Washington — Threatening to shake the fragile structure of the American Jewish federations’ umbrella organization, one of the key partners for overseas funding has turned down a proposed agreement on distribution of funds, putting the system in a state of disarray.
The American Jewish Joint Distribution Committee announced that it has rejected a decades-old understanding that gave it only a quarter of all money raised in the United States for overseas causes, while leaving the lion’s share for the Jewish Agency for Israel.
The decision illustrates not only a new phase in the competition between the two agencies over dwindling American funds, but also their struggle to reposition themselves in light of a changing philanthropic reality in which fewer funds are available and some federations are beginning to prefer direct giving to their favorite causes over contributions to a managing agency.
While negotiations between JDC and the Jewish Agency over the distribution of funds raised by federations had been going on for the past 18 months, it was only in recent weeks that the dispute boiled over. Days before the recent gathering of the Jewish Federations’ General Assembly, attempts to craft a new agreement reached an impasse. In an unusual move, given the otherwise quiet manner that characterized the negotiations, JDC made its disappointment public. In a November 12 letter addressed to Kathy Manning, chair of the Jewish Federations of North America, JDC’s president, Irv Smokler, wrote that his group would not accept the latest draft agreement, and therefore, “reluctantly
we must indicate that there is no national agreement on the distribution of overseas core dollars.”
Smokler argued in his letter that an accord, rooted in a 1952 understanding that instituted a 75:25 ratio in favor of the Jewish Agency, should be revisited, since the role his organization plays in Jewish life has grown dramatically, while the Jewish Agency’s main goal of dealing with mass immigration to Israel is no longer relevant. “The world has changed significantly, and the funding formula must reflect this new reality,” he added.
During months of talks between the two agencies, JDC had presented facts about its growing needs, as it provides for more than 200,000 Jews struggling with poverty in the former Soviet Union and in other Eastern European countries. It also claimed that the distinction once held between Israel and other overseas needs is no longer valid, since JDC is also involved in many social service projects in Israel.
“The current system is arbitrary and has nothing to do with reality on the ground,” said Steve Schwager, JDC’s executive vice president and CEO, in an interview. “The money should follow the needs.”
But switching to a system based on needs from one based on a fixed formula is viewed by the Jewish Agency, and by many in the North American federation system, as unacceptable. In discussions, the Jewish Agency pointed to the fact that JDC has other sources of income, whereas the Jewish Agency relies on federation money as its primary source of overseas funding. Representatives also argued that since the distribution process is geared for long-term planning, it should enable the Jewish Agency to deal with unexpected emergencies in the Jewish world, such as waves of mass immigration.
Richard Pearlstone, chairman of the Jewish Agency’s board of governors, said in a statement that his group will continue working with all sides to reach an agreement on allocating the funds. “JAFI was surprised and disappointed,” by JDC’s decision to withdraw from the talks “because we had been working in good faith with JDC for the past 18 months and were seemingly close to an agreement,” Pearlstone said.
Funding for both agencies has been in constant decline in recent years. In 2007, the Jewish Agency got $159.5 million, while JDC received $58.4 million. The amount dropped in 2008, and although final numbers are not in yet for 2009, the Jewish Agency is expected to get only $124 million and JDC $51 million.
The decline, which has forced both agencies to cut back on staff and caused JDC to dig deeper into its endowment, reflects more than just the financial downturn in the United States. It also represents a growing trend among Jewish donors who are distancing themselves from the mega-agencies in favor of designated giving to specific projects overseas.
“People prefer the hands-on approach. It helps them feel they know where their money is going,” said Kenneth Kaiserman, chair of the Center for Israel and Overseas at the Jewish Federation of Greater Philadelphia. His community has been among the first to break with the long-established funding system in which federations provided their donations to the umbrella organization (which was formerly known as United Jewish Communities and is now called the Jewish Federations of North America). The umbrella organization would then funnel the donations, known as “core funding,” to the Jewish Agency and JDC according to the 75:25 formula.
Philadelphia now provides its funds directly to programs in Israel and the former Soviet Union, thus bypassing the current system and having a greater say in the destination of the funds.
Designated gifts have also become a greater part of giving at the Combined Jewish Philanthropies of Greater Boston. That federation has been shifting most of its funds away from the umbrella organization and toward specific projects. Many of these projects have been done in cooperation with JDC, which has been successful in tapping into the new trend of designated giving.
“The JDC found ways to think of a new agenda and develop ideas for us to work together,” said Barry Shrage, federation president. He added that the Jewish Agency, on the other hand, “had difficulty in formulating an agenda that we could engage with.”
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