Could the Economic Downturn Kill Jewish Innovation?

The past decade has seen a groundswell of innovative Jewish nonprofits — from the birth of a Jewish pop culture magazine, Heeb, to the creation of a slew of trailblazing Jewish social service organizations, to an array of projects that allow Jews to express their Judaism through ways other than the prayer book.

But as these initiatives reach adolescence and eye expansion, the spiraling economy and financial crisis threatens to stunt their growth and thwart the next generation of startups from even getting off the ground.

Story after story has been written about fears that the economic downturn will hurt philanthropy. The thinking goes that when people feel economically unstable, the first thing they do is cut their discretionary spending – and charity, no matter the moral or biblical obligation, is still viewed by most as discretionary spending.

Until recently, most of the concern had been based on speculation; charities had been holding out hope that they would be able to avoid significant cutbacks. But, according to a survey taken in late September by the private wealth research firm Prince & Associates, the cuts have arrived.

According to Forbes magazine, Prince spoke to 439 high-net-worth families, with 73 percent of respondents saying they had been significantly hurt by the economic downturn. Fifty-one percent said they planned on giving less next year than they did this past year — and only 16 percent said they planned on giving more.

The concern about such trends was detectable recently at the Manhattan launch party for the 2008 edition of “Slingshot,” an annual guidebook to innovative Jewish organizations put out by the Andrea and Charles Bronfman Foundation. The leaders of several of the most well-regarded and established innovative Jewish projects expressed concern, saying they are expecting to feel the pinch.

“Most recently, we are starting to hear, ‘We love what you do. We think that it is really, really great. And because of the economy, we are not going to fund any new projects this year. We are going to fund the things that we already fund.’ And that is only over the past few weeks,” said Aaron Bisman, who runs JDub, the non-profit Jewish record label that produced Matisyahu’s first album. “I had heard it was maybe going to be a possibility, but we are really starting to hear that as a definitive answer.”

JDub, the product of two incubators of Jewish startups, Bikkurim and the Joshua Venture, is widely regarded as one of the most successful young Jewish projects to get off the ground in recent years. For the last five years, Bisman’s budget has increased as funders have taken notice of the group and JDub’s record sales have started to bring in additional income.

Early this summer, Bisman was talking about expansion. Those plans were based on being able to tap into new revenue streams, attract new donors and entice foundations to become new investors.

But by late September Bisman was talking cutbacks — in both programming and staff.

Bisman’s experience reflects what most philanthropy experts see on the horizon. Philanthropists may not completely shut their coffers, but new grants — the lifeblood of young organizations — are going to be the first to get cut because, like any investment in any startup, they are risky proposals that may not pay dividends.

“Everybody is looking to this as a real event that they are dealing with, and especially for groups that are young and startup and in a growth phase, it is challenging,” said Rabbi Eli Kaunfer, the cofounder of Kehilat Hadar, an egalitarian, traditional-style minyan in New York that is a model for the independent minyan movement.

Hadar has yet to lose any grants, but Kaunfer has been told to brace for next year.

That is when the real crunch could come, especially for those who rely on funding from endowed foundations. Those foundations are required by law to give away 5 percent of their assets each year, based on the assets from the previous fiscal year. As the market drops, that 5 percent shrinks, leaving less for foundations to give away.

To put it in perspective, the Washington Post reported that the Community Foundation for the National Capital Area, one of the area’s largest grant makers and comparable in size to the Koret Foundation, the Pritzker Foundation and the Mandel Fund, lost about $40 million between July and September. The fund had approximately $330 million in assets at last reporting.

Back in 2006, Hadar was able to raise enough funds to launch an egalitarian yeshiva. Kaunfer says he’s unsure if the founders could have pulled it off in the current climate.

“Today would be a very hard day to start an organization and raise the soft dollars,” Kaunfer said.

Such projects — especially those focused on building Jewish identity — could be facing an even greater challenge in the coming months if they need to compete with social service agencies that are getting squeezed on both ends as they face greater demand for services and shrinking revenue streams.

But a bad economy does not need to be the death knell for Jewish innovation.

Those who run new organizations that have established a foothold for themselves and are looking to grow, like JDub, have won recognition in the Jewish organizational mainstream. Their leaders have become regular speakers at federation events and at the federations’ annual conference, the General Assembly of the United Jewish Communties.

At last year’s G.A. in Nashville, organizers dedicated a plenary session to young Jewish innovators and gave them a chance to address several thousand federation lay and professional leaders. Though they will have to work hard to secure funding, many of them have at least one foot firmly in the door.

And most of the newer operations have an advantage over established organizations: They tend to operate on relatively small budgets of under $2 million and so are not yet in need of mega grants.

There may even be hope for those looking to start nonprofits, as the Joshua Venture — the incubator that helped launch this movement, but then went on hiatus in 2006 — has announced on its Web site that it is now seeking new applicants.

Nina Bruder, who runs the UJC-funded incubator Bikkurim, said she is hopeful.

“When the economy is bad, the need for basic human services goes up and the funding for basic human services goes down,” she said. “In the circles that are concerned about that, there is going to be a big push about that basic subsistence needs are going to have to be met.”

“But I think there is a whole other part of the funding community that doesn’t focus on that and still has an attention for other kinds of creative cultural and special needs areas,” Bruder went on. “I think we are going to have to wait and see what happens.”

(This article was adapted from Jacob Berkman’s blog on the nonprofit sector, which can be found at www.fundermentalist.com.)