Feeling the Squeeze

The economy’s woes are starting to make it tougher on organizations running ambitious capital drives.

Fund raisers across the country say that individuals, corporations, and foundations they expected to make big gifts to capital campaigns this year have refused to do so, while others say that donors are making smaller-than-expected contributions.

Still others say that donors are delaying decisions about whether to make a big commitment. They often cite concerns about stock-market volatility and the potential for deeper economic turmoil as well as the possibility that this year’s presidential election will result in higher taxes on affluent people, fund raisers say.

Among the organizations that have faced challenges:

• The New Jersey Center for the Performing Arts, which hopes to complete a $180-million campaign this year, has raised $153-million so far. But “we are certainly working harder to get leadership gifts now,” says Peter Hansen, vice president for advancement. Two foundations the center had counted on for gifts of $1-million or more have declined to give because their assets have shrunk. The center had also hoped to receive big donations from donors who worked at Bear Stearns, the investment-management company that collapsed in March, a victim of the mortgage crisis. “We will lose two to three gifts this year just because of that,” he says.
• Shasta Community Health Center, in Redding, Calif., ended a $3-million campaign to expand its facility last year but is still awaiting payment of some $1-million in campaign pledges. While Dean Germano, the center’s executive director, says he is not worried about the largest of those pledge payments, he is concerned about money that the health center’s employees promised. Three-fourths of employees signed up to let the center deduct money from their paychecks over five years to pay off campaign gifts. But in the last three or four months, about 20 percent of those employees have either stopped or decreased the payroll deductions, says Mr. Germano. “They say it’s getting harder to make ends meet.”
• The Capital Area Food Bank, in Washington, now in a $36-million capital campaign, had hoped to receive a grant from the state of Virginia, after getting $330,000 last year.

  “But when we went back this year, we received nothing,” says Jennifer Vanmeter, the food bank’s campaign director. “This is related to the tight economy, their budgets are down. Legislators gave us hope, but that all changed in February, when they said that no nonstate agencies would be funded.”

• The Dallas Opera, now in a three-year drive to raise $4.5-million to move its offices into a new Dallas Performing Arts Center, has seen corporate gifts, particularly from financial-services and international companies, decline by 15 percent, to $585,000, in the fiscal year ending this month.

  Cynthia Young, the opera’s director of development, says that she began noticing the trend in February.

  “They are talking about tough economic challenges their industry is going through,” she says. “So many of them are having problems. They either decrease or are not renewing their gift.”

To be sure, not all campaigns have been affected by the rocky economy. Many fund raisers, particularly at large institutions, say that they have seen no change in the pace or type of giving to their campaigns.

At Yale University, now seeking $3-billion by 2011, for example, officials say that contributions are higher this year than in 2007, and donors have not delayed or canceled any pledge payments. “Right now, things look very, very good for us,” says Inge T. Reichenbach, vice president for development.

The Museum of Fine Arts, Boston, in a campaign to raise $500-million by the end of next month, has received generous gifts from both individuals and corporations, “even where I thought you might have seen a lessening,” says Patricia Jacoby, deputy director for external relations. Describing the museum campaign as “completely on track,” Ms. Jacoby says it has secured several big gifts recently, such as $10-million from State Street Bank and $5-million from Bank of America, two companies in an industry that has been hard hit.

Expecting Trouble

Still, even institutions with flourishing campaigns are bracing for what could be a bumpier ride at the end of this year. Despite raising a record $14-million at a dinner event last month, much of it from hedge-fund and other Wall Street executives, officials at Harlem Children’s Zone say that contributions to its $100-million endowment campaign are likely to slow, particularly in the final quarter of the year.

“I believe people will feel less inclined to give as generously or pledge as much,” says Mindy Miller, vice president of development. “We recognize it will be more challenging.”

But even fund raisers who have watched big campaign gifts slip away expect to complete their drives successfully. For now at least, the number of donors who don’t want to give is relatively small.

North Carolina State University, which has already surpassed its goal by raising $1.2-billion in a billion-dollar campaign that ends this year, says two donors in recent months declined to make multimillion-dollar gifts because of the troubled economy.

One gift was from a wealthy individual who was deterred after the value of his stock declined significantly, and the other was from a retail company that had been close to making a $4-million campaign contribution, says Nevin Kessler, the university’s chief fund raiser. He says the university hopes to renew discussions and eventually secure the stock gift when the economy improves.

“The downturn is affecting some individuals’ and corporations’ confidence in their ability to make long-term financial commitments,” Mr. Kessler says.

Giving on Hold

Many nonprofit groups report that donors are not completely rejecting the idea of giving but are delaying making any decision about whether to make a big contribution.

Such hesitation has prompted the Kauffman Center for the Performing Arts, in Kansas City, Mo., to encourage some individuals to make a pledge to its campaign, pay nothing this year, and begin payments when the economy improves.

About 20 donors have made such pledges so far, says Jane Chu, the center’s president.

“This has been attractive for donors who were on the fence about giving because they wanted to make a donation but couldn’t presently because of the economy,” she says. “We are hearing many comments like ‘I want to make a gift but need to wait until the economy improves.’”

The center needs to raise $70-million more in its $353-million campaign for a new facility it has started to build.

In other cases, donors’ uncertainty is causing them to make smaller-than-requested campaign gifts, fund raisers say.

At the Georgia Institute of Technology, now halfway through a campaign to raise $1-billion, Barrett H. Carson, vice president for development, says that the economic downturn has prompted many donors to make gifts to pay for current operations rather than larger gifts to the endowment.

While Georgia Tech’s campaign is on track, raising more than $555-million to date, he says, it is a third short of what it had wanted to raise for its endowment by this point and about a third ahead of its goal for current operations.

“Instead of funding an endowed professorship for around $750,000, some donors give the equivalent of the income of the endowment, $50,000,” Mr. Carson says. “If they believed their assets were fully or more fairly valued, they’d be more willing to permanently endow their gift.”

Some of those donors, says Mr. Carson, have said they might be willing to add onto their gift later, once the flagging economy improves.

Sometimes it is better not to accept an offer from a donor who is willing to make a smaller gift, says Bruce Flessner, a Minneapolis fund-raising consultant who is advising three nonprofit clients in billion-dollar campaigns. Instead, he suggests waiting until a donor is in a position to give more generously.

“A big hedge-fund guy who has donated to one of our clients lost as much money in the last 100 days as he probably made in the last two years,” says Mr. Flessner. The donor, he adds, had been expected to make a campaign gift of at least $100-million.

“We need a nine-figure gift, and he could probably still make an eight-figure gift,” says Mr. Flessner of the donor. “But in this case, I will counsel the client to wait,” partly because the money being raised is not for emergency or immediate needs.

In such cases, charities should continue to maintain close relations with the donor even though that person gives nothing now, he says. “Go slow, and don’t ignore the guy.”

While he is advising clients to slow plans for some big solicitations, Mr. Flessner says that a poor economy should not keep charities from holding a campaign altogether. The duration of most campaigns, he says, “is so long that chances are there will be a bear market somewhere along the way.”

Says Robert M. Zimmerman, a San Francisco fund-raising consultant: “I am wildly optimistic that campaigns can be successful now. The economic downturn is hurting nonprofits but not in the way most of them think. They take the downturn as an excuse not to do fund raising. I hear a lot of whining and moaning about the economy, but the best way not to raise money is not to ask for it.”

Lower Expectations

Despite Mr. Zimmerman’s optimism, many charities entering campaigns now are setting less-ambitious goals than they would have a year or two ago.

“There is hesitancy on doing a stretch goal,” says William Krueger, a Louisville, Tenn., capital-campaign consultant. “If they think they can raise $25-million, they might set the goal at $20-million.”

And if history repeats itself, few charities will start campaigns this year.

Marts & Lundy, a Lyndhurst, N.J., fund-raising consulting company, examined a database of campaign announcements maintained by The Chronicle of Higher Education and found that, from 1993 to 2007, the number of colleges or universities beginning the “quiet phase” of a campaign to secure the largest gifts plunged from a high of 50 in the flush economy of 1997 to just 10 in the 2001 recession.

Already some charities are delaying campaigns or extending existing drives because of the bad economy.

The Brooklyn Children’s Museum had planned to end its $15-million campaign to pay for a new building next month but extended the drive until the end of the year. So far, the museum has raised $13.6-million, but its leaders are concerned about “donors hesitating,” says Carol Enseki, president of the museum.

“At this stage, we are going out to people who have not funded us in the past,” she says. “Our expectation is that a lower percentage of those people will give. We’ve had to identify more potential donors because of the lower success rate.”

Leaders of the Ann Arbor Symphony Orchestra, who expect contributions to be flat this year, at about $520,000, have decided against proceeding with a campaign to raise $1.7-million to $2-million for the symphony’s endowment.

“We have been working on this for some time,” says Guy Barast, the orchestra’s development director. “But when the economy really started to falter, we said maybe this is not the right time.”

Indeed, fund raisers involved in campaigns begun a few years ago are quick to express relief that their drives were under way long before the economy started to worsen.

“I’m glad we were out there three years ago — we’ve locked into some pledges,” says Jack Murray, director of development at the Natural Resources Defense Council, which has raised $266-million in a $400-million campaign scheduled to end in 2010.

“I am concerned about this downturn,” he adds. “If I were going into a campaign now, I’d be worried about it.”

Elizabeth Schwinn contributed to this article.