Republican power puts federations in tough spot

In the lead up to the Jewish federation system’s General Assembly in New Orleans,  Jim Besser elucidates  in the New York Jewish Week what is a growing concern among federation officials in the aftermath of Tuesday’s elections that saw the House of Representatives taken over by Republicans.

Republicans are sure to push for steep tax cuts and in other cases extend and expand tax cuts implemented by the Bush administration, all of which could put even more pressure on nonprofits – including the federation system – that rely on federal support to prop up their social service work as fewer tax dollars could mean fewer dollars for nonprofits at a time when these agencies are already struggling to raise money.

It could not have come at a worse time for the Jewish Federations of North America, writes Besser:

The figures for 2009 show steep declines in giving for a number of federations, including groups in San Francisco, Chicago, Boston and, to a lesser extent, New York.

Recently the Jewish Federation of Greater Phoenix, facing financial hardships because of that city’s devastated economy, let go eight employees and announced a major belt tightening due to a “significant reduction in revenues.”

While federation officials insist the Jewish groups are faring better than philanthropies in general, a Chronicle of Philanthropy list of 400 top nonprofits revealed that overall fundraising for the largest Jewish charities was down by an average of 18.5 percent in 2009 — almost twice as high a rate as the list as a whole.

Looking at 2009 figures, “the federation donor drop-off is troubling since the demand for essential services have concomitantly increased,” said Mark Pearlman, a New York investment strategist and nonprofit activist who recently compiled and analyzed published statistics on Jewish philanthropies. (Pearlman writes the JInsider column in The Jewish Week.) “With the exception of Baltimore, all communities were down double digits. In the one year, more than $200 million disappeared from the federation system. Even if there is slightly positive growth in the future, it will be almost impossible to recover a material portion of these losses.”

In New York, the country’s largest Jewish federation is already preparing for the worst, the UJA Federation of New York’s CEO John Ruskay told Besser:

He agreed that new government spending cuts are inevitable and that the group is undergoing “a very serious process” of preparing for them.

“Philanthropy cannot offset substantial government reductions,” he said. “So UJA and others will be forced to say: what programs are absolutely essential? What can we do to help government agencies reduce budgets in ways that are compassionate, and how can we use our philanthropic dollars in ways that are most essential to the Jewish community?”

He argued that “this has nothing to do with the outcome of the election. Government spending is coming down, and Jewish federations and others have to get crystal clear about the impact on our communities.”

JFNA officials are also bracing for backlash from the public over huge budget deficits federal, state and local governments are racking up, William Daroff, the head of the JFNA’s Washington office, which lobbies for hundreds of millions of dollars in federal aid each year, told Besser.  

“We have to navigate this in a way that is consistent with there being a vital, vibrant social safety net that helps those in need,” he told The Jewish Week. 

But Besser points out a somewhat troubling predicament for Daroff and the JFNA. While the federations might be imperiled by tax cuts, they might have a hard time lobbying against them, as some of the largest donors to the federation system stand to be significantly helped by those same cuts. The question will be whether the federations can afford to stand on the sideline as not to upset their donor base and hope that the impending tax debate works out in their favor.