Financial Transparency: The Key to Building a Vision

Unless you have been living under a rock or the din of night seder drowns out the stray murmurings of YU current events, you probably heard about the abrupt and unexpected sale of the Geraldine Schottenstein Cultural Center on Beren Campus. A terribly unfortunate casualty of the continuing financial wreckage brought on by the moribund economy and the actions of Bernie Madoff, the Cultural Center was an important venue for the social and educational life of the women at Stern College. It housed the SCW drama productions, Shabbat prayers, and other social and cultural events, and the sudden news understandably caused quite a stir in the YU community. But maybe we shouldn’t have felt so blindsided.

On June 21, 2011, Moody’s Investors Service downgraded Yeshiva University’s credit rating to A2 from Aa3 on a large chunk of YU’s debt. This essentially means that Yeshiva’s ability to honor certain financial obligations is shakier than it once was. The report attributed this downgrade to a number of factors, including “a weakened ability to generate growth in tuition and gift revenues.” The decline of revenues coupled with large operational expenses has resulted in “sizeable operating deficits.” In other words, YU is spending more money than it has.

The report contains many disheartening facts about the state of YU’s finances, which are closely connected to the state of YU’s undergraduate program. Yeshiva’s total financial resources totaled $1.14 billion in fiscal year 2010, down 38% from its 2007 total. Net tuition revenue grew by only 2% between fiscal year 2007 and 2010, as freshmen applications steadily declined. Fundraising declined by $83.5 million from 2008 to 2010, and Madoff alone cost YU $95 million in its 2008 and 2009 operating budgets. The effects of the isolated events and financial trends that have led to YU’s precarious financial situation are bound to persist, at least into the near future.

In light of the above information, the sale of the Schottenstein Cultural Center should never have come as a surprise to so many people. Yet it did, and only afterwards did students really begin to express concern over the transparency of administrative decision-making. At the most recent Beren campus town-hall meeting, President Joel proposed the idea of forming a student committee to improve communication between administration and students, and Jina Davidovich, in her recent editorial “No Education Without Representation” went one step further in proposing a joint committee of students, faculty, and administration to address uniquely educational concerns. I believe, however, that a further step is necessary to facilitate these forward-thinking and proactive ideas: Yeshiva University should publicize its financial statements.

Financial transparency is a sticky subject, and, legal considerations aside, the question of whether it should be condoned cuts straight to the heart of a much more fundamental issue – the complicated nature of our relationship with our university. On the one hand, our relationship with YU is one of consumer and service provider, a simple market relationship. YU is a for-profit organization that creates a product – Torah U’madda education – and sells this product to consumers for six easy payments of roughly $39,999.99. As consumers, we are responsible to do our due diligence before investing our time and money in a Yeshiva University education. The university, as a private institution, has no moral or legal obligation to provide information that might be damaging to its reputation or future financial standing. Any information, financial or otherwise, not presented to the public may cause market inefficiencies (impediments to optimal decision-making in the marketplace), but nondisclosure does not necessarily constitute a moral failing. If we as consumers are uncomfortable with the amount of information provided to us, we can choose to get an education elsewhere.

Now, Yeshiva University has a unique market position in that it is essentially a monopoly. Its brand of Torah U’Madda is singular - inclusive but traditional, open to inquiry but cautious – and it certainly caters to a niche market. While the ebb and flow of the economy may affect student enrollment on the margins, the institution has an unmatched product and a stronghold (at present) on the community to which it caters. So, to be completely honest, many of us wouldn’t go anywhere else for college even if we were uncomfortable with the veil of secrecy surrounding many of the administration’s decisions. On top of this, the nature of university in general is that student population is constantly in flux. Information is only relevant to the present consumer base in three or four-year cycles. This provides a terrible disincentive for YU to release financial information. Why should it risk the potentially negative effects of transparency when its market position is safe and secure?

But our relationship with YU is also one of student and university, which is markedly different from a provider-consumer relationship. Students all over the world see University not just as a service, but also as a home and as an integral aspect of their intellectual and professional development. And here at YU, this connection is much more personal. YU is distinct in that the identity of the university is inextricably tied to the identity of its students. I doubt that University of Maryland students identify with a giant turtle, and I sincerely hope that Duke students don’t feel one with the Devil, but YU students are Maccabees, and, willing or unwilling, we create, strengthen, and communicate YU’s unique message simply by being here. In other words, YU is about something greater than education, professionalism, and profit, and this unique quality calls for a special type of University-student symbiosis.

If we truly want to work together to create a robust institution that fills student and university needs, we should all have access to information that will allow us to set realistic expectations for what we would like to see accomplished. Our dreams of institutional grandeur, which often leads to unrealistic expectations and then disappointment would be tempered and kept within the limits of financial feasibility. During years of plenty, it would allow us to confidently work with the administration to create programs that reflect our joint vision of what YU should be. During years of famine, we can brace ourselves for tough cutbacks and, on some level, collectively decide which programs (and buildings) are expendable.

Currently, there is no readily available financial information on the YU website, and one has to visit the university’s budget and accounting offices in order to obtain budget and balance sheet information. You are not guaranteed access to this information, and it is, according to the website, “carefully monitored.” PwC conducted an independent audit of the university’s financial affairs this past June, but you must scroll down to the sixth result on a Google search of “Yeshiva University financial statements 2011” to find an unofficial draft of the audit report. Specific budgetary information is certainly out of students’ reach. Students of YU should not take this lightly. If we wish to be active partners in creating the programs that make YU a bastion of Modern Orthodox Judaism, we should have access to the documents that detail the strengths and limitations of our current program.

The objective of this piece is neither to muckrake nor to caution YU students about inevitable cuts and restructurings that will almost certainly affect the remainder of their stay at YU. If the major sale of a large piece of YU real estate wasn’t warning enough, I don’t know what is. The primary purpose of this piece is to question the financial transparency of our beloved institution, the one that we all wish to grow and succeed. It is to convince you that in order to maximize the benefits that YU and its students can gain from its current and future resources, we need access to the details of these resources. In order for us to truly work together with the administration, we need greater access to the same information. The suggestion is not crazy. Many private universities already provide detailed monthly financial reports on their websites. YU should add its name to the list.