The continuing decline in Jewish philanthropy, mainly in the US, could seriously harm Israel's nonprofit sector and, in turn, damage many of its welfare services, according to a paper to be presented later this month at the annual Presidents' Conference in Jerusalem.
Obtained exclusively by The Jerusalem Post ahead of the October 20-22 event, the research by Prof. Hillel Schmid and Avishag Rudich from the Hebrew University of Jerusalem's Center for the Study of Philanthropy in Israel demonstrates how pledges to the US Jewish Federation system are significantly down compared to last year. It also highlights the impact of Bernard Madoff's Ponzi investment scheme on many organizations, nonprofits and foundations involved in funding programs and services in Israel.
"The recession and decrease in philanthropic support will surely result in some painful implications for Israeli social services and their providers, primarily nonprofit organizations," the two experts predicted in the conclusion to their findings.
Based on information taken from numerous studies on both the Jewish and non-Jewish philanthropic world, Schmid and Rudich found that the United Jewish Communities - the chief fund-raising arm of American Jewry - has received $608 million in pledges so far this year, compared to $714m. taken in by federations over the same period last year.
In addition, the report noted that the average gift to Jewish federations has dropped by some 4.3 percent, with many federations being forced to cut grants to Israeli organizations "as much or more than they are cutting locally." As a result, Schmid and Rudich suggested that the financial stability of nonprofits in Israel could be seriously undermined and their autonomy compromised if they had to rely on the government instead for support. The paper also infers that many charitable foundations here will be forced to close, and academic institutions will have to make far-reaching cutbacks.
The two also pinpoint specific organizations such as the Chase Family Foundation, Yad Sarah, Hadassah Women's Organization and the American Technion Society, which face growing financial instability caused by the Madoff scandal.
"Yes, the economic downturn has impacted federation campaigns while often increasing local service needs," commented Rebecca Caspi, senior vice-president of the Jerusalem-based Global Operations: Israel & Overseas office of the UJC/The Jewish Federations of North America.
"Many federations have tightened their belts, yet also devised creative strategies to maintain and even increase giving," she added.
Schmid and Rudich's research also noted that despite the obvious challenges, the economic crisis could offer some organizations a unique opportunity. They also noted that the sector was not hit as badly as predicted at the start of the recession, with data from 2008 showing a lower decrease than expected.
"[The economic crisis] will probably lead to the demise of some nonprofits, yet others will flourish," wrote Schmid and Rudich, adding, "The future of the organization is dependent on the steps nonprofits are willing to take in order to survive the crisis: stronger streamlining, reconsidering areas of activity and programs, and innovations."
In addition to US Jewish philanthropy, the paper also highlighted the effects of the global economic crisis on charitable giving inside Israel. While the last decade has witnessed an increase in domestic philanthropy here on both a corporate and individual level, the paper pointed out that the recession had also hit Israel's rich dramatically. Israeli millionaires and billionaires have seen their wealth decrease by 19.5% in 2008, and the number of Israeli millionaires fell by some 2,300 last year.
"It is not clear to what extent this decrease will damage Israeli giving, since the data on Israeli mega-philanthropy is not yet gathered; yet, it does suggest a prospective decrease in Israeli philanthropy, too," said the report.
Yaron Sokolov, director of the Israel Civic Leadership Association, an umbrella for nonprofit organizations in Israel, told the Post Wednesday that while the recession had taken longer to reach the third sector here, the economic pinch would be felt for a long time to come.
"While when times were better, nonprofit organizations here received large donations, in this new era, even when the situation improves again, people will not be willing to give as much as before," he theorized. "Philanthropists, especially abroad, will be much more careful about where they are putting their money and will demand much [higher] returns on their investments." However, Sokolov said this could be a positive change, as it would force charities to be better managed and more productive.
It is estimated that roughly 80% of social services in Israel are contracted out by the government to nonprofit or private organizations.