U.S. Jewish groups face cut-backs over plunging dollar
Israeli children celebrate the arrival of new immigrants at Ben-Gurion Airport, Tel Aviv in an event organized by the Jewish Agency for Israel (Encho Gosh/Jini)
The steady decline of the American dollar is causing financial headaches for American Jewish organizations with overseas operations, forcing some of the most prominent agencies to cut staff and scale back services.
On June 24, the Jewish Agency for Israel wrapped up a meeting of its board of governors facing a shortfall of $20 million to $30 million in the current fiscal year, and a gap of $45 million for next year’s budget. The American Jewish Joint Distribution Committee, meanwhile, estimates that it has lost $60 million in overseas purchasing power and recently cut 60 staff members. Other not-for-profits say they are also feeling the squeeze.
All share a common problem: Though many of their expenses are in foreign currencies, they raise funds in dollars. As the dollar has weakened against most major currencies, and as costs for food and fuel continue to rise worldwide, organizations – both Jewish and not – are finding that their funds are no longer stretching as far as expected.
“It’s definitely a big problem. Not only are organizations having to pay more on the ground to deliver aid, but they’re also having trouble raising money here because of the economy,” said Stacy Palmer, editor of The Chronicle of Philanthropy, which tracks the philanthropic world. “It’s a double whammy.”
Though Jewish organizations do not necessarily have more pronounced difficulties than other charities, a couple of factors have made their fiscal pain particularly acute. One is that American Jews have traditionally been the leading source of funds for Jews in Israel and elsewhere. What’s more, two of the largest destinations of Jewish aid are Russia and Israel, both countries where the currencies have been particularly strong.
Not long ago, the JDC announced that the dollar’s recent sag had sapped its $325 million budget for 2008. As a result, the JDC has had to scale back on everything from Jewish cultural events to programs that feed the elderly. The moves have come even as fundraising efforts have remained strong.
The situation is potentially even more ominous at the Jewish Agency, which has seen core allocations from American federations stagnate and even fall in recent years. Over the past year, as the dollar has dropped nearly 20% against the shekel, the Jewish Agency’s financial planning has been thrown into turmoil. According to the Israeli media, the agency’s board chairman, Richard Pearlstone, said that the 2008 budget was made with the expectation that a dollar would be worth 4.25 shekels. The dollar today is worth 3.38. Insiders worry that the resulting budget cuts could cripple an agency already scrambling to find new sources of funding.
Though the Jewish Agency and the JDC are two of the most prominent organizations to be hit by the weakening dollar, smaller groups are also feeling the pinch. American Jewish World Service, an organization that makes grants to not-for-profits in developing countries, has started drawing up contracts with foreign consultants in local currencies in order to shield programs against the possibility of further slides in the dollar’s value.
Other organizations have hedged their bets by shifting some of their funds to other currencies. Since December 2007, the Hebrew Immigrant Aid Society has converted $1.3 million to euros – a move that has proved to be wise, as the dollar has continued to decline against the euro. Other not-for-profits have been reluctant to take risks with the currency markets.
“Hedges are like going to Atlantic City and putting money on red or black; they’re not free,” said Steve Schwager, executive vice president of the JDC, which has not made any such moves. “If you guess right, you’re okay. If you guess wrong, you just lost that money.”
Schwager said his organization was focused on trying to raise money to compensate for the dollar’s shortfalls.
Ultimately, there may not be any solution to the overseas woes except to hope that the dollar will make a comeback.
“You can’t raise money from Americans in shekels,” said Gary Tobin, president of the Institute for Jewish & Community Research, a think tank that studies Jewish giving. “You take your lumps, you wait it out and you hope for the best.”