The Unfolding Economic Crisis: Its Devastating Implications for American Jewry

Steven Windmueller, Ph. D.

Posted on February 3, 2010 / 19 Shevat 5770

Written by Steven Windmueller, Ph. D.


The full impact of the current economic crisis may not be felt for years. In the midst of it, core institutions are fundamentally being reshaped and individual life-styles reconstructed.

The nonprofit sector generates some $166 billion into the American economy. It accounts for 10.5% of the workforce or some 9.4 million individuals, in addition to engaging some 4.7 million volunteers. In 2008, 35% of all these agencies faced decreased giving but encountered a 64% increase in demand for services and assistance.1

The effect of this financial dislocation has significant implications for the American Jewish community in five core areas:

  1. The political and economic clout of American Jewry will be compromised by a community that will be perceived as structurally and functionally weakened by this crisis. Both as a community and as individuals, Jews would appear to be adversely affected by this new reality.
  2. The impact of this economic dislocation has already generated a significant increase in anti-Semitism globally; will it also be felt in this country?
  3. The infrastructure of the Jewish communal system will be forever altered; some Jewish institutions will not survive this crisis and others will seek to merge or be acquired by stronger organizational partners.
  4. The downward shift of accumulated wealth will impact philanthropic giving, affiliation patterns, and the levels of communal participation for the foreseeable future.
  5. A new class of “near poor and new poor” Jews represents one of the significant yet real outcomes from this economic storyline.
  6. As a result of the Madoff affair, there is a loss of confidence and trust in the management of philanthropic institutions.

Over time, each of these conclusions will need to be evaluated, as to both their validity and to the extent that the Jewish community has been fundamentally impaired and structurally altered by recent events.

The confluence of three additional issues directly and uniquely impacts the Jewish community in connection with this economic dislocation:

  1. The emergence of a new generational cohort whose views about philanthropy and whose marginal engagement with Judaism and Jewish life adds directly to the fiscal burdens and long term policy challenges facing the religious and communal system. Lower affiliation rates, reduced giving patterns, and less connection to core Jewish political and social concerns, including Israel, mark some of the demographical trends that will reshape the engagement of younger Jews with institutional participation. Over the course of the past several decades, the emergence of new organizations and alternative religious expressions, reflective of the tastes and interests of new generations of Jews, will continue to challenge “traditional” institutions and the denominational movements at a time when these core structures are already feeling the impact of the economic crisis.
  2. Related to the above generational patterns of change, one finds a series of life-style choices and altered consumer practices that have been underway prior to the current economic situation but have resulted as well in different forms of communal participation and affiliation further undermining the existing infrastructural system.2
  3. The impending leadership crisis in the American non profit sector appears to be more acutely felt within the infrastructure of the Jewish community3. Such a crisis of leadership is both evident within professional ranks and with reference to attracting and sustaining lay leadership. The Jewish communal system has been built around both attracting the wealthiest and most effective voluntary leadership and securing a cadre of senior professional leaders. In this current environment, there are indicators that the communal enterprise is experiencing a serious leadership deficiency. There are today fewer qualified, informed and engaged lay leaders to effectively lead and support the institutions of American Jewish life.

Beyond these new and serious structural realities, it is important to note the social and psychological impact of such changes on American Jewry. For many older Jews many of their core institutional patterns of personal engagement have been altered, while for younger Jews the changing scenarios of may provide opportunities for further experimentation and disengagement from these traditional infrastructures.

An Assessment of the General Economic Data:

The Nonprofit Finance Fund study of “How Nonprofit Groups Have Fared During the Recession” (March 2009) is particularly sobering and responds most directly to the first of the indicators referenced above4. Extrapolating similar patterns that would apply to Jewish institutions, then the following statistical data may be specifically relevant5.

  • 62% of charities have less than three months’ cash on hand.
  • 16% of nonprofits are in a position to pay their expenses this year and next
  • 41% reported as having or intending to reduce personnel
  • 39% announced plans to reduce or eliminate programs
  • 42% have joined forces with other institutions to collaborate on programs and an additional 13% have taken steps to share administrative expenses
  • 43% indicated the need to draw down reserve funds
  • 65% have developed a “worst-case scenario” contingency budget
  • 22% announced reduced employee hours and a similar number reported reductions in employee benefits.

The impact of this economic crisis can also be measured in terms of the status of individual philanthropists. One such measure involves a recent Forbes Magazine assessment of the financial picture of the world’s billionaires.6 A significant percentage (18% estimated) of this group happen to be Jewish .  The article suggests that collectively billionaires lost over $2 trillion during this period, causing many within this group to re-prioritize their charitable giving, just as they are reorganizing their business interests.

This downturn in philanthropic support is also reflected in a study released by the Association of Fundraising Professionals.7

“Reflecting the toll exacted by the economic downturn, the percentage of fund raisers whose institutions raised more money last year was a new low in the eight years the survey has been conducted. In a typical year, 60 percent of fund raisers report being able to raise more money.”8

In addition, only 28 percent of the 481 individuals surveyed for this study believe that their institutions will raise more money this year.  Unlike prior fiscal downturns, smaller institutions were more likely to be adversely impacted; that appears not the case in this recession, organizations at all levels were feeling the effects of this economic situation.

Beyond the welfare of individual donors, the Center on Budget and Policy Priorities estimated that 46 states will not have enough money to cover their budgets this year and beyond. In states, such as New York and California, the deficits exceed 25% of available revenues. Unlike the federal government, by law most states are not legally able to operate with a deficit budget.9

Social commentators are suggesting that the decline of social capital will further weaken the personal and institutional ties that individuals have with their communities and correspondingly, key associational networks are likely to unravel or to be seriously weakened. A few others have suggested that the loss of confidence in the economic system to successfully recover in rapid and sustained fashion will undermine for some an abiding belief in the achieving and maintaining the “American dream”.

The scope (depth) and focus (particular industries or businesses) of the recession in part defines the populations most directly affected and the corresponding impact on the social fabric within the broader society, creating new sectors of economically displaced individuals who are suffering as a direct result of the current situation.

Yet, despite the difficult circumstances, the Chronicle of Philanthropy announced that 16 individual donors announced gifts of $100 mission or more last year, more people than have ever done so in the past 12 years. The Chronicle reported “The total amount of the donations on the 2008 list far outstripped last year’s: more than $8 billion, compared with $4.1 billion by philanthropists on the list in 2007.”10

In a subsequent story the Chronicle identified five factors that have helped to promote giving among some key donors during the current crisis:11

  1. More people are giving
  2. Charities are getting visibility
  3. Donors are making unusual gifts
  4. Tax changes may prompt new gifts
  5. Parts of the economy are thriving

Economic Impact within the Jewish Community:

A complete inventory of the impact of this economic transition is still to be determined, yet the number of positions eliminated and the announced budgetary and programmatic reductions are particularly striking. There is substantial evidence that major structural reconfiguration is occurring at both a rapid rate and across the institutional spectrum within the Jewish communal and religious system. Downsizing has been evident everywhere, with profound implications for the ability of institutions to deliver critical services.

Correspondingly, charitable institutions with more restricted resources will be forced to curtail vital services and specific programs and re-prioritize their organizational focus. Such downsizing may have a significant impact on the most vulnerable populations in the society. As charitable institutions compete for shrinking resources, there will be increased attention to the quality and scope of services being offered, as donors prioritize their giving options. With restricted resources, organizations often select programs or services with high PR impact, as a way to promote their value to donors. The current environment is affecting organizational memberships and donor support as individuals and families need to make critical choices pertaining to the use of available financial resources. Institutions without multiple streams of funding have been most directly imperiled. In the midst of this upheaval, organizations have been exploring alternative and creative models of managing their resources as they strip away significant elements of their infrastructure in order to gain economic viability.

In these difficult and unsettling times, many new realities can be felt both on the personal and institutional level. In this context, American Jews are experiencing fundamental life-style changes where the “givens” and expectations once central to their lives, are no longer present. In such an environment, anger and fear take on a heighten dimension, as people seek avenues for their expression of frustration. The psychological and social impact is being felt by many at all levels of the economic strata; the level of uncertainty creates a heightened concern of one’s financial welfare and social well-being. As a result, emotional paralysis can overpower individuals, in addition to the presence of increased medical problems and/or physical symptoms. Depression, and even family violence, is certainly a potential outcome.

Impact on Individuals and Families:

Similarly, this economic crisis may well have specific implications for Jewish families and individual Jews, as a result of the prevalence of Jews employed in the financial markets, real estate, and allied fields. Particular segments of the Jewish population will be adversely affected by these adverse market conditions. The poor and near-poor, especially those on fixed incomes, may face particularly difficult times over the course of the months and even years ahead. Students will face rising tuition expenses, while at the same time confronting a shrinking job prospects.  In such cases, young people may elect to live for longer periods at home with their families or delay marriage or having children until the feel more secure economically.

As in previous periods of such social and economic stress, new vulnerable populations will likely emerge. These “new poor” may well include families and individuals whose businesses are being adversely impacted or whose investment portfolios no longer provide a basic safety net. In addition, there will be families who are unable to maintain their mortgage payments, due to the loss of income as unemployment increases.

As Jews are proportionately older than other sectors of the American population, retirement planning may need to be readjusted to account for the loss of investment income, delaying or altering retirement or forcing individuals and families to make difficult choices. Similarly, those who are a part of the Baby Boomer Generation who are preparing for their future face the possibility of needing to work beyond their planned retirement. In a recent AARP Poll, Americans were asked to evaluate the impact of the recession on their plans; for individuals between the ages of 55 and 64, the following data was recorded12:

  • 27% postponed their plans to retire
  • 16% reported having lost employment
  • 19% indicated a pay cut
  • 24% noted reductions in health care benefits
  • 24% referenced that their employers had stopped contributions to their 401 (k) retirement plans

For some, this particular crisis may permanently impair their ability to recover. Educational choices set aside, lost income, and displaced careers represent the types of scenarios that may define the new generation of younger Jews.

Revisiting the Depression Years:

In the context of understanding both the events surrounding the Depression of 1929 and the current global economic crisis, it may be of value to examine other similar trends, shared challenges, and potential opportunities that shaped the lives of America’s Jews and its communal institutions.

Unprecedented synagogue growth would accompany the period of the 1920’s. Between 1916 and 1926, for example, the number of congregations in the United States would double, and numerous congregations prior to the Depression were involved in major building fund efforts. These same patterns of expansion are not dissimilar to the data covering the past number of recent years, involving the growth of synagogues, the development and expansion of day schools, and the establishment of capital campaigns to upgrade facilities.13

During the 1930’s there was an acceleration of management and labor disputes along with tenant-landlord tensions, often pitting Jews against one another over questions of employment and wages or housing and rental matters. The growth of radical political movements offering economic solutions and options to the existing crisis involved Jewish activists supporting various ideological causes.

Based upon a 1936 survey of 456 congregations in the Metropolitan New York City area, the synagogue community reported a collective debt of $14 million. New York’s Temple Emanu-El would witness a 44% decrease in its membership, while the Brooklyn Jewish Center reported the loss of one-half of its 1,500 families. While the Jewish community has yet to assemble information on the fall-out from this current economic crisis, the loss of congregational members, indications of unbalanced budgets, and the necessity of budgetary and program reductions are being cited by synagogues across the country.14

The Depression would spark, in fact, a religious renewal in America. In response, synagogues of that period, joining with churches, created a national Drive for Religious Recovery, paralleling the federal government’s National Recovery Act. Congregations created “Loyalty Days” designed to reach out and attract synagogue participation, employing the slogan, “Every Jew Present and Accounted For”.15

Drawing upon the events of this period, the American rabbinate saw a unique opportunity to inspire and galvanize Jews to engage in volunteer service not only with reference to the needs of the Jewish community but also in connection with the larger society; to employ for the first time radio broadcasts and newspaper advertisements as a way to reach out to encourage Jewish learning and synagogue involvement and to speak out on behalf of public policy matters and social justice concerns.

Similarly, fund raising on the part of Jewish charities in the 1920’s achieved extraordinary results; this is not so dissimilar to the recent success of American Jewish institutions covering the past quarter of a century.

As a result of the Depression, Jewish social service agencies acknowledged that they could no longer meet the needs of the community’s most vulnerable, which involved a 40% increase in case loads of families in crisis. This new reality would create a debate over the “Stuyvesant Promise,” namely that dating back to the first arrivals of Jews to New Amsterdam (New York); the community had committed itself to the task of caring for its own to the then-Dutch Governor Peter Stuyvesant. The onset of the 1930’s would launch the first partnerships where government agencies working in conjunction with Jewish social service institutions would provide relief services.16

Implications for Today’s Environment:

No Jewish organization remains unaffected; the most vulnerable structures have or will close their doors forever including CAJE (Coalition for the Advancement of Jewish Education), on February 27th, 2009 and the BJE  (Bureau of Jewish Education) of Boston in May of 2009 as representative of this new reality.

The best measures for assessing the impact of this economic downturn on Jewish communal and religious institutions would include five core indicators:

  1. Reduction in personnel and other budgetary operational savings and adjustments for communal institutions, schools and synagogues
  2. Decline in synagogue membership data
  3. Financial aid requests (day school tuition relief, summer camp scholarships, temple dues adjustments)>
  4. Annual and capital campaign data for 2008 and 2009 as compared to prior years
  5. Closure of Jewish organizations, foundations, and special projects

Some of this data has yet to be compiled or evaluated but a random assessment of the available information confirms that the infrastructure of the American Jewish community is currently undergoing a significant transformation.

Among the significant casualties are key national umbrella institutions and religious denominational groupings and their affiliated seminaries.

This reality has been borne out by cuts that have been announced by federations and its parent organization, the United Jewish Communities. The UJA-Federation of New York on March 11th announced an 11% reduction of its workforce (53 positions); the same day, the Atlanta Jewish Federation laid off 14 employees, leading to a 19% reduction in its operating budget. One week, earlier, the Jewish Federation of Greater Cleveland laid off 25 staff members. Facing a $3 million budget shortfall, that federation sought to trim its expenses by some $600,000. Cleveland’s annual campaign results were down $5 million, and its endowment funds portfolio values had decreased by 29%.  Similar announcements have been made over the past three months by such communities as Denver and San Francisco among many other federations across the country.17

The politics of “localism” seems to emerge in such critical settings, where groups transfer scarce resources to core local or home-based services rather than sustain their support and engagement with their national systems or overseas programs. As a result, some of the anticipated services that such national groups traditionally provided will need to be replaced or downsized. 18 This can be borne out by announced cuts by national umbrella organizations such as the UJC (United Jewish Communities) where already in May of 2008 37 positions were eliminated and its annual budget was reduced from $40.2 million to $37 million19 and again with more recent reductions this past spring. Likewise, the URJ (Union for Reform Judaism) has made significant staff and budgetary reductions in mid-March of this year, eliminating some 60 positions and reducing its budget from $25 million in 2008-09 to $20 million for the 2009-10 fiscal year.20

In a survey undertaken by the Los Angeles Federation of its schools, congregations, and summer camps, each of the institutions surveyed is reporting a record increase in the number of scholarship requests or tuition adjustments by families covering the current year and project similar if not higher applications for such assistance next year.

The Jewish Community Foundation of San Francisco reported an immediate need of some $7 million in emergency funding needs. That community noted the need for resources:

  • For direct financial assistance to meet basic needs such as food, shelter and medical care, with a 50% increase in services has been requested.
  • For additional vocational services, to assist with job placement and counseling where requests have doubled.
  • For interest free loans for emergency needs, with demand up 33%.
  • For pre-school, day school, congregational school and camp scholarships.21

As there is no comprehensive study of the impact of this economic crisis on the Jewish family, one must depend on anecdotal evidence. federation agencies are reporting across the country increased demands for an array of services including free loans,food resources, counseling, job placement and training, housing assistance, and scholarship support.

Synagogues serve as one of the key barometers and in a recently completed study by NATA (National Association of Temple Administrators) focusing on congregational fiscal health, the data is particularly significant.

  1. More than 46% of Reform Congregations reported on plans to layoff personnel, with 30% of the synagogues indicating their intention to reduce senior staff.
  2. 50% of the reporting synagogues indicated they were considering or have imposed salary reductions or the freezing of salaries and benefits.
  3. Over 72% of the congregations indicated that projected a deficit for the current fiscal year, with 30.7% noting that their deficits would be between $100,000 and $250,000; nearly another 7% reported deficit numbers of $250,000 to $500,000.
  4. 55% noted that they were increasing their fundraising activities, while nearly 45% reported plans to increase fees.22

One might expect liberal congregations and their movements to feel the impact of the economic crisis more severely as more traditional Jews view synagogue affiliation, day school education, and related activities as core to their lives, whereas Jews who are affiliated with Reform, Reconstructionist, and Conservative institutions may feel less compelled to sustain their support and engagement with such affiliations.

Mark Pearlman, an experienced business strategist (CBS Inc., Fox TV) and MIT Graduate, used publicly available filings, primarily via the Web sites GuideStar and Charity Navigator, from more than 400 Jewish non-profit organizations, and focused on all financial data. The revenue data for each organization was then “compiled and categorized according to systematic service groupings” like education, communal life, etc.23

The results, he readily admits, are incomplete, in large part because religious organizations are exempt from filing tax reports available to the public. But what he has found makes for some fascinating study and discussion points within the Jewish community — for instance, that the Jewish GDP is $9.7 billion, with most funds going to social welfare (25 percent), followed by education (20 percent). Twelve percent of services provided go for communal life, with 3 percent for advocacy, 1 percent for the arts, and less than 1 percent for Arab-Israel relations.

More than 25 percent of all funds come through the Jewish federation system, and 33 percent of all revenue is concentrated among the top 10 nonprofits, including UJA-Federation of New York, the Jewish Agency for Israel, Hadassah, American Jewish Joint Distribution Committee, Yeshiva University, FEGS Health and Human Service System, Jewish Geriatric Center.

Impact of the Madoff Scandal:

The loss to Jewish philanthropy as a whole has been estimated between $600 million and $1 billion. “I consider that, if anything, a conservative estimate,” noted Professor Jonathan Sarna of Brandeis University. “It is catastrophic — there’s no other word. The Jewish community will look different when this is all over.” 24

“The names of organizations and individuals allegedly affected read like a Who’s Who of the rich and famous: A charity of director Steven Spielberg. A trust tied to real estate magnate and New York Daily News owner Mortimer Zuckerman. Spielberg’s Dreamworks partner Jeffrey Katzenberg and the foundation of Nobel laureate Elie Wiesel also reportedly were hit. Countless family foundations up and down the East coast, the lifeblood of so many Jewish causes, have been devastated — among them the Shapiro Family Foundation in Boston, said to have lost $145 million.”25

Many don’t even know yet if they were affected. “I don’t think we’ll know the scope of this for a year,” said Mark Charendoff, president of the Jewish Funders Network, an umbrella body of family foundations.26

Gary Tobin, a leading expert on Jewish philanthropy and President of the Institute for Jewish and Community Research, commented, “It’s the biggest scandal in philanthropic life …as long as anyone can remember. There are foundations that have lost major assets, donors that have lost their ability to give, and organizations whose investments have disappeared. You add to that the psychological fallout, and it’s just devastating.”27

The “affinity fraud” as evidenced and practiced by Bernard Madoff has left its own profound impact on the Jewish community, its donor base, foundations, and agencies. Possibly, no other community will be experiencing the level of dislocation as the Jewish community as a direct result of the Madoff affair.

Samuel Freedman commented on the particular nature of the intricacies of the Madoff phenomenon noting:

“Their leaders and members overlap like a sequence of Venn diagrams. They bound by religious praxis, social connection, philanthropic cause. Yet what may be the community’s greatest virtue—its thick mesh of personal relations, its abundance of social capital—appears to have been the very trait that Mr. Madoff exploited.”

The impact of this scheme on the overall health and viability of certain institutions is profound. The larger fall-out related to donor confidence and future non profit business procedures will be significant. The possibility of government intervention, designed to monitor and even regulate investment policies and setting management practices for non profit organizations, could result in the aftermath of this scandal.

The Rise of Anti-Semitism:

Similarly in such periods of economic dislocation, there has been historically a corollary rise in anti-Semitism. Historically, there has been an acceleration of hate crimes and the emergence and growth of anti-Semitic organizations. While this nation, and more directly its Jewish community, is in a far different place than in the 1930’s, the economic fall-out can still contribute to heightened social tensions within the society.

“In response to the financial crisis, age-old anti-Semitic stereotypes about Jews or the ‘Zionists’ controlling world events, governments and finances are emerging in Europe, Latin America and the Arab and Muslim world.  Much of the anti-Semitic material appearing on Web sites as articles or comments is from unidentified individuals who are angry and seeking to place blame for the spreading impact of the crisis.  Others are written by authors who accuse Jews or Zionists of creating and benefiting from the crisis. Some are accompanied by vicious anti-Semitic caricatures and images.”28

Seeking Creative Solutions:

“One of the creative solutions to come out of these difficult times was introduced by the Jewish Federation of Metropolitan Chicago – distributing the aid through rabbis.29
“It’s not a gimmick,” explained Dr. Steven B. Nasatir, president of the federation. “It’s called J-help, which we developed a couple of months ago as a response to this recession. We can’t fix all the problems that exist, but sometimes middle class people don’t want to go to social services, – they go to rabbi and say: ‘Rabbi, we have some problems’.”
Nasatir says the rabbis in Chicago’s hundred-plus synagogues are given money and wide leeway to disburse it as they see fit, with very little bureaucracy.

“We are also focusing on trying to get people jobs so we have a vocational service,” he said. “But it’s not simple in a bad economy – and it’s a very bad economy. It’s more difficult to raise money at the annual campaign, when people lost their job or their wealth. The Jewish community has great wealth, but in Israel people sometimes don’t realize that we have our poor too. In Chicago, about 20 percent of our population is at the federal poverty guideline. When journalists are visiting our community and we take them to places where we feed people and subsidize houses – they are stunned. Now, when some people lost 20-50 percent of their wealth, it doesn’t mean they are automatically poor, but they are less willing to donate.”

A 2008 study of new Jewish organizations, undertaken by Jewish Jumpstart revealed similar financial and structural challenges among these groups30:

  1. The sector has grown dramatically, but new initiatives may lack the infrastructure to weather the economic downturn.
  2. Startups younger than seven years old are especially vulnerable because they do not yet have stable revenue streams.
  3. Startup leaders face challenges building sustainable models for governance and financial management.
  4. Jewish startups are already feeling the effects of the economic crisis and say they need sector’s wide support to survive.
  5. Startups seek collaborative approaches to increase the effectiveness of their programming.
  6. Startups say they would benefit most from mechanisms that lower administrative and operational costs.

Yet, many institutions faced with immediate and significant financial pressures will fold into their calculations longer term issues, substituting a deliberative planning process in order to achieve both immediate budgetary relief and strategic organizing.  This moment may allow for conversations about this “shared crisis” allowing for both institutions to engage each other and communal structures to embrace new ways of managing. Similarly, philanthropists and foundations are examining core priorities and underlying values in making strategic choices.  This is also the time for entrepreneurship, and funders have an opportunity to invest strategically their resources. 31

Leadership Transition:

“In the Jewish community there’s a need for new talent and new “software” at major institutions as well. One of the most serious long-term challenges is leadership and succession, particularly the need for renewed vision at senior levels. The largest communal institutions are mostly run by a generation that grew up in a very different world from the one experienced by today’s Jews under 40. Those entities operate as if the under-40 cohort will change to become more like their elders, though realistically it’s the institutions that need to adapt, not the post-1969 generation.”32

In this context, for-profit consultants and non profit centers of professional managerial expertise may well replace the in-house resources of such national structures to counsel and guide institutions through this intensive period of structural change and institutional planning.

Planning for a New Moment in Time:

As we brace for the full impact of this transformational period, the long term implications would suggest a far weaker, less-cohesive American Jewish community. In turn, a communal system weakened by scandal and experiencing economic dislocation will inevitably be less powerful. The results of these structural changes will be profoundly significant as this new period of American Jewry unfolds. Such internal and organizational changes will by necessity recast the role and place of Jews within the larger society, as well.

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