Friday, August 13, 2010

The Giving Pledge

The Wall Street Journal last week publicized the names of those who had joined “The Giving Pledge.” This initiative, spearheaded less than two months ago by Microsoft founder Bill Gates and his pal, America’s greatest investor, Warren Buffett, asks all of the billionaires of America to donate “the majority of their wealth to the philanthropic causes and charitable organizations of their choice either during their lifetime or after their death.”

To date, forty have signed up. “Many of the names already were known,” wrote Robert Frankel in the Journal. “But the list also includes some notable new ones,” adding that “the list could become a strong financial force for philanthropy, if for no other reason than peer pressure, publicity and the inspiring example of others.”

Jews, religious Jews in particular, don’t need to look outside their own circles for inspiration or direction when it comes to charitable giving. We are, as the Sages put it, “compassionate, the children of the compassionate.” The mitzvah of giving charity is ingrained in us from a young age; even Jews who are not wealthy give charity, understanding that it’s a priority of Jewish living.

But a disturbing trend seems to have developed recently, if Dr. Marvin Schick, president of the famed Rabbi Jacob Joseph School in Staten Island, New York, is to be believed. Writing in The Jewish Press, Dr. Schick laments “the message that basic Torah education is not a tzedakah priority.”

I don’t want to quote Rabbi Schick out of context; obviously he knows about all the yeshivos and kollelim, both here and in Eretz Yisrael, which are supported by philanthropic individuals. What he is lamenting is the lack of a comprehensive funding model for Jewish day schools.

The most obvious reason for this is that the Torah education of children is an obligation, first and foremost, of their parents. Why, a philanthropist might argue, should my tzedakah dollars be spent on people who ought to provide for themselves? Priority is therefore given to causes where poverty “can’t be helped.”

Seemingly overnight, however, we are faced with a “tuition crisis.” The rising cost of yeshiva education (brought on to a large extent by good developments, such as limited class sizes and higher wages for mechanchim), coupled with factors such as the higher costs of housing in the frum community and the current economic downturn, has pushed the tuition issue to the fore. For most families, tuition is the single largest after-tax expense they face.

In response, some communities—notably Chicago and Bergen County—have set up “kehillah” funds to begin the process of moving the financial burden of education from parents to the community at large. As noble as these funds are, however, the money they raise is a drop in the bucket. I am told that the funds offset tuition, in their respective communities, by approximately $200 per child—hardly a game changer.

If we truly have reached a breaking point in the financing of Jewish education, then something more considerable must develop.

The most substantial, dollar-neutral way of lowering tuition is to convert post-tax dollars into pre-tax dollars. There are two ways to accomplish this. The first is through school vouchers. This is something that has been, and continues to be, lobbied for, without success. And with the current budget deficits facing all state governments, it is unlikely that school vouchers will happen anytime soon.

The second way to convert post-tax dollars into pre-tax dollars is for charitable contributions to supplant tuition. A family now spending $40,000 annually on tuition would save in the area of $10,000 in taxes if that $40,000 was a voluntary contribution.

Naturally, this won’t happen.

While it may work out on paper, human nature being what it is, people aren’t likely to give voluntarily the same amount they are currently giving “forcibly.” Yeshivos have tried this in the past—asking parents to donate more in exchange for lower tuition—and it hasn’t worked. This is a grand shame, because without spending one dollar more than they currently are spending, parents could save, collectively, millions of dollars in every community.

My feeling is that the weak response to these restructuring attempts is due to the fact that they don’t lower tuition immediately. They simply function as a promise for the future. In the meantime, people actually end up paying more—this year’s tuition, plus a pledge for next year.

But what if the concept were tweaked somewhat? Then could it work?

This is where the Giving Pledge comes in.

What if a group of Jewish super-philanthropists in a community agreed to fund the entire day school budget of that community for one year? The money would be raised before the school year began, with the understanding that the heretofore tuition-paying members of the community would be responsible to replenish the funds by the end of the school year. If they don’t, tuition reappears the following year.

The parents would pledge to continue funding the kehillah with the same amount they had heretofore been obligated to pay via tuition. They continue doing this every year. If the money runs out, or even runs low, tuition comes back—and they’re spending the same amount, but forfeiting a valuable tax-deduction.

I would hope that the looming threat of taxable tuition would keep the donations coming.

Now, who’s ready to pledge?


Anonymous Anonymous said...

Though well reasoned and thought out, i don't think it's workable because there is no enforcement.
Schools have tried this on a smaller scale, creating a voluntary scholarship fund with the understanding that the IRS requires 501(c)3 contributions to be voluntary in order to qualify for a tax deduction. The funds were never collected and in many schools now the scholarship funds are mandatory.
A smaller scale idea would be for a few likeminded families to set up a foundation, through which to pay tuition.
Questions are:
1) Would schools credit those "contributions" toward the tuition bills
2) Is this plan just glorified money laundering.

At the end of the day, though converting tuition from post tax to pre tax dollars would save substantially, the bottom line is that it's not enough for average families with multiple children and obligations
The federations and community at large (not just parents with school age children) need to share the burden if we hope to transmit our way of life to future generations.

Mon Aug 16, 09:37:00 AM  
Anonymous chareidilite said...

Anonymous- The federations and community at large (not just parents with school age children) need to share the burden...

The problem is that the community-at-large largely consists of parents, grandparents and great-grandparents, all of whom have paid tuition for many years and are currently participating in paying tuition for children, grandchildren and great-grandchildren. This severely limits the amount of money that can be raised from the community. And the federations (which raise most funds from non-Orthodox sources) are not interested in supporting yeshivos in any major way.

I thought that the main point of Marvin Schick's article was a call for a change in tzedaka priorities. Individuals need to give a much larger percentage of their tzedaka to local yeshivos, rather than other charitable causes.

Mon Aug 16, 02:05:00 PM  
Blogger CJ Srullowitz said...


What can I say? For the most part you are correct; there is no enforcement - except that people are "forced" to pay tuition each year.

I do think it's fair to argue, however, that past attempts were unscuccessful because they came AFTER parents were already paid up on tuition, with (tenuous) promises of reduced tuition the following year.

If the circumstances were reversed, that is to say that tuition is set at a lower amount INITIALLY, and then, in order to keep them low, the funds would need to be raised or tuition goes up the following year, maybe, maybe there will be greater success.

As for your idea of a foundation, it won't fly with the IRS. Unfortunately. I've researched this a great deal.


The problem is, as Dr. Schick points out, is that you can't really tell people what to do with their tzedakah money. Although, I agree that by educating people on these halachos, it may have an impact.

Mon Aug 16, 02:36:00 PM  
Anonymous Anonymous said...

I think the federation and wider (outside of the observant community) is slowly beginning to realize that our only future is by funding education.
Jack Wertheimer (of JTS) wrote a fascinating article in commentary a few months back addressing this issue.

There is no other solution other than to making funding education priority number one of the federation. We have more than enough Holocaust museums by now; it's time to look to the future or there won't be one.

Mon Aug 16, 02:43:00 PM  
Blogger CJ Srullowitz said...

The problem is that many philanthropists who give toward education are starting to pull back from day schools in favor of "alternative" education- summer camps, trips to Israel, etc.

Dr. Schick discusses this in his piece in the Jewish Press.

Mon Aug 16, 04:29:00 PM  
Blogger Neil Harris said...

In Chicago we are fortunate that the Federation is a major back of our chinuch institutions.

Although, in the current economic state there has been a major push within our city to keep tzedakah "local".

Tue Aug 17, 12:07:00 AM  
Anonymous Anonymous said...

How is the Federation funded? Is it mostly people from the greater Chicago area?


Thu Sep 02, 09:21:00 AM  
Anonymous Anonymous said...

Using tax deductible dollars for tuition is a great idea, but how would it work on a practical level? The following is an attempt at fleshing this out on an individual basis and then working up to a school or community level.

If you receive something for your donation, then it is not legally deductible (essentially). At what point in the tuition setting process is it optional? when can a school officially lower an individual family's total tuition bill?

example: I know tuition is about 10k/yr for my children. I give a donation to the school prior to official registration and prior to their officially sending out tuition rate letters? does this get around it, if they then "grant" me a scholarship / reduction of tuition equal to the amount donated? what are the technical criteria for doing this in a legal manner?

Next, we'd have to get around how to do this from a cash flow perspective, except for people who have a year of savings in the bank for lump sum payments.

Once you do this for a couple years in a row, for a decent number of families, then a school could standardize and or believe those families would continue. The school would receive payment up front, helping from a CF perspective, as well as potentially reducing admin costs.


Thu Sep 02, 09:26:00 AM  

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