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October 21, 2014 / 27 Tishri, 5775
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Yeshiva University May Run Out of Money in 2015

It is too easy to blame Bernard Madoff for Yeshiva University’s financial problems.
By:
YU President Richard Joel (L) with past President Rabbi Dr. Norman Lamm.

YU President Richard Joel (L) with past President Rabbi Dr. Norman Lamm.
Photo Credit: Maxine Dovere

Yeshiva University is at risk of running out of unrestricted cash in the near-term future, Moody’s Investors Service is warning.

Moody’s has downgraded  the university’s credit rating several times over the last three years, including a March 5 downgrade to B3 rating, indicating a high credit risk.

A new report released March 21 warns that deep and growing operating deficits are likely to continue due to “poor financial oversight and high expenses;” much of YU’s cash and investments are tied up in restricted funds the university cannot use for operating expenses; and banks may not extend credit to the troubled university.

“The negative outlook reflects the risk that Yeshiva will deplete its available unrestricted liquidity before management is able to execute a successful financial turnaround,” Moody’s new report says.

Only 14 percent of the $1.2 billion the university had on hand in 2013 is free from donor restriction and could be used for operating expenses, according to the report. Unless there is a change in operations, the report warned, the university will run out of money by the end of 2015.

YU was a victim of Bernard Madoff’s Ponzi scheme, which cost it $1900 million, but its financial problems can be traced to roots a lot deeper.

The Moody’s report, which was first publicized by the Forward on Tuesday, calls YU’s business model “untenable.” Last year marked the sixth consecutive year of operating deficits, and YU’s operating margin excluding gifts dropped in 2013 to -42 percent. Seven years ago, the operating margin was at -6 percent.

“The severity and long duration of Yeshiva’s operating deficits are primarily due to weak financial management and the board’s unwillingness or inability to act,” the report says. “Historically ineffective internal controls and limited transparency contributed to an inability to identify and correct problems.”

The report faults the board for failing to hold leadership accountable. Through a spokesman, YU President Richard Joel declined to comment.

The university has taken several steps in recent months to improve the university’s finances. Last month, YU confirmed that it is selling 10 apartment buildings in the vicinity of its campus in the Washington Heights section of Manhattan, which could net the school $250 million. The board also has approved exploration of a voluntary retirement program, the Moody’s report said.

“The university’s near-term financial viability depends on substantial and swift actions,” Moody’s said.

The report cites several reasons for high costs at the university: maintaining separate men and women’s campuses, upgrading equipment at the Albert Einstein College of Medicine in the Bronx and the university’s high-cost educational model. Meanwhile, tuition revenue has stagnated as YU’s competitors eat into the school’s core market for students.

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3 Responses to “Yeshiva University May Run Out of Money in 2015”

  1. As a graduate of Yeshiva University with numerous degrees I appeal to its alumni to help raise funds for this great intuition. In the 80's I raised over 1 and half million dollars. I am upset that the speech department was destroyed, however Yeshiva University is my second home and it is a place of great Torah learning. I for one have read too many articles trying to destroy this institution..
    -Rabbi DR. Bernhard Rosenberg

  2. Driving to teach Public Speaking at Yeshiva College a few years I received a call stating that the speech department is closing at YU. I was the first speech major at Yeshiva College in 1969 and together with Dr. Abraham Tauber of Blessed memory created the first speech department at Yeshiva College. I have taught at Yeshiva College in the 70's, 80's and in the last 4 years. What is not working at Yeshiva College? Why is enrollment down? Why are students unhappy and leaving? According to my observations, shiurim are too large and Rebbes are unable to develop close relationships with students. How much do the administrators and officers make? You would be astonished. Why fire talented adjuncts while keeping full teachers who are not evaluated and cannot teach? Consider the YU nepotism which gives untalented people jobs. There seem to be a lot of people running around doing nothing and getting paid. Rabbi DR. Bernhard Rosenberg

  3. Jerome Parness says:

    This is just too depressing for words. The institution that spawned the intellectual religious basis of societally engaged Orthodoxy, that gave the religious, educational and intellectual outlet to that magnificent star in our lives, Rav Yosef Dov Halevi Soloveitchik, is endangered. The vast majority of the its graduates are middle class, financially stressed between Torah education for their children, college tuition, and long term post graduate learning for careers that are often less likely to be as economically viable as their parents and unable to contribute substantially to their alma mater.

    Top this off with financial mismanagement and nepotistic hiring, and YU is facing a dire prospect, having to resort once again to ridding itself of its fiscal albatrosses – first buildings, and then faculty, and then its educational jewels – its graduate schools – as did Rabbi Lamm when he first ascended to the Presidency. He was forced to rid YU of its top tier graduate school of the sciences: mathematics, chemistry and physics, in order to financially retrench and regain the ability to ascend once again. Yet, what a loss that was! (I believe that the science programs at YU never recovered from that loss.)

    Does this portend that YU will, as did the archdiocese of NY in unloading NY Medical College and Westchester Medical Center to Touro, sell off Einstein, Cardozo and Wurzweiler in order to cement the financial ability to fund its core mission of training Rabbanim and socially engaged and well educated, Orthodox college students? Does it not realize how much momentum it lost when it deprived itself of brilliant scientific minds when it rid itself of its science graduate program? How much will YU have to contract before its financial house is in order? How much will YU have to lose before its financially-able alumni realize their potential towards the University and seize the opportunity to donate during their lifetimes to keep this institution running, while demanding appropriate financial oversight. They can actually use this opportunity to force administrative accountability. It may be an uncomfortable thing to do, but the alternative is too devastating a prospect to contemplate consciously.

    If the members of the YU Board really see themselves as the financial and administrative overseers of YU, it is they who have to take the lead in this. The small donors are not going to give to what they see as a failing institution. Students will be afraid to come, not knowing whether they will be able to graduate from an institution of higher learning that has the respect of the larger academic community. Serious and creative management strategies have to be put in place, and quickly. I doubt the entrenched bureaucracy at YU is nimble enough or altruistic enough to force the changes that need to come.

    I might add another question: where are the Ron Perelmans, the Sheldon Adelsons, the Pritzkers and the other great Jewish philanthropists of this country? What is it about YU that does not allow them to support a meaningful, traditional Jewish presence in World Society? It is a question I openly ask them, and it is a question I ask the YU Development Team.

    Jerome Parness MD PhD
    YUHSB-M '67, YC '71, SGGD '82, AECOM '85

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