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Monday, 16 February 2009

Market Meltdown and Madoff Scandal Cost Israeli Higher Education Some $250-Million

CHRONICLE OF HIGHER EDUCATION
DAILY NEWS BLOG: February 16, 2009

Jerusalem — Israeli universities have lost annual income of at least $250-million — more than 10 percent of their total yearly operating budgets — because of the effect of the world economic crisis and, in particular, the investment scandal allegedly perpetrated by Bernard L. Madoff.

The Israel Council for Higher Education, the government-appointed body that oversees Israeli colleges and their budgets, has appointed a special committee headed by a former Bank of Israel governor, Moshe Mandelbaum, to assess the extent of the crisis and recommend steps to stem the losses.

Yuval Lidor, a spokesman for the Council for Higher Education, told The Chronicle that an initial assessment by Mr. Mandelbaum and his colleagues suggests that Israeli universities have lost at least $250-million from budgets that in 2007 totaled $2-billion. Mr. Lidor said that in 2007 foreign donors gave at least $175-million, of which some 70 percent was now feared lost.

“Currently, the state finances some 65 percent of the universities’ budgets, and tuition covers another 18 percent. The remainder comes from donations,” the Israeli daily Haaretz reported today.

Israeli universities’ endowment portfolios have been hit by the worldwide slump in the capital markets, reducing investment income. Funds from wealthy foreign donors also struggling with the economic downturn have dwindled to a trickle.

The Madoff scandal hit Israeli universities particularly hard because many of Mr. Madoff’s clients were Jewish and many of them regularly donated large amounts to Israeli education. Some Israeli institutions and their American fund-raising arms also invested directly with Mr. Madoff.

Hadassah, the American Women’s Zionist Organization, which supports the Hadassah-Hebrew University Hospital in Jerusalem, lost $90-million in Madoff investments. The American Technion Society, which raises funds for the Haifa Technion-Israel Institute of Technology, lost $25-million.

Mr. Lidor said the area hardest hit was university research and development, much of which is financed with foreign donations. The Chais Family Foundation, a California-based charity that gave away more than $12-million every year and was believed to be the single largest donor to Israeli universities’ R&D, was forced to close in December, after it emerged that its entire investment portfolio had been handled by Mr. Madoff and had simply disappeared. The pattern echoes events in the United States.

“No university will collapse,” said Mr. Lidor, “but we are really afraid that all R&D will be frozen.” —Matthew Kalman

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