Rained Out

Federation's rainy day fund to help Detroit Jewry is nearing its discretionary limit;
legacy endowment fund to be developed.

HARRY KI RS BAUM

StaffWriter

A n economic downturn exac-
erbated by declining invest-
ment returns has corn-
pressed Detroit Jewry's
"rainy day fund" and caused the com-
munity's oversight umbrella agency to
announce a round of layoffs among
budget reductions.
Faced with a $6.2 million shortfall
in unrestricted reserve levels of the
General Fund for fiscal 2003-2004,
the Jewish Federation of Metropolitan
Detroit last week announced reduc-
tions in overseas allocations, domestic
allocations and Federation opera-
tions, including layoffs of 10 percent
of its staff— up to 15 positions.
"The bottom line is that we have
to reduce our spending by roughly
15 percent over the next three years
throughout our community," said
Robert Aronson, Federation CEO.
The formal announcement, culmi-
nating seven weeks of intensive
review, came at a joint board meet-
ing of Federation and its finance
arm, the United Jewish Foundation, at
the Max M. Fisher Federation
Building in Bloomfield Township.
To understand the reductions, it's
important to understand the General
Fund, which was established in 1984
to consolidate unrestricted gifts to
Detroit Jewry. When this fund grew to
nearly $70 million during the 1998-
1999 fiscal year because of spirited
stock market growth, Federation voted
to draw 10 percent to support agen-
cies, programs and initiatives, includ-
ing day schools and synagogues, elder-
ly needs, needs in Israel and renova-
tion costs of the Jewish Community
Center's two buildings.
Now, the General Fund has declined
to $20 million because of necessary
spending and negative market returns,
and Federation can no longer count
on the General Fund for emergency
and contingency help, said Mark
Hauser, president of the Foundation,
which handles Federation's banking,
real estate and investments.
Federation President Lawrence

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2003

12

Jackier said, "For a number of years,
the needs of the community have
exceeded the current campaign's ability
to address those needs."
Last year, the Federation raised
$37.75 million in the Annual
Campaign — $ 30.25 million in the
regular campaign and $7.5 million for
the Israel Emergency Challenge Fund.
Of that, $33.09 million was available
for allocation.
Jackier said the needs of the com-
munity were still greater than what
any year's campaign could address, so
Federation tapped General Fund
reserves.
"We re-utilized not only the earn-
ings of the reserves, but
the principal of the
reserves," Jackier said.
"We made conscious
decisions to spend the
money very effectively
on addressing needs in
this community.
'As a result of that
and
the decline in the
Jackier
market, we have come
to the point where, in
over-simplistic terms, we don't have
the reserves any more to bridge that
gap, particularly in the short run."
He added, "As much as we'd like to
continue to address the various con-
stituencies and the needs that we believe
we want to be supporting, we can't."

The Breakdown

To address the shortfall, Federation
approved General Fund recommen-
dations that include:
• a $1.8 million decrease in over-
seas allocations to $11 million
• a $100,000 decrease in national
agency allocations to $540,000
• a $1.3 million decrease in local
agency allocations to $9.9 million
over three years, with reductions of
$750,000 in the first year
• a $300,000 decrease in capital
needs allocations to $395,000
• $1.3 million less toward
Federation's operations budget over
three years (consistent with the local
agency allocation change), with
reductions of $750,000 in the first
year. Local programs to be affected
by the budget shortfall include the
Alliance for Jewish Education,
Neighborhood Project,
Commission On Jewish Eldercare
Services, Israel and Overseas
Services and Michigan Jewish
Conference.
The Federation and Foundation
boards approved using up to $6 mil-
lion of the reserves to cushion reduc-
tions for capital needs, local agencies
and Federation operations during the
three-year budget transition period.
That will leave a baseline reserve of
at least $14 million, which
Federation leaders expect to grow

GENERAL FUND REDUCTIONS

• ISRAEL AND OVERSEAS ALLOCATIONS, $1.8 decrease to $11 million

• NATIONAL AGENCY ALLOCATIONS, a $100,000 decrease to $540,000

• LOCAL AGENCY ALLOCATIONS, . a $1.3-million decrease to $9.9 million over
three years, including $750,000 the first year

• CAPITAL NEEDS ALLOCATIONS, a $300,000 decrease to $395,000
• FEDERATION OPERATIONS, a $1.3-million decrease to $8.7 million over three
years (consistent with reductions to local agencies), including $750,000 the

first year

ONGOING CAPITAL IMPROVEMENTS

• JEWISH COMMUNITY CENTER HEALTH CLUB,

• WEINBERG JUDAIC ENRICHMENT CENTER,

West Bloomfield

JCC, West Bloomfield

• SALLY A. & GRAHAM A. ORLEY AND SUZANNE E. & JOSEPH H. ORLEY
JEWISH FAMILY SERVICE BUILDING, West Bloomfield

through the new Detroit Legacy
Fund.
Exact year-to-year adjustments will
depend on market activity, the
Annual Campaign and the Legacy
Fund. Review of the impact of this
year' s reductions to programs and
services continues.
Aronson says Detroit will still have
the third highest allocation to Israel
in the United States following the
reductions.
David Page, a Federation board
member and former president, said
he supported the actions of
Federation officers.
"Our General Fund was initially
intended to be a rainy
day fund; it was not
intended to be an
endowment. The
whole idea of a rainy
day fund is you
absolutely dip into it
when you have crises,"
he said. "That's what
it's there for."
Berman
Federation and
Foundation have cre-
ated the Detroit Legacy Fund as a
means to rebuild a permanent unre-
stricted endowment within the
organized Jewish community.
The Legacy goal is a $50 million
unrestricted fund, said Jackier.
"Its primary focus is on an estate
planning approach, where donors will
endow forever all the good works that
they have done by leaving us a signifi-
cant gift in their estate plan," he said.
Mandel Berman, who will help
Aronson raise money for the Legacy
Fund, said, "The problem is obvious.
We quite legitimately spent dollars
from our unrestricted endowment
fund and, when the market went to
hell, the unrestricted endowment
fund began to shrink."
"Since part of the budget was made
up of these unrestricted funds, we had
to cut back across the community.
"Over the long run, if the market
doesn't do it for us, we're going to
have to refill that unrestricted fund by
legacies," Berman said. "It's something
the community has to do." ❑