Charitable Giving Slides

Overall donations fall 2.3%, but some groups see big gains

American individuals, corporations, and foundations contributed $212-billion to charity last year, or 2.3 percent less than in 2000 when inflation is taken into account, according to

“Giving USA,” an annual survey on the state of philanthropy. That marks the first time in seven years that contributions have dropped in inflation-adjusted terms, and is a decline that is somewhat sharper than in typical recession years, when contributions dip by an average of 1.1 percent.

The figures released last week provided the first official nationwide, comprehensive look at the effects that the recession and the September 11 terrorist attacks have had on donations from private sources.

The numbers confirmed what many fund raisers say they have witnessed in the past 12 to 18 months: Raising a dollar takes at least twice as much effort as it did when the economy was booming — and often takes experimenting with new approaches to appeals. In interviews, many fund raisers said that the turbulent economy is making 2002 just as difficult as 2001, but that most expect to raise about as much as they did last year or a little more. Few groups have canceled or postponed major campaigns, nor have they made their fund-raising goals significantly more modest.

The report also put into perspective the unprecedented outpouring of support for the September 11 relief and recovery efforts. Individuals, corporations, and foundations contributed $1.9-billion to September 11 efforts — more than any other relief effort has produced — but that was still less than 1 percent of the total raised by charities nationwide, “Giving USA” estimated.

“Giving USA” is published by the American Association of Fundraising Counsel Trust for Philanthropy, in Indianapolis, the research arm of an association of fund-raising consultants. The Center on Philanthropy at Indiana University conducted the research for the report.

Among the report’s other key findings:

• Corporations, which contributed $9-billion, decreased their giving by 14.5 percent — a bigger percentage drop than any other type of donor. The decline, which takes into account the 2.8-percent inflation rate last year, reflects the drop in corporate profits, “Giving USA” said. Pretax income fell from $845.4-billion in 2000 to $698.5-billion last year.
• Three-fourths of the donations, or $160.7-billion, was donated by individuals, a decline of 1.7 percent. Another $16.3-billion came from bequests, a drop of 7.1 percent from 2000. One reason for the drop: Since many bequests are made up of large stock portfolios, the slumping stock market caused the value of many estate gifts to decline.
• Foundations gave $25.9-billion, an increase of 2.5 percent.
• Human-services groups saw their donations rise more than any other type of group, taking in $20.7-billion, or nearly 12 percent more than in 2000. One reason was the outpouring of September 11 gifts, but even excluding those, donations rose by 8.7 percent. Donations to international groups rose the second fastest, growing to $4.1-billion, an increase of 9.9 percent. The biggest decline was at health groups, which saw a drop of 4.8 percent, and education groups, which experienced a 2.3-percent decrease.

“Giving USA” determines its giving estimates by collecting data from charities, examining federal and private research, and using a statistical model that takes economic conditions into account to figure out how much was donated. Because the Internal Revenue Service’s data on charitable contributions, a key component of figuring out how much was donated, is usually not released for at least two years after donations were made, “Giving USA” does a preliminary estimate about six months after a calendar year closes and keeps revising its numbers. For example, the group now reports that giving in 2000 was $211-billion, even though it reported a year ago that $203.5-billion had been contributed.

In this year’s edition, “Giving USA” provided data showing how recessions since 1971 have affected giving. The drop in the amount received through bequests and the downturn in corporate donations were the main reasons that giving fell more than it has in other recessions, according to “Giving USA.” Foundation grants outpaced the typical recession, when awards usually fall by 3.2 percent.

Donations from individuals dropped by a percentage consistent with past recessions, and the share of income they gave slipped from 1.9 percent to 1.8 percent.

But some unusual patterns emerged. Giving to human-services groups, for example, usually falls during a recession, causing big problems for groups that tend to see demand for services rise fast as the economy worsens. “Giving USA” researchers said they were not certain why giving to human-services groups was on the rise.

One possibility: the high visibility that social-services groups received after September 11. “It could be that there’s this awareness created by the president calling on Americans to help one another,” said Eugene R. Tempel, executive director of the Center on Philanthropy at Indiana University, in Indianapolis, which produced “Giving USA” for the AAFRC Trust for Philanthropy. “Certainly the events of September 11 might create an awareness that drives people to think about others in a way that ends up in human-service giving.”

Still, not all human-services groups are doing so well in 2002.

Social-service and health charities that depended on money from the United Way in Chicago are gearing up to feel the pinch of lost income. Earlier this month, the United Way told the 140 groups it regularly supports to expect a 19-percent cut, on average, in support for the 2002-3 year because its annual campaign fell $5-million short of its $97-million goal, and $4-million less than it raised in 2000-1.

Brian T. Hassett, the group’s president, said the decline was caused in large part by layoffs and other economic problems suffered by companies in the city — including Arthur Andersen, which has its headquarters there — and by the number of donors who earmarked their United Way donations for victims of the terrorist attacks, or other health and human-service charities that are not among the ones United Way supports. That left less money for the local charities it does support. Although the United Way has trimmed its staff by 20 percent, reduced its spending by $2-million, and sought to increase giving through a new effort to obtain gifts of $1,000 or greater from women, it has already reduced its fund-raising goal for 2002-3 to $82-million.

Mr. Hassett said the group has put information on its Web site about the cuts in financing to the groups it supports, in the hopes the news will serve as a “rallying cry” to encourage people to step up giving to local charities. “I’m really worried about homeless shelters, domestic-violence shelters, and Boys & Girls Clubs,” he said. “I’ve been at this for 22 years in nine different cities. I’ve experienced ups and downs, and this is the worst I’ve seen it.”

The downturn in the economy has caused fund-raising problems not only for groups that are dependent on corporations and their workers, but also for those that rely heavily on stock donations, especially stock gifts that are used as the basis of planned gifts.

The Presbyterian Church (U.S.A.) Foundation, in Jeffersonville, Ind., which seeks planned gifts, saw its contributions drop 23 percent, to $50-million last year. Planned gifts, which provide tax and other financial benefits to donors, are “pretty much dictated by the state of the economy,” said Robert E. Leech, the group’s president. “The stock market was down, and most larger gifts tend to be made with appreciated stock.”

Uncertainty About Economy

While some economists predict that the recession has ended — meaning that charities should see signs of recovery in the next 12 to 24 months — some experts say that it may be quite some time before giving stabilizes because Americans are uncertain about the true state of the economy and nervous about terrorism.

“Uncertainty does two things,” said Bernard Wasow, an economist and senior fellow at the Century Foundation’s Washington office. “It makes people less optimistic about the future and therefore less open to making charitable contributions, and it probably also switches the kind of contributions they make.”

For instance, he said September 11 may have made people more likely to give to charities working to reduce terrorism or help those who have suffered from it.

To combat the reluctance to give that comes with a shaky sense of economic and physical security, many charities have been taking belt-tightening measures or adopting new fund-raising approaches. In so doing, they avoided major losses in 2001 and hope to do the same this year. For example:

• At Project Angel Food, in Los Angeles, a charity that delivers food to people infected with HIV or who have AIDS, a year-end fund-raising event fell several hundred thousand dollars short of its goal when 11 corporate sponsors dropped out so they could spend their money on September 11 relief efforts. In addition to writing letters and calling major donors to seek contributions to cover the shortfall, charity officials planned two more events in the spring, a house party and a bowling outing, that raised a combined $75,000 for the charity. The charity also laid off three employees in January and cut a juice-delivery program to save money. The group now expects to fall around $100,000 short of the year’s projected budget of $4.8-million when its fiscal year ends this month.
• The Boulder Shelter for the Homeless, in Colorado, reduced this year’s budget by $100,000, to about $1-million, and did not hire replacements for three employees who left, in anticipation of reduced donations. Because of those measures, the shelter expects to meet its goal when its fiscal year ends in September. However, the personnel cuts have meant the shelter had to reduce the number of people it could assist in a program that helps homeless people find jobs, from 50 to about 35.
• Beginning the “quiet phase” of its capital campaign will help fund raisers at Maine Medical Center, in Portland, increase fund raising nearly $1-million over last year, to $8-million. However, campaign gifts aside, it has been harder for fund raisers to secure annual dollars, because of the troubled local economy and competition from other charities for the same pool of donors. “We are reaching out to twice the number of people to get those same size gifts,” said Susan Doliner, associate vice president for development. The organization is taking several steps to encourage businesses and individuals to give more. To prompt businesses to make donations, fund raisers are offering to send medical personnel to give health talks to company employees and invite corporate leaders to the medical center to discuss its plans. In addition, fund raisers are putting a greater emphasis on getting gifts from doctors by meeting with them in small groups, to make the appeal more personal. Ms. Doliner has also tried to make the most of her stretched staff members’ days by concentrating on special fund-raising events that take less staff time and raise more dollars. Fund raising next year is going to be a “huge challenge,” she said. “We need to be ready to be patient in terms of the time frame of donors making decisions.”

Some charities that were hoping for gains had to be satisfied with just keeping fund raising stable. At Habitat for Humanity South Bay–Long Beach, in California, two corporate sponsors have postponed the $10,000 commitment needed to build a house this year, while a third has canceled its commitment altogether, said Erin Rank, executive director. The company that had to cancel told her that its budget got cut, “so you guys got cut,” she said.

“We were hoping to build around 15 houses this year,” said Ms. Rank. Now, she says, it is more likely to build 8 or 10.

In addition, she said, while contributions from individuals who have a history of giving to the charity are still coming in, she hasn’t seen as many gifts from new donors. The two factors combined means that the charity won’t push its fund raising from $5-million to $7-million as it had hoped it would when the fiscal year ends this month. “We are going to maintain the status quo in building when we were hoping to increase building,” she said.

Optimism in Some Quarters

In spite of the challenges many charities have been facing, some nonprofit groups are looking to the future with great optimism.

While the Chicago United Way faced a significant downturn, United Ways around the country are mostly seeing increases in giving, said Ann E. Andrews, a United Way of America spokeswoman. She said her group had received reports from half the nation’s United Ways and found that 64 percent of them had raised more in their 2001-2 campaigns than they had in the previous cycle, with 14 percent citing gains in double-digit percentages. Final results are expected to be announced in August.

The Rhode Island School of Design, in Providence, is pushing ahead with its first major campaign, which started in 1998 and has raised $47.8-million so far, despite weak economic signals. Colleen Bartlett, associate vice president for development, is not worried. “At some point in a five-, six-, or seven-year campaign cycle you are going to hit a downturn in the economy, unless you were lucky enough to have your campaign run from 1995 to 2000,” she said.

And even though officials at the Pittsburgh Ballet Theatre have seen three corporate donors either cancel or downsize renewals of previous commitments, totaling a loss of $10,000, and had to tell its 35 staff members to take a mandatory five-week furlough to meet its $7.1-million budget, the group has already raised $1.7-million toward the $2-million needed for a new production of The Nutcracker next year. Steven B. Libman, the managing director, did not consider canceling the fund-raising effort. “Those organizations who decide to throw up their hands and abandon projects are the ones at the end of the day who fail,” he said. “You have to continue to push ahead.”

Other organizations have a less rosy outlook, and not just because of the economy. Questions about the credibility of some nonprofit groups have made fund raising more challenging.

At the Catholic Charities affiliate in Milwaukee, Diane M. Knight, the group’s executive director, has recently been fielding calls about whether donations to the charity will help the church settle abuse cases. Despite assurances to donors that their contributions only support the charity’s programs, the group has cut nine staff positions and is considering eliminating programs if fund raising does not improve to cover a deficit of nearly $1-million. The shortfall is mainly caused by the rising cost of its programs and the stagnating amount of government grants, which account for a large part of the group’s budget. “Given the climate and the competition for the donated dollar and the issues in the church, it makes what was a steep hill to climb even steeper,” said Ms. Knight.

Copies of “Giving USA 2002″ are available for $65 each from the AAFRC Trust for Philanthropy, Fulfillment Department, P.O. Box 1020, Sewickley, Pa. 15143. More information can be obtained by calling (317) 816-1613 or from the group’s Web site, http://aafrc.org.

Harvy Lipman contributed to this article.