The Coming Crisis for Jewish Institutions, Part II

When I was chairman of the board of a local yeshiva many years ago, there was one phenomenon that you could count on almost without exception. In virtually every case of parental discord, tuition payments were the first thing to go. The school was left holding the bag in almost every case of divorce and had to fight and threaten to get paid.

Given the current financial crisis, a similar thing is already starting to happen, and will accelerate, albeit in a different context. When people start to feel financial pressure, the monthly payment that goes first is invariably tuition. This, of course, is not surprising. As among missing mortgage payments, real estate taxes, car payments and tuition, the one with the fewest consequences is tuition. Schools will not toss a kid out for failure to pay tuition, particularly under these circumstances.

But what will happen (and, I am told by reliable sources, is already happening in a number of schools) is that many schools will fall behind in paying teachers. (Keep in mind that teachers salaries are, by a very large margin, the biggest expense for virtually every school (unless they've overbuilt and overleveraged).

Behind even tuition in the hierarchy is shul membership. Most people who are in financial distress will not even consider paying shul membership. And, of course, the shuls are even less inclined (and have far less leverage) than schools to do anything about it.

This is, to put it mildly, a shlechta maisa. Most shuls and schools (with some notable exceptions) lived hand to mouth even during the best of times and do not have much in the way of reserves. They are going to suffer mightily. And, exacerbating the situation is that the g'virim and the regular givers, whom they counted on in the past to make up budget deficits, are (as I pointed out in my previous post) going to be much less able or willing to fill in the gap.

This does not bode well for other Jewish organizations. If there is less money available for the two primary institutions, what does that say for organizations that are farther down the list and rely much more on discretionary income?

Interestingly, many of these organizations may be better able to weather the storm. Many are better run than most schools and shuls and have modest reserves to call upon. Many less well run outfits also have much more fat to cut than schools or shuls. While the only way to really save money in a school is by getting rid of teachers (not a realistic option), most large charitable organizations become bureaucracies over time and tend to over hire, like any bureaucracy. They are going to have to make some hard decisions and cut out the fat. Some, of course, will have to cut into muscle and reduce some of the services they offer.

But the mosdos that are going to suffer the most are the Israeli-based chessed organizations and the kollelim. Priority-wise, they are 15th on most people's lists of ten.

Sorry for the pessimism, but I think it's going to get really ugly.