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The Slumping Economy It’s Not Business As Usual for Most Family Foundations

In the past two years, the Manuel & Rhoda D. Mayerson Foundation of Cincinnati has plummeted in value by some $4 million.

Yet the $20 million foundation this year is expanding its Jewish giving, which amounts to about one-third of its total grants.

The foundation, launched 15 years ago, funds such local efforts as Dor L’ Dor, which brings seniors to Jewish day schools to lecture, and Kesher, a network for Jews with disabilities.

Neal Mayerson, son of the founders, says the foundation has escaped tough economic times in part because the family remains active in the real-estate business.

Thus the group hasn’t seen its assets wither in the souring stock market as have many of the estimated 7,000 Jewish family foundations.

“It’s business as usual for us,” says the foundation’s director of Jewish giving, Pam Saeks.

For other Jewish family foundations, however, it’s anything but.

From the $180 million Walter & Elise Haas Fund in San Francisco, whose namesakes built the Levi Strauss jeans company, to relatively modest upstarts such as the $1 million Joshua Venture, Jewish foundation assets are getting buffeted by the bear market.

Many foundations, it seems, are digging in for a long fiscal storm, either limiting their annual grants or narrowing their overall scope.

“By and large, asset bases are way down, and most funds allocate off their asset base,” said Mark Charendoff, president of the Jewish Funders Network, which serves as the unofficial clearinghouse for Jewish foundations and the non-federation philanthropic world.

The declining stock market served as the backdrop to this year’s 13th annual conference of the Jewish Funders Network, which earlier this month drew some 300 representatives of Jewish family foundations, large and small, to San Jose, Calif., to peer into the future of Jewish foundation philanthropy.

So far no one has compiled any precise data gauging the economy’s impact on the Jewish foundation world.

Yet anecdotal evidence from the conference, one informal survey of participants and one larger study of the wider family foundation world show everyone is hunkering down for tougher times.

And increasingly for Jewish causes, that matters.

The community still relies on the traditional organized federation world for support, but the more entrepreneurial family foundations have become the alternative form of philanthropy.

The United Jewish Communities, the umbrella of 156 federations and 400 smaller communities in North America, raised $840 million in 2002 in addition to $328 million for an Israel Emergency Fund, according to Michael Fisher, a consultant for the UJC.

In the federation world, the faltering economy seems to have left little impact. In 2003, the federations have already secured $566 million in general pledges by Passover, Fisher said.

Despite a “lousy” economy, he said, “when Jews are in need, Jews dig deep and come up with big bucks.”

It’s a different story in the foundation world.

An e-mail survey of conference participants by the Jewish Funders Network found that of 180 foundations that replied, 27 of them, representing $161.3 million in funding in 2002, said they expected their allocations to shrink to nearly $134 million in 2003, a drop of 17 percent.

When asked how they were dealing with the economy, the highest number — 35 percent — said they would be cutting the number of grants they awarded in 2003, while only 11 percent said they would award more grants this year. The rest said the number of grants would remain the same.

Of those survey participants, 19 percent also said they would be narrowing their philanthropic mission, while 3 percent said they would be expanding their focus.

As Charendoff sees it, foundations are taking two main paths.

“Either you’re viewing this as a time of crisis, and you’re hunkering down and wondering about preserving, or you’re viewing this as a time of opportunity,” he says.

Urging more tzedakah, or charity, Charendoff exhorts foundations to increase the 5 percent portion of their endowments they are legally required to award each year in order to retain their tax-exempt status.

If a foundation has a multimillion endowment, “the difference between 5 percent and 8 percent is huge,” he says.

One of those big givers is the Charles and Lynn Schusterman Family Foundation of Tulsa, Okla., which awarded $12.75 million in 2002 and is planning to give some $14 million this year.

The foundation awards 75 percent of its grants to Jewish causes such as birthright israel, which sends young people to Israel and also focuses on problems such as child-abuse prevention.

“This is such a time of need out there, I felt I really needed to step up what we were doing” for Jewish and non- Jewish causes, says Lynn Schusterman.

And the Walter & Elise Haas Fund, which awarded nearly $11.9 million in grants in 2002, about 40 percent to Jewish causes, is actually raising its annual 5.5 percent giving limit to 6 percent, said Robyn Lieberman, the group’s program officer.

“The idea was, there was more need out there, and we were not eating into our corpus significantly,” she says, using the term for their total assets.

Meanwhile, the San Francisco-based Koret Foundation, which awards half of its $15 million to $20 million annually to Jewish causes, is keeping a tighter rein on its spending, says Sandra Edwards, the group’s director of grants.

The Koret family, which made its money in women’s fashion, built a $300 million endowment during the past 25 years that is now approaching a “maturation” phase, Edwards says.

“We’re scrutinizing projects more closely,” she says. “We’ve moved to a pro-active kind of grant making,” and taking a more “business-like” approach.

Yossi Abramowitz, a trustee of the Richard Wortman Family Foundation of Auburndale, Mass., says the economic downturn has actually helped grant seekers like his publishing company Jewish Family & Life, of which he is chief executive officer, which has built a track record in recent years.

He recently convinced mega-philanthropists Edgar Bronfman and Lynn Schusterman to give $2 million total toward MyJewishLearning.com, a Web portal into Jewish education and ideas.

But Charendoff and others caution that studying the annual charitable fluctuations of family foundations remains only one measure of their health.

In part that’s because foundations often award a lump sum of each grant in one year, then continue smaller awards in typical three-year cycles.

But economic turbulence also hits philanthropy in a less visible way, he adds.

The rise and fall of various financial markets also dry up the cash flowing into foundations’ various investments. So while a foundation may meet its $1 million in grant commitments in a given year, Charendoff says, it may have less cash on hand for new proposals.

“That new money is the value added that allows not-for-profits to experiment,” he says. “That’s an impact on the field that’s much broader and deeper than you would normally intuit.”

Other foundations are even going back to the drawing board and taking a fresh look at what kind of causes they support.

The Haas family has felt economic ups and downs, Lieberman, the program officer says, but it has also undertaken a “strategic planning process” reorganization.

“We’re identifying those causes which are mission critical,” she says.

Jeffrey Solomon, president of the Andrea and Charles Bronfman Philanthropies, which awarded $21 million in 2002, said the Bronfman group is also “totally revising our strategy.”

That means the Bronfmans are looking at projects that are “risk-takers,” Solomon says, but which have a “careful measurement of outcome.”

Bronfman beneficiaries such birthright israel, the post-September 11 Gift of New York and Project Involvement of the Reform movement in Israel are all such examples, he says.

There is some evidence that the Jewish foundation picture mirrors the larger foundation world, too.

Stacy Palmer, editor in chief of the Chronicle of Philanthropy, conducted a study of the larger foundation world for its March 6 issue, and she said most foundation endowments are shrinking.

“It’s really mixed. Either you’ve got some foundations saying that absolutely, we have to be giving more because people are having a hard time, or others are saying our assets have been really crushed by the stock market and we’re not giving.”

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