While economists fret over how the falling U.S. dollar will affect global markets, Jewish charities that rely heavily on U.S. fund raising to support programs outside the United States are facing serious budget crunches.
The dollar has been on a slow decline against the euro since January 2003, when the two currencies were basically even.
Last Friday marked an all-time low, as the dollar traded at $1.4572 against the euro — a decline of more than 11 percent since the start of the year.
The dollar also has fallen sharply against the shekel, to 3.93 shekels per dollar from 4.30 in January.
With the credit crisis, housing recession and high U.S. deficit having sent the dollar into a tailspin in 2007, Jewish community professionals in charge of overseas nonprofits are facing major problems paying for their programs.
[photo 1111eurodollar align=left] The dollar’s weakness already has hit groups like the American Jewish Joint Distribution Committee and the Jewish Agency for Israel, the two overseas arms of the North American Jewish federation system, particularly hard.
The JDC allocates some $360 million annually in 66 countries; 90 percent of the funding comes from U.S. donors. While the budget number has stayed the same since January, its value has declined significantly. That has made the $70 million the JDC spends in Europe every year 10 percent less effective in 2007.
“Ultimately we provide less service if the dollar doesn’t go as far,” the JDC’s chief financial officer, Eugene Phillips, told JTA. “People are getting hurt.”
The impact has been most severe in the former Soviet Union, Phillips said. The cost of home care for the elderly, for example, has jumped to $2.43 per hour from $1.42 per hour a year ago.
Other charities are facing similar problems.
George Ban, the executive vice president and CEO of the Ronald S. Lauder Foundation, which runs a network of Jewish schools in Eastern and Central Europe, said the shrinking dollar “creates a tension because you are a professional and you have to keep yourself within a budget frame.”
For Ban, this means that while a teacher’s salary of 500 euros cost him $500 in 2003, now he has to pay $700 per month for the same teacher, he said. That increase extends to every line item in his budget, from food to electricity to heat.
To cope with the loss of value, the foundation has cut all non-essential grants and reduced costs across the board. Camps Ban used to run out of high-end hotels are run now at cheaper facilities.
The American Jewish World Service, which provides some $12 million in grant funding to grass-roots organizations in 36 countries, is considering adding funds via stop-gap grants to groups whose original grants — made in dollars — turned out to be insufficient to cover the costs of their programming, an AJWS spokesman said.
“In countries like India and Thailand, where the dollar has taken the biggest hit, it means that our partners have had to adjust how they are budgeting their resources in areas like staffing, project supplies and physical overhead,” Joshua Berkman said.
In India, AJWS costs rose to $1.6 million this year from $1.2 million in 2006. In Thailand, they rose to $600,000 from $320,000.
The Jewish Agency, the quasi-governmental agency that runs welfare and education programs in Israel and abroad, is similarly at risk because 70 percent of its income is received in dollars while 80 percent of its expenses are paid out in shekels, chief financial officer Yaron Neudorfer said.
This poses extreme risk for the organization, since the dollar’s decline against the shekel is continuing unabated.
Currency value changes have opened up an $11 million budget gap, agency officials said.
Both the Jewish Agency and the JDC say they will need more money from the United Jewish Communities — the federation umbrella group that provides the two groups with the lion’s share of their budgets — to close the gap.
[photo 1111roubledollar align=left] Howard Rieger, the UJC’s president and CEO, said he does not yet know how the UJC will respond to this need. He pointed out that in other years the dollar has gone up, generating savings.
For the short term, the JDC and the Jewish Agency, like other Jewish nonprofits active overseas, are trying to tackle the problem on their own.
The JDC has decided to keep a balanced budget, pressing their local service agencies to stretch their funds as far as possible until it can raise more money.
The Jewish Agency has been able to soften the blow of the declining dollar by hedging its financial exposure through currency insurance. After the shekel-dollar exchange rate became extremely volatile in 2006, the agency bought an option from an Israeli bank that allowed it to lock in a specific shekel-dollar rate, netting the agency some $1.5 million in savings for ’06.
In 2007, the Jewish Agency again bought an option, locking in a 4.10 shekel-dollar exchange rate on $150 million.
Neudorfer says the Jewish Agency expects that move to save $2.2 million in ’07, offsetting approximately 20 percent of the organization’s losses stemming from the falling dollar. The exact amount will depend on where the exchange rate stands when the agency exercises its right to buy the shekels at the 4.10 exchange rate, which it has until February to do.
“We don’t have to worry until February 2008,” Neudorfer said.
Then, he said, the agency will have to figure out how to stem the budget shortfalls for ’08.
The Archive of the Jewish Telegraphic Agency includes articles published from 1923 to 2008. Archive stories reflect the journalistic standards and practices of the time they were published.