Wednesday, December 10, 2008

Are Yeshivos Economically Viable?

Unless you've been living on the third moon of Rigel VII for the few months or so, you're no doubt aware that we are in the midst of a severe economic downturn. As can be expected, the frum community has been hit hard by this recession. The extra costs that accompany an Orthodox Jewish lifestyle have severely allow for a much smaller economic margin of error than in a typical American household.

MoChossid commented that yeshivos and other Jewish institutions are usually the first ones to feel the pinch. He writes:

When people start to feel financial pressure, the monthly payment that goes first is invariably tuition. This, of course, is not surprising. As among missing mortgage payments, real estate taxes, car payments and tuition, the one with the fewest consequences is tuition. Schools will not toss a kid out for failure to pay tuition, particularly under these circumstances.

What he says is, for the most part, true. Most schools won't toss a child except in the most egregious cases of non-payment. They usually won't hit you up for late fees (although one of my kids' yeshivos does), and they certainly won't up your finance rate to 29.99% for missing a payment. They aren't going to toss you out of your home, throw you in jail or repossess your car. They're not going to turn off your lights or have your family living in an unheated house in the dead of winter.

Is it right that the yeshivos are on the bottom of the totem pole, so to speak? No, it's not. They should be at the top or on top. On the other hand, when the financial pie of any family is only so big, it's hard to fault a family for choosing to pay the mortgage, or the electric bill or the grocery bill ahead of the school; especially when the consequences for missing any of them are so much greater than the consequences of missing a tuition payment.

On the other hand, schools aren't merely buildings and institutions. They are actually made up of people - people who deserve to get paid (and paid on time) for the work that they do. But when parents begin to default on tuition payments*, and especially when that is coupled with a downturn in donations, it's usually the teachers and other employees of the school who suffer first. Most schools, when faced with a choice between paying the electric bill or the teachers, will go for the former.

All this comes to forefront this week as the teachers of Bais Faiga in Lakewood are now in the third day of their strike. They haven't been paid in quite a while and have finally decided to take matters into their own hands. 1800 (yep, that's one thousand eight hundred) girls are now out of school until the matter is resolved.

Ezzie asks an interesting question. He notes that schools are heavily dependent upon donations to meet their annual budget. Donations, of course, rise and fall with the general state of the economy. To insulate schools from the effects of an economic downturn, the majority of thier income would have to come from more... consistent sources, such as parent's tuition. He asks (bolding his):

The real question is: Is it truly economically viable - in any Orthodox community - to support and maintain a school within its own budget? Does anyone know of a school whose revenues outside of donations exceed its expenses? If so, let's see it! If not... what must the approach be? Store away the donations in good years to make up the gap in other years, like the Yosef/Pharaoh analogy a commenter said yesterday? Is that realistic? What changes are possible within the frum community to make it possible to keep a school afloat on its own?

I don't know the answer to his question, but my first guess would be that there are no such schools. If they did manage to somehow meet their expenses based on tuitions alone, then the excess funds from donations wouldn't have been saved, but would probably have been spent on capital projects and the like. Unfortunately, that seems to be human nature -- you see this phenomenon in government all the time -- in good years, rather than save money (or give some of it back to the taxpayers), programs (worthy and not) get expanded, and when bad times come, huge deficits spring up.

Of course, all this is contingent upon parents actually *paying* the tuition. If they cannot (things happen in life -- job loss, disability, death, divorce, etc.) then the system collpases again. But I think that if a school can get to the point where the vast majority of parents pay their tution, they should be able to ride out the odd cases where things go wrong.

So, where does this leave us? Assuming that schools must collect tuitions to stay viable, how do they deal with parents who cannot pay? Unfortuantely, I don't have an answer to that. You don't want to toss a kid out of school because of factors that are beyond his/her control (or even the family's control), but the school has to pay it's bills too.

A basic rule of personal finance is that you cannot (or should not) spend more than you earn. If you do, you are going to wind up in trouble. Of course, in any large population, people are going follow this rule to varying degrees -- some will be very fiscally responsible while others will continue to spend, spend, spend as if there is no tomorrow. As much as we might wish that it were otherwise, yeshiva tuition is a form of spending, and must be accounted for in the budget. Tuition payments, as a budget item, fall into one of three categories for most people:

1. Payments that can be made comfortably (i.e. affecting no other items in the budget other than savings)
2. Payments that can only be made by cutting other non-essential items in the budget (i.e. belt-tightening).
3. Payments that can only be made by cutting essential items from the budget (like the electric bill, or the mortgage payment).

For most of us, I'm willing to bet that tuition falls into the second category. However, as the economic situation worsens, I'm willing to bet that more and more families are sliding into the third category. For families in that category, there are a few options:

a. Find ways to earn extra income, dip into savings, or go into debt, so that the extra income can go to the essentials, sliding tuition back to category #2.
b. Ask for a tuition reduction, sliding the tuition payment into category #2.
c. Not pay and hope for the best.

Of the three possible options (and, granted, I might have missed some), all but the first (the hardest to implement) put additional economic pressure on the school. While the school may be able to absorb a certain percentage of parents whose tuition payments fall into the third category, there is a breaking point, beyond which the school can no longer operate. At some point, as the tuition checks stop coming in, the school will be forced to stop paying its own expenses (including salaries). Even if there is no finanical mismanagement in the school (yes, I know that's a big if), a school will eventually be unable to meet it's expenses.

That's where Bais Faiga is today.

Many people would like to blame the situation in Bais Faiga on the kollel lifestyle, but I'm not certain that the kollel lifestyle is really the problem. It's certainly arguable that because of the kollel lifestyle, Bais Faiga is the among the first instituions to come to this, but I believe that it will eventually spread to the "working communtiy" as well. The question is, when (and if) it hits the working community, at what point does the whole system become unsustainable? At what point will yeshivos be forced to make the difficult decision to turn away kids or close? Or at what point will parents have to make the decision to send their kids to public school?

In short, is the entire concept of everyone going to yeshiva sustainable? Or have we ran it as long as we can and now that the bills are coming due, it can happen no longer?

The Wolf


G6 said...

The problem of funding and sustaining Yeshivos in general aside, this whole matter with Bais Faiga confounds me because I wonder what happens to all the revenues made on the nightly use of the hall for weddings?
Nobody has been able to satisfactorily answer this question to my knowledge....

Ezzie said...

In short, is the entire concept of everyone going to yeshiva sustainable? Or have we ran it as long as we can and now that the bills are coming due, it can happen no longer?

That was part of my question, though I think that's overstating it. We've seen economic downturns, and yeshivos have survived. The question is more how many and at what cost to the community, and how can we put in a system to avoid having such a large drain in these kind of times.

I don't think the kollel lifestyle is to blame; it's bad budgeting priorities that are to blame. The kollel lifestyle, however, makes the problem much, much bigger and on the flip side, that much harder to escape.

As for the rest, you've spelled out the details well. A large part of the problem is as someone (wish I could recall who) put it recently: An expectation that one's children are entitled to an upper-middle-class education while we don't live upper-middle-class lives or earn those incomes. While I understand that to an extent people must do what they have to for themselves, and perhaps if there's no money, tuition is the logical cut - but the expectation can't be that the school should let it slide, either. There's a consistent expectation within the frum community that it's on someone else to pick up our slack. No! It's on us to pick up our own slack, and if we're afraid of being put into a bad situation at some point in the future, then it's on us to do what we can to avoid it. If that means working more, it means working more; if it means working, period, that's what it means. It's simply not right to place the load on everyone else's back all the time.

Anonymous said...

Maybe Orthodox Jews will have to do what they did in the first half of the 20th century: go to public school.

Tzipporah said...

But NO schools are funded solely from income from attendees. Public schools are funded by property taxes - we don't give childless couples or those with only grown children a break on their taxes because they're not currently "using" the school services.

Just so, an entire community needs to support its schools. As I recall, a combination of the basic half-shekel tax from everyone plus tuition from the users is the general standard.

Leah Gayle said...

You hit on a point I have pondered before - and most schools have been running a huge deficit for years and have no means of digging themselves out of the mess they're in. Many will end up closing completely, leaving frum parents with little choice but to form homeschool cooperatives (because they will not under any circumstances send the kids to public schools). That completely removes the expenses of buildings from the picture. It also means the kollel guys and stay-at-home moms and unmarried graduated girls are going to have to put in time as teachers, since classes will be sent to various homes and be much smaller (hence more teachers will be needed). On the upside, with no building and property expenses, the teachers can probably all receive a fairly decent stipend. It's a doable system - Christians have been using in in various areas for years. We need to let go of our ego-based "building with a name on it" paradigm and shift to something a lot more affordable.

Originally From Brooklyn said...

Yeshivas could just start cutting services. They can make bigger class sizes. cutting salaries to amounts that they can pay, and at the same time cutting school hours for the time the teachers have to actually put into the job. The ones that can't finance themselves will have to close down.

And if worse comes to worse they can always ask for a government bailout. If the car companies, a nongovernmental organization, can get one, Why can't Yeshivas?

The game is that inefficient organizations get bailed out in this day and age.

ProfK said...

Tziporah has mentioned a point that you did not consider Wolf; that the responsibility for having a yeshiva is not something that should be borne by parents with children in the school only. A yeshiva serves a community function, and it will take an entire community to sustain it. The problem with this is that many communities are highly splintered with each faction having allegiance only to the school they believe in. As long as all schools remain in private hands and under private control then getting an entire community to support those schools is going to be all but impossible, at least in large urban areas with a multiplicity of schools.

Interesting note: front page article in our newspaper today reported that the NY governor, who has already cut payments to private schools such as the catholic and jewish schools down to 88% of what it was before, is now saying that there will have to be a larger cut because the state can't afford to subsidize private schools the way they did in the past. These are the subsidies for mandated services that the state requires all schools provide, such as taking attendance, administering Regents exams etc. They are now looking to cut from other services the state provides to the private schools. The bad financial news for yeshivas is just getting worse and worse.

Anonymous said...

They are viable, IF families in general eliminate their luxuries, such as new cars, vacations, bungalows, sleep over camps, fancy weddings/bar mitzvahs, house size, in-style clothing etc. This would eliminate a lot of household debt that is now in mortgages and credit cards.

This will be a necessity going forward to keep the system afloat. Think about, family sizes have ballooned in the last twenty years, with 6 or more children being the norm rather than the exception. Schools must expand facilities at a tremendous rate to keep up with the population growth. Couple this with reduced earning power from unskilled head of households, you have recipe for economic collapse.

One idea: use the schools to house schools. This would save on facilities. I know in Baltimore the shuls sit empty all day. Granted they are not setup for a school, but it can be done if the need is great enough. Coming soon!

I just hope this current downturn is a wake-up call for everyone to change the system.

Anonymous said...

The system is NOT sustainable and began to collapse before this economic downturn. There have been commissions and other things set up to look at the issue and no one is able to come up with a viable plan that will sustain the system. The M/O communities are going to start to get hit fast and hard by this very soon because $14,000 a kid for elementary school is just no longer doable and the people who were giving more can no longer afford to. The situation is dire and I fear for what is coming in the next few months.

cool yiddishe mama said...

Beis Faiga turned down a friend's daughter since they are a "working" family.

Schools are businesses, pure and simple, with owners, bottom lines, etc.

Home schooling will become viable, even for frum families. Watch for more info later!

Anonymous said...

Yeshiva's a ridiculous expectation. If you have a large family and you want them all privately educated, you must have a correspondingly large income, because private school is a luxury. Those on tiny incomes should not be seeing luxuries as necessities.

Anonymous said...

Somewhat similar to other charities. If someone makes a small donation it goes towards paying bills or providing the basic services. On the other hand, someone recently made a million dollar pledge to a charity, I wonder if the charity will decide that they need their own building and to start expanding services. All of a sudden this charity, will have a larger amount to raise each year.