JDC faces tough choices at board meetings

From the Fundermentalist newsletter:

On Sunday and Monday, the JDC’s board of trustees will gather at the Helmsley Hotel in New York City to decide on next year’s budget. They must make serious budget cuts primarily, the JDC says, because of drastic reductions in the allocations it receives from local Jewish federations via the Jewish Federations of North America (formerly the UJC).

Two weeks ago, officials at the Jewish Federations met with both JDC and the Jewish Agency for Israel — which together have received on average nearly $200 million per year in recent years — to tell the organizations that they should expect their federation allocations to decline by 10-20 percent this coming year, and perhaps more next year as local fund-raising campaigns struggle with the recession.

For the JDC, that means a cut to its core allocation of anywhere between $4 million and $8 million; for the Jewish Agency, it’s three times as much.

In September, the JDC’s budget and finance committee came up with final recommendations, and a budget recommendation will be put before the board this weekend for approval.

The JDC’s CEO, Steve Schwager, would not specify which exact items the organization is contemplating cutting from its budget, which still presumably will top $300 million. But the lion’s share of the cuts will come from its operations in the former Soviet Union and Israel, where the organization does about two-thirds of its work, he told The Fundermentalist.

"We sat with our staff and went project by project around the world," Schwager told me earlier this week. "There were no sacred cows. We decided which were high-priority projects and which were lower priority. We made lists. We took it to the board. And we ended up in a very spirited discussion with them."

The JDC long has had something of a dual identity: By day it is the organization that is the 911 of the Jewish community, there to save Jews around the world in trouble and feed hungry Jews. By night it builds Jewish community around the globe. While many JDC leaders will say that both constitute vital parts of the organization’s mission, the funding mechanism for each of them is very different.

Over the past few decades, donors (including board members) have become much choosier about what they fund, with many eschewing giving to core budget items in favor of designated projects.

In the JDC’s case, 80 percent of its budget comes from donor-designated funding, generally used to cover community- and identity-building programs outside of the United States. Most of the other 20 percent comes in undesignated allocations from the federation system, which go to cover core budget items like the cost of keeping the lights on in JDC’s Manhattan offices and feeding hungry people in the former Soviet Union.

(According to Schwager, the organization does collect money from private donors to feed the hungry, but usually they want to see their donations leveraged with matching money from the federation pool.)

Already, the JDC has seen a reduction in its feeding programs in the former Soviet Union. Three years ago the JDC was feeding as many as 250,000 poor Jews in the region; since then, the number has been reduced by 60,000, in part due to budget cuts (the organization sees an annual 5-percent drop in clients due to natural attrition).
Schwager says that, while designated funding from private donors is on target, funding for the core budget is down.

For now, despite the budgetary difficulties, Schwager says that the JDC remains committed to pursuing both halves of its mission.

"We asked ourselves: ‘Are we a welfare organization or are we a renewal organization or are we both?’" he said. "Welfare and renewal are linked together. When we do welfare, we build local instruments and they have boards who are the leaders of those communities. Everything we do is built around helping the poor, but we are building communities so eventually we don’t have to."

But for the organization to maintain that balance, either the federations will have to miraculously come up with more money or its donors may have to reconsider how they give to JDC.

"Feeding hungry Jews vs. identity projects — clearly they are both important and hopefully we won’t have to choose between the two," one member of the JDC’s executive committee told me this week on condition of anonymity. "There are those who say the thirst for Jewish knowledge is most important and those who say visceral hunger is. Both are important, and that has always been an issue. Not to sound dramatic, but we really are talking about people’s lives and the quality of people’s lives and about our ability to act in good conscience as a community."

Strategic visioning statements aside, how the board votes this week ultimately could go a long way toward deciding the true nature of the JDC. The decisions largely could come down to whether JDC board members are willing to put aside some of their own philanthropic interests to reallocate their giving to areas deemed more dire now.
It’s a difficult decision, admits the board member.

"Like everyone else, I am tempted with special projects, but I also know that core money [is short]. The selfless thing to do is to overcome the desire to fund specific projects," the executive board member said. "The people I know are agonizing over this. In the conversations I have, people are swallowing hard and saying these are unusual times and we don’t necessarily have the luxury to make the kinds of decisions we might have once had as board members."

The executive board member added: "There were times you would go to a board meeting and you would know people were passionate about one corner of life in Latin America. They would come to the meeting prepared to go to war for their project. I think you have a board that understands that those rules don’t apply anymore."

In an effort to fend off the need for such choices, the JDC has started a direct fund-raising campaign outside of the federation network to raise money for core budget items; Schwager said the JDC will try to make up its budget gap by reaching out to any donor it can.

Fundermentalist’s take: If the board cannot figure out a way to convince donors to shift money to close the gap in the core budget, one possible option is for the organization to go back to the federations with a hard-line pitch.

For the past year, Schwager — along with the leadership of the Jewish Agency — have publicly pleaded for more money from the federations. It started at last year’s UJC General Assembly, when he and then-Jewish Agency chairman Ze’ev Bielsky both told a plenary session of more than 2,000 federation leaders that the two organizations needed more money. And it has continued throughout the year as both have pushed stories about their respective budget gaps getting wider due to smaller core allocations from federations.

In June, Schwager wrote a public letter to his donors saying that the federations were falling short.

"Our 2010 best estimates at this point are that only $66.1 million of undesignated funds will be available. This represents a shortfall of $7.8 million for 2010," he wrote. "The majority of the shortfall is expected to be the result of reduced overseas support from the UJC/Federation system."

UJC insiders say that that move rankled federation leadership.

The latest missive came at the end of August, when Schwager announced that the JDC would have to close 20 Heseds in the former Soviet Union because of funding problems.
Perhaps Schwager, one of the smartest in the business, is hedging his bets.

As part of the UJC/Jewish Federations of North America meeting earlier this month, new CEO Jerry Silverman pressed the idea that the federations, the JDC and Jewish Agency all have to work together to tell the story of the overseas organizations better.

The Jewish community and the federation system have proven in recent years that that they are still very, very good at raising money in response to a sudden, dramatic crisis (the Lebanon war, the tsunami). But how will the federation system respond to the message from JDC that old people in the former Soviet Union and Eastern Europe are starving because the federation allocation has been cut? Will donors respond?
 

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