serious trouble. Typically their fiscal years don’t end until Dec. 31, and most do not have cash in hand for the pledges that were made in the early part of the year.

Kanfer confirmed the serious concern that these federations will fall short on their projections because donors will not be able to pay their pledges.

Compounding the concern over annual fund-raising campaigns is the impact of the spiraling stock market on federation endowments. Federations earned approximately $1.5 billion last year from their endowments in new contributions and returns on investments. Endowments almost uniformly have been hit hard in recent months.

The UJC will not have third quarter numbers available on how the local federation endowment investments are performing until later this year, but the country’s largest private endowed Jewish Foundation, the Harry and Jeanette Weinberg Foundation, lost 13 percent of its assets—or $300 million—in the past year. The foundation dropped from $2.3 billion to $2 billion despite having only 60 percent of its money is invested in the stock market.

Even the $16 million touted at the Lion of Judah Conference includes not only pledges made at the gathering but also those made by donors earlier this year.

The decreasing intake of dollars is bad news for a system that already has reported an increase in need from the organizations it funds. While most federation-raised money goes to help Jews in North America, about 33 percent is used for overseas causes. Among the federations’ two primary overseas partners, the Jewish Agency for Israel and the American Jewish Joint Distribution Committee, the fear is real. The Jewish Agency is responsible for immigration and absorption into Israel and Jewish identity programs abroad, and the JDC helps impoverished Jews around the world.

They currently divide a pool of approximately $180 million that the UJC collects from the federations as part of a required overseas allocation. That money, which is divvied up according to a 3-1 split for the Jewish Agency, pays for the organizations’ core operating budgets. The agency—and to a far greater extent the JDC—also collects additional money from federations for specific projects.

The Jewish Agency, which received about $140 million, already has announced that it will need to cut its budget for next year by $45 million. And the JDC, which instituted heavy layoffs in the spring, is seriously concerned that the budget for next year it set in July will be irrelevant by the start of 2009.

An official from one of the overseas organizations told JTA that they are expecting the federation fund-raising campaigns could bring in 5 percent to 8 percent less in 2008 than they had expected. That could spell trouble for overseas allocations.

Federations already facing increased demand from the local social service organizations they fund in their communities could choose to focus their resources to stave off crisis at home versus overseas. Among the local pressures: Jewish family and children services, food banks and other social services are seeing spikes in their client rolls, and Jewish community centers and day schools are turning to the federations for help with budget shortfalls because of membership loss and tuition woes.