Why synagogues run a deficit

The other day, someone asked me regarding a large local synagogue, "They must never have money problems, right?" He pointed to their busy catering operation, and their long membership list, as the basis for this assumption.

Without discussing any particular shul, though, I can say with some confidence that every shul which attempts to serve its members with more than a simple space for davening runs a deficit, whether small or great. I have three reasons for this statement:

1: The staff's goal is to provide services

As with any non-profit, the goal is not profit, but rather services. Any money which comes in, whether budgeted revenue or surprise contribution, is plowed back into the operation in order to provide more services - which cost money.

[As I noted above, the exception is the synagogue that is just a room in which to daven.]

2: The budget-setters harbour religious optimism

Many shuls function with the belief, spoken or unspoken, that "things will work out", and they will survive, regardless of any immediate crisis. We have a hard time imagining that the shul could collapse. This leads to a degree of fiscal laxity.

3: The customers set the price

Manufacturers determine their prices based upon their own costs, and what they believe the market will bear. The same is true for service providers. In synagogues, though, the paying customers – members of the board – are the ones who decide how much they need to pay in dues. [The same is true for schools with parent-based finance committees.] The result is that dues are calculated based on a negotiation between the customers' needs and those of the institution, and the synagogue will not be able to rely on dues to fund their budgets.

My point is that a synagogue's financial stability is not dependent on the salaries of the staff, or the size of the building, or income from a catering operation. Rather, it depends on the attitude of the people who decide what services to provide, the people who set the budget, and the people who set the price.

Of shul rabbis and school tuitions

In a recent column on the Tuition Crisis, Rabbi Yitzchok Adlerstein discussed the strife generated by tuition inequality, including the following thought a day school parent might have:
If a shul hires a new rov, why should his four children be entitled to any tuition assistance, when it translates into a demand on the baal habos who does not even daven in his shul? Should it not be the responsibility of the shul to pay salaries that will allow the rov to pay his tuition obligation without thrusting him upon a small group from whom it is demanded that they foot the bill?

For the record: I don't think schools should offer shul rabbis (or community rabbis) automatic tuition assistance. Certainly, the rabbi helps the school. And certainly, the rabbi is there to serve the community. Nonetheless, the school is providing the great service of educating the rabbi's children, and the rabbi should pay them for it, just as others do.

And I say this as someone who just made out his checks for next year's shul dues, and tuition for four kids…

Want help cheating on your taxes, Rabbi?

Abramoff, Agriprocessors, Boesky...

I join in the dismay and outrage and embarrassed על חטא- klopping every time a Jew is indicted for improper business practices and immoral activity. Yesterday I heard about another case, and again went through the recriminations.

That said, I must add two caveats from personal experience:

1) The rationalizations for financial impropriety are often very tempting, and

2) Rabbis are sometimes involved in it, without even knowing they are doing anything illicit.

One particular case, from my own experience, comes to mind:

A while back I officiated at a funeral for an unaffiliated family. They made all of their arrangements with a local funeral home, and the funeral director was to pay me for my services.

(Disclaimer: As a general rule I don’t charge for funerals, or other services; people want to do things right, they need a rabbi, so how could I make that difficult for them? Bar Mitzvah training, weddings, funerals, I decline payment. But if people offer payment anyway, then I accept it.)

So the funeral director came to write me a check. He pointed out that this check, in tandem with other checks he might write to me for other funerals during the year, could trigger a 1099 form, so that I would have to pay taxes. Being a nice guy, he asked if he could write the check to my Benevolent Fund, so that I could take the money through the Fund, and avoid having to pay taxes on it.

I’m no tax lawyer, but I believe there is a term for this sort of activity: It’s called money-laundering, sending money from A to B via a third party to avoid paying taxes on it. As I understand the law, it’s just as illegal as claiming a charitable deduction for paying yeshiva tuition.

The offer was tempting:

1) I shouldn’t really have a 1099, since I am not really a contractor of the funeral home. I’m the family’s contractor. The funeral home is only cutting the check because the family gave them the money as a third party. The problem is that the payment is on the funeral director's books, which triggers the 1099.

2) It’s not clear how to classify an honorarium given for funeral services, in the first place.

3) I already pay a ridiculous amount in taxes, because clergy have to pay self-employment tax.

4) I give a lot to help others, financially and otherwise (see a good Orthonomics post on this point, here).

5) And, as, the funeral director took pains to tell me: Everybody does it.

As I said above, the justifications and rationalizations for unethical activity are tempting... but I declined.

My point is not to say, "Torczyner is wonderful." I'm not wonderful; I'm just someone who was raised to be honest.

Rather, my points are these:
1) If we expect our community to act ethically, we - and especially rabbis - had better be ready to act ethically, ourselves; and
2) This applies even to the justifiable cases. In reality, all of them are "justifiable" cases, or at least look like it at the time.

False deductions, funnelling money through a Benevolent Fund, accepting payment in cash, hiring a nanny off the books, these are just as illegal as the crimes committed by Agriprocessors in the scandal du jour.

קשוט עצמך ואחר כך קשוט אחרים, the gemara says, with a sharp play on words: קישוטים are ornaments, but קושטא is truth. Ornament yourself before you ornament others, and make sure you are telling the truth before you insist that others do the same.