Toward a Cautious Optimism

Slow economic recovery keeps charities’ hopes in check

The Rev. Joseph J. Sicari, diocesan director of Catholic Charities of Buffalo, sees a brighter future for his group’s finances. “We’re confident we’ll reach our fund-raising goal,” he says. “It seems like the economy is turning around.”

But despite the rising economic tide, Father Sicari’s group expects this year to bring in just 1 percent more than 2003’s revenue, or $10.5-million — an amount equal to the group’s income three years ago. If Catholic Charities of Buffalo aimed for a greater increase, he says, “people would look at us like we’re crazy. People are a little more optimistic than they were before, but we know we can’t go too high.”

A recent check by The Chronicle of more than 50 nonprofit officials and fund raisers found that, like Catholic Charities of Buffalo, most organizations expect to raise more money in the new year compared with 2003. But their fund-raising goals remain conservative because of concerns that, while the economy is improving and the stock market is up, benefits for philanthropy will be scarce.

‘Extremely Challenging’

Historically, charitable giving begins to grow a year after economic indicators show an end to a downturn or recession, says Patrick M. Rooney, director of research at Indiana University’s Center on Philanthropy. However, fund raisers are concerned that the current recovery, which has failed to reduce unemployment significantly, may not follow that trend, slowing a philanthropic resurgence.

“While the economy is getting better, it’s still extremely challenging,” says Jim Rainbolt, director of marketing and development for the Boys & Girls Clubs of Indianapolis. Mr. Rainbolt expects his group to raise $3.5-million this year, $200,000 more than last year, but the same as was raised in 2002. In part because of the disappointing results from 2003, the charity has been forced to close its clubs on Saturdays and trim its hours of operation by a half hour during the week.

Other findings from The Chronicle’s check with fund raisers:

• Most charities said they raised more money in 2003 than 2002. But nonprofit officials are quick to point out that 2003 gains are not surprising, since many veteran fund raisers consider 2002 one of the worst years for fund raising in the last decade, if not longer. “One of the reasons ’03 feels better is because ’02 was so bad,” says Michael K. Durkin, president of the Mile High United Way, in Denver, which pulled in $30.5-million in 2003 — $500,000 more than in the previous year. “2003 was a tough year, but it wasn’t as tough as the year that preceded it.”
• For those charities that saw gains in 2003, the margins of increase were small. The Montgomery Museum of Fine Arts, in Alabama, for example, raised $3.8-million in 2003, an increase of just 1.6 percent — or $60,000 — over its 2002 results, says Andrea B. Carmen, deputy director for development. And to help achieve that slight gain, the organization held a new fund-raising event, a sale of “lovingly used art” donated by museum supporters, because large gifts and membership dues were down for the year.
• Despite the slow economic recovery, major gifts have increased for some nonprofit groups. The 900 chapters of the American Red Cross, for example, are reporting 20-percent to 30-percent growth in major donations, defined as $1,000 or more by most chapters, says Shannon M. McElligott, a spokeswoman at the Red Cross’s national headquarters in Washington. Ms. McElligott says most Red Cross affiliates report that they raised more money in 2003 than 2002. (Fund-raising totals will not be available until next month.)

Some Gains

To be sure, a number of charities reported extremely successful fund-raising efforts in 2003. At Care USA, an international-relief agency in Atlanta, “we had the best year in our history, exceeding the $100-million mark for the first time ever,” says Debra G. Neuman, the group’s spokeswoman. The group closed its 2003 fiscal year, which ended in June, with $101-million — 58 percent over fiscal 2002 donations.

Ms. Neuman credits the year’s success primarily to the charity’s emphasis over the past two decades on encouraging people to name the organization in their wills. In 2003, the charity received $40-million in bequests. “We’ve worked for decades to help our older and loyal donors with estate planning,” says Ms. Neuman.

At the UJA-Federation of New York, the timeliness of its cause played a big part. The federation received a continued wave of donations in response to an emergency appeal two years ago to help Israelis. Gifts increased by $18-million to $125-million for 2003, says Paul M. Kane, the group’s senior vice president. What’s more, pledges in response to the group’s annual appeal, which operates on a July-to-June fiscal year, rose $5-million compared with the same time last year.

Even some small charities, which many fund raisers say faced the biggest struggles during the recent economic downturn, experienced banner years.

For example, the Animal Legal Defense Fund, in Petaluma, Calif., last year received more money than it had in any year since it opened in 1979. It took in $2-million, a 14-percent jump from 2002. Yet despite the increase, the group’s executive director, Joyce Tischler, expects it to make smaller gains this year. The fund is “damn lucky and still being conservative,” she says.

As part of their cautious view of fund raising in 2004, charity executives told The Chronicle they do not plan to replace staff members they laid off during the economic downturn or end hiring freezes.

Denver’s United Way let go seven employees, mostly fund raisers, from its 58-person staff in 2002; despite a 2-percent increase in gifts last year, the group does not plan to fill the positions.

And while the Ocean Conservancy, in Washington, raised $1-million more than the $9-million it took in in 2002, it will continue to suspend hiring. For the conservancy to start hiring again, says Roger Rufe Jr., the environmental group’s president, “we would have to see the economy, or our funding support, come back stronger than it has up until now.”

Signs of Pessimism

While the U.S. economy’s annual rate of growth was 4 percent for the last three months of 2003 — slower than many economists predicted but high by historical standards — most fund raisers remain pessimistic about the economy’s effect on fund-raising efforts, according to a survey taken in October. The Philanthropic Giving Index — a semiannual measure of fund-raiser confidence produced by Indiana University’s Center on Philanthropy — reports that 57 percent of 108 respondents said the economy is hurting their ability to raise money.

Some nonprofit leaders say they are less optimistic today about fund raising than they were when indicators started to show economic growth in the fall.

“I thought it was going to be a quicker recovery, and then I realized I was a Pollyanna,” says Eileen R. Heisman, president of the National Philanthropic Trust, a commercial donor-advised fund in Jenkintown, Pa. “Six or eight months of recovery is just not enough to get over three years of downturn. We’re not going to see a full bounce back until this year or maybe next year.”

Mr. Rooney, of the Indiana University Center on Philanthropy, says some signs suggest that giving by individuals will pick up in 2004. According to Mr. Rooney, the best indicator of personal giving is the Standard & Poor’s 500 Index, a catalog of stock prices of 500 publicly traded companies. In 2003, the index rose 26 percent.

But Mr. Rooney warns the United States is facing a tumultuous period in history — with the conflict in Iraq and a global war on terrorists — that may cause citizens to hold on to their assets to feel more secure. “People may have a desire for a financial cushion that’s higher than pre-9/11,” he says. The media’s portrayal of recent economic growth as a “jobless or joyless recovery” may have fueled this apprehension, he says.

Government Aid

What’s more, while increases in the stock market may translate to more giving by individuals and foundations, which usually base their grant making on their endowments’ earnings in the previous year, charitable dollars may remain tight because state and federal money is expected to be flat or face cuts.

Dwindling government support has sent many charities that depend on such allocations to search for money in the private sector, says Kim Klein, a fund-raising consultant in San Francisco. “Groups that have a lot of foundation and individual donors are now in fairly serious competition with groups that were previously government funded,” she says.

The increased competition has forced some charities to shut their doors.

In Denver, the local branch of Dress for Success, a nonprofit group that provides business attire and job training to poor women, closed in January because of a drop in foundation grants. Supporters, like the Gates Family Foundation and the Adolph Coors Foundation, continued to give to the group but in smaller amounts, says Kris A. Mattione, the organization’s executive director.

“We went through struggles to lay off staff, trim our programs,” she says. “My board tried everything it could, and I tried everything I could, and the volunteers did everything they could, but it just wasn’t going to work. That’s our story, and it’s really sad.” The group had a budget of $125,000.

Other charities that have faced financial strain have survived and are continuing to search for new sources of revenue.

The Boys & Girls Clubs of Indianapolis, for example, hopes to be able to raise enough money to reopen its clubs on Saturdays through a number of strategies that include a big push to reach donors who stopped giving during the last three years.

Several nonprofit groups have already reported success in recruiting donors who had stopped giving for a long period of time.

At the Save-the-Redwoods League, in San Francisco, more than 270 people have made gifts in response to a November appeal to 25,000 previous donors, two-thirds of whom had not made a contribution in more than six years, says Katherine Anderton, the environmental organization’s executive director. In August, an appeal to 15,000 donors who had not given in the last two to nine years brought in $10,300.

Joe Manes, a direct-mail consultant in Washington, expects former donors to return in droves this year as their finances improve. “They didn’t quit giving because they didn’t like the issue anymore, but stopped giving because the economy was tight,” he says.

Some charities are also benefiting from solicitations of large donations.

At the American Kidney Fund, in Rockville, Md., donations totaled almost $39-million in 2003, up from $35.9-million in 2002, in part because of donations of $1,200 or more. Such gifts accounted for $440,000 in 2002, but more than $1-million in 2003. The group’s executive director, Karen Sendelback, attributes the increase to the charity’s efforts to strengthen ties with donors.

For example, in the past the fund relied on an outside company to send thank-you letters to donors of big gifts. Now, the charity sends the letters itself, which allows it to customize them with information about a donor’s relationship to the cause. In addition, either Ms. Sendelback or one of the group’s board members calls each donor who makes a large gift.

But at least one fund raiser warns that focusing on large gifts from a few people is a risky strategy. Ms. Carmen, deputy director for development for the Montgomery Museum of Fine Arts, says that was driven home for her last year when a museum donor who had previously given an annual gift of $25,000 reduced that gift to just $10,000 in 2003.

“It made a real dent,” says Ms. Carmen. “Had I had 15 more people at $1,000, and one of them dropped back to $500, that wouldn’t have hurt as much.”

Ms. Carmen has been working to broaden the museum’s pool of donors, in part by developing special fund-raising programs associated with its exhibits. The museum has even tested the idea of giving donors the option of sponsoring individual pieces of artwork in an exhibit.

Many fund raisers say that regardless of what new practices groups may adopt this year, nonprofit leaders deserve to feel good about the coming year’s prospects, even if the economy is slow to rebound.

“For nonprofits, the recovery is not here,” says Ms. Klein, the California fund-raising consultant. “But they’ve made adjustments, they’ve cut budgets, they’ve figured out a way to live, so their optimism is because they have survived.”

Elizabeth Schwinn and Nicole Wallace contributed to this article.