Billions from Jerusalem: New Financing for Jewish Day School Education

Originally posted on PEJE's Knowledge Center by Yosef I. Abramowitz, December 2013.

This is one of a series of essays on Jewish day schools in Sustainable Stories, a project of PEJE, the Partnership for Excellence in Jewish Education. Originally posted on PEJE's Knowledge Center, December 2013.

JERUSALEM. Every decade or so, yet another demographic survey reveals the obvious: The American Jewish community is in flux, with reduced affiliation indicators. And each time, the community circles back to what we know works: quality Jewish education, along with Jewish camps and Israel programs. Taken together, these initiatives are effective identity-builders, especially if repeated for many years.

I am a product of the Solomon Schechter Day School system, and my children attended the independent Jewish Community Day School when we lived in Newton, Massachusetts. My Jewish education, bolstered by Young Judaea and other camps and Israel programs, sparked several decades of serving the Jewish people as a civil servant. So this meant I was doubly taxed: first, the expensive day school bills, and second, a lower salary than my non-communal friends and family members because I worked for Jewish nonprofits.

Foul.

We know which identity-building programs work, but the community needs new ideas to ease the financial burden on families. I was a scholarship kid growing up and am grateful for the assistance I received from the community and Hadassah. It made a difference. We also have seen, via Taglit-Birthright Israel, that new financial and communal models are possible, even those that would require significant and seemingly out-of-reach financial resources.

Part of the secret to Birthright Israel is that, for the first time, the Israeli government is allocating significant funds to enhance Jewish identity of youth outside of Israel. This precedent serves as positive testimony of what can be done when we see Israel as a full partner in preserving and enhancing Jewish identity worldwide.

It is time for Israel, and the strength of her economy, to play a critical role in making day schools affordable in new ways.

Israel has an excellent credit rating; indeed, A+, according to Standard & Poor’s. The Bank of Israel could make long-term, low-interest loans available to Jewish families, via PEJE or another body, perhaps working with an Israeli bank that has a U.S. affiliate. Or, at the very least, it could provide a loan guarantee for day school parents.

While our children were at JCDS, my wife Susan and I took out a $23,000 loan one year to help cover tuition through Prepgate, a commercial service for private-school families, carrying a relatively high interest rate of LIBOR plus 5 to10 percent. If the loan were generated by the Bank of Israel and passed along to us at cost, it would be far more affordable.

Here’s how Israel could play a financial role: While a child is enrolled in Jewish day school, part of the repayments would be covered for parents – half by the local Federation and half by the State of Israel.

Payments would be frozen whenever the recipient visited Israel, whether on summer programs, junior year abroad, MASA, or other long-term programs. If the recipient makes aliya by a certain age and stays in Israel three years, then all or part of the loan would be forgiven.

According to Nefesh B’Nefesh, each North American oleh adds significant financial benefit to the Israeli economy, so this works from a macro-economic perspective. If the recipient becomes a full-time Jewish communal professional, then there should be some loan forgiveness as well.

So using Israel’s excellent credit to provide low-cost loans to Jewish families via our communities is one approach to make Jewish schools more affordable.

A second idea to help offset tuition costs is to focus on Jewish communal endowments. There is now more money being generated by Jewish foundations and endowments than by the annual Federation campaign, and this means we need, as a community, to create new strategies to finance major initiatives in Jewish life. The truth about Jewish endowments is that they are not performing like the Harvard endowment in terms of returns and are managed very conservatively by outside professional money managers. Even a modest 2 percent increase in annual returns, from the Federation endowments of $15 billion, would produce annually about $300 million that could be earmarked for Jewish education, especially if the 2 percent were generated from safe, Israel-based investments.

I will give you an example. Solar fields in Israel are financed 80 percent by Israel’s very conservative commercial banks and 20 percent from equity investors, who enjoy a roughly 9 percent annual average return for 20 years, linked to inflation and backed by the State of Israel. That is more than double the return on an Israel Bond. Imagine a Federation endowment investing money in Israeli infrastructure projects – in, say, their Partnership 2000 communities in Israel – and using the boost in profits to lower the cost of Jewish education back home. These would truly be worthwhile investments, because they promote social and environmental benefits in Israel while throwing off enough funds to support Jewish education in communities outside of Israel.

The State of Israel is also creating a sovereign wealth fund to invest smartly the huge windfalls from the discovery of natural gas. It is expected to receive $125 billion over the next two decades. While Israeli education, defense, renewables, and society should certainly be the major recipients of the profits here, asking the State to set aside 10 percent of the funds, or $12.5 billion, to finance affordable Jewish education around the world would radically transform lives and strengthen the State of Israel by strengthening Jewish peoplehood.

Winner of a Covenant Award for Excellence in Jewish Education, Yosef I. Abramowitz serves on the advisory board of the journal Sh’ma, and is now based in Jerusalem promoting Impact Investing. He was named by CNN as one of the top six green pioneers worldwide, works with two Israeli solar companies, and is married to Rabbi Susan Silverman. He can be followed on Twitter @kaptainsunshine.