A High-Yield Investment

It’s one of the longest-standing and most futile complaints in synagogue life: Why are they always schnorring for money?

The answer, of course, is that while synagogues are much more than businesses, they need steady and significant revenue to be able to provide the services that the community needs, expects and benefits from.
But where the old leaky-roof appeal may have saved a synagogue from going into debt in the past, today’s synagogues are looking for more hefty and stable streams of charitable income that will allow them to think bigger and better than subsistence.

“The mental leap has to be that we’re more than a hand-to-mouth operation, that we have a real and vital role to play in the community and that we need to stake that claim,” says Lee Hendler, who spearheaded a campaign in her Baltimore synagogue that brought the endowment up to $11 million. “We have to stop thinking of synagogues as the second cousin or the poor relation of all other Jewish institutions.”

That’s why more and more synagogues are talking to their congregants about establishing endowments, bequests and annuities where the synagogue is the beneficiary and the contributor receives sizable tax deductions.

There is much at stake. The word in philanthropic journals is that baby boomers in the next couple of decades are set to inherit an estimated $25 trillion from their parents, and many will be looking for ways to keep as much of that as possible out of Uncle Sam’s pockets.

“If we don’t ask them, they will be asked by Federation and colleges and local hospitals,” says David Katowitz, director of the Fund for Reform Judaism at the Union of American Hebrew Congregations (UAHC). “We believe the synagogue is the most important Jewish institution in people’s lives, and we shouldn’t be afraid to ask.”

Dues cover about 40 percent of the budget for most synagogues, while High Holiday appeals and major fundraising events, like dinners, might make up another significant portion. A handful of shuls have sizable incomes from catering facilities or cemeteries.

Income also dribbles in through scrip programs, fundraising events — which tend to be labor-intensive — and smaller personal donations. Directors or rabbis often get sponsors for specific programs.
“The drawback of doing a budget and running a temple the current way is there is just so much you can do, and everything else becomes optional,” says Harriett Zeitlin, executive director of Kol Tikvah in Woodland Hills.

Kol Tikvah is one of several local congregations that is for the first time looking into setting up an endowment.

“We don’t want to just offer two or three things, we want to offer everything we can for the community, and of course that takes money,” Zeitlin says.

Rabbi Steven Weil of Congregation Beth Jacob in Beverly Hills says that expanded vision is one of the reasons synagogues need to rethink funding methods.

“The synagogue of the 21st century cannot exist on dues and fundraisers and a journal dinner, and one of the reasons for this is that synagogues today provide many more services, qualitatively and quantitatively, than synagogues of the 20th century.”

Add to that the high cost of real estate in Los Angeles, day school tuition, and young people that are more likely to be professionals than entrepreneurs, and you have a different philanthropic picture than existed a few decades ago.

Synagogues need to embark on the slow process of changing the culture of giving in their congregations, and that will start with an attitudinal change.

“It’s time to see the synagogue not as a mom-and-pop store, but as an institution that has a plan and a dream and wants to fulfill them,” Katowitz says. “Once people feel the investment in terms of their hearts and minds, they will be happy to invest their dollars as well.”

Hendler, a board member of Synagogue 2000, an effort to revitalize synagogues run out of the University of Judaism’s Whizin Center for the Jewish Future, presided over a five-year fundraising effort at Chizuk Amuno Congregation in Baltimore that not only nearly doubled the endowment but saw this year’s campaign exceed its goal of $500,000.

The success came, she says, because the campaign pushed the 1,400-family Conservative congregation to crystallize its vision and detail its dreams. That effort sparked passion and motivation among not only the long-term planning committee but among the congregation as a whole. Thus, along with raising funds, the 129-year-old shul has heightened enthusiasm and participation in its many programs.

Formulating a mission statement “became the cornerstone for thinking about what it is that we hope to fulfill, what gets in the way and whether in fact we are living up to the standards we set for ourselves,” she says. What emerged was a “very unique and inspiring sense of who we are.”

Potential donors were solicited face to face and were included in formulating the vision for the synagogue. They were given different options for contributing over five years to the annual fund or to the endowment or both.

And throughout, they were kept abreast of the programs they helped to actualize.

“The storytelling piece is often terribly neglected, and you neglect it at your own peril,” Hendler says. “You can’t take the money and run. You have to be regularly thanking people for what their commitment and generosity have meant, and you have to be sharing evidence of the value of their investment,” Hendler says.

For many contributors, giving to a synagogue is indeed an investment not just in the community, but in their own estate and tax-planning strategies.

Many shuls are pushing alternative ways of giving that offer great benefits to the donor, such as different types of trusts, donating appreciated stocks to avoid paying capital gains tax, or taking out a life insurance policy where the beneficiary is the shul, so that a small investment now has tremendous yield for the synagogue in the long-term. The Jewish Community Foundation of The Jewish Federation of Greater Los Angeles recently launched the Partnership Life Annuity Program, which encourages synagogues to have contributors set up a charitable gift annuity.

The foundation is licensed to administer the annuity fund, paying out a fixed, guaranteed annual sum to the contributor after she turns 55. At time of death, 95 percent of the remaining principal of the annuity goes to establish an endowment for the designated synagogue, and five percent goes to the foundation’s endowment.

UAHC runs a similar program, with the synagogue taking 82 percent of the principal.

“Seniors are very concerned about trying to acquire as high a fixed income return as they can, and charitable gift annuities almost always perform better than other comparable fixed income opportunities,” says Baruch Littman, vice president of development at the Jewish Community Foundation.

But, he says, the investment can be very lucrative for younger people as well. The earlier in life you take the annuity, the higher the percentage paid out, so someone in her 30’s may be looking at a payout of more than 30 percent when she reaches 55 or older.

And annuity payments made in stocks allow a large percentage of the capital gains tax to be avoided completely and the rest to be deferred and then prorated over the life of the annuity.

Beyond the annuity program, the foundation, working with Federation’s Council on Jewish Life, awards synagogue grants for specific programs. In the fall of 2000, the foundation awarded $110,000 to synagogues that submitted proposals for innovative programs.

For Zeitlin, having a program paid for — whether by a grant or a donor recruited to sponsor that program — is essential.

“I know some people feel that God will provide,” says Zeitlin, executive director of Kol Tikvah. “But I like to make sure it’s provided first, before we spend the money.”