Fund Raisers Fear That the Economy Could Stumble –  and So Will Donations

Hurricane Katrina has many fund raisers worried about the possibility of short-term fund-raising

problems and longer-lasting challenges.

Many charities that are not involved in the relief operation can expect a temporary dip in contributions as gasoline prices soar and people open their wallets to help hurricane victims. Such dips occurred after the 2001 terrorist attacks and December tsunamis, according to philanthropy researchers.

But whether donations will be affected over the long term depends on whether Hurricane Katrina, by unleashing untold billions of dollars’ worth of damage, will push the national economy into a slide and cause many donors to reduce or withhold gifts. If average gas prices of more than $3 per gallon persist for a year’s time, Americans will have to pay an additional $84-billion for fuel, economists say. That increase could make it tougher for many people to give as generously as they did last year.

Particularly critical are the coming months, the time of year when Americans often make the bulk of their contributions. While giving has historically remained strong following most crises, the situation with Katrina may be different, said Walter Sczudlo, general counsel at the Association of Fundraising Professionals. In addition to the need for charities to raise money to deal with the hurricane recovery, he said, “there could be an economic crisis. I cannot recall a time when there were two massive crises confronting the charitable sector. That type of one-two punch would be particularly challenging.”

Eugene R. Tempel, director of the Indiana University Center on Philanthropy, in Indianapolis, agrees. “If the economy goes flat, giving goes flat,” he said. “People don’t stop giving, but it doesn’t grow.”

Giving USA, a report on charitable donations compiled by the Indiana center, has found that after an economic downturn, charitable giving typically does not keep up with increases in inflation. In two economic slumps, in 1973 and again in 2001, donations failed to keep pace with the growth in inflation for three years straight. Giving also declined after the 1987 stock-market collapse.

Not everybody expects giving to falter because of Hurricane Katrina. The disaster “might have an effect in delaying year-end giving, but I would be surprised if it affects the year-end total,” said Roger Craver, founder of Craver, Mathews, Smith & Company, an Arlington, Va., direct-marketing consulting firm for several big charities that are not involved in hurricane relief. “Over all, this wakes people up for philanthropy. They become aware of how vulnerable people are.”

Bracing for Trouble

While it’s still too early to gauge Katrina’s economic impact in the months ahead, many charities are bracing for an immediate decline in donations, and some groups have already faced a slump. One week after the storm, the Muscular Dystrophy Association’s annual Jerry Lewis Labor Day Telethon, for example, raised $54.9-million to fight the disease, compared with the $59.4-million last year.

Officials at the muscular-dystrophy group say their own fund raising might have been hurt because they broadcast hurricane-relief appeals during the telethon. Up to four short hurricane appeals per hour to benefit the Salvation Army were aired during the national broadcast, which lasted more than 21 hours. Those spots, along with a toll-free donations line, generated more than $1-million for the Salvation Army.

“Because it’s a national disaster, we knew we should help,” said the muscular-dystrophy association’s director of public information, Bob Mackle. Unlike other hastily prepared fund-raising efforts after the storm, he said, “we had everything in place.”

Given the circumstances, the Labor Day telethon was expected to raise much less than it did, Mr. Mackle added. “That we were still able to raise almost $55-million is pretty impressive.”

Meanwhile, at charities with fund-raising events scheduled for this month, a popular time of year for such gatherings, officials worried that attendance would be down. The annual gala of the Metrocrest Medical Foundation, in Farmers Branch, Tex., is on October 1. “Our invitations landed in mailboxes yesterday,” Joyce Brown, the executive director, wrote in an e-mail message last week. “I am nervous. Tickets are $75 per person, and folks might have already spent their extra giving money on the Katrina effort.”

With mail delivery suspended to 1.7 million households in Alabama, Louisiana, and Mississippi because of the hurricane, charities rushed to make sure they did not send solicitations to any of those areas, with many deciding to delay all direct-mail solicitations until the flurry of hurricane-related appeals subsides. At ALSAC/St. Jude Children’s Research Hospital, in Memphis, John P. Moses, the chief executive officer, said the hospital has ceased all mail and telephone solicitations to areas hurt by the storm, and he expects a corresponding drop in contributions. Donors in Louisiana alone, he said, account for 6.5 percent of all direct-mail revenue the charity receives.

“We have delayed most mailings for one to two weeks,” said Mr. Craver, the direct-marketing consultant, who serves five large charities and a handful of smaller groups.

But Mr. Craver said that most of his clients have proceeded with telephone appeals. What’s more, he said, donations in response to telemarketing solicitations are up by about 15 percent among donors to his client organizations. “We were on the phone the night the storm hit and every night since,” said Mr. Craver. Some donors did not give as much as usual, but the number of those who contributed over the phone increased, more than making up for the dip, he said.

“This is the part of the business that defies logic,” Mr. Craver said, adding that he saw a similar telemarketing spike following the September 11 attacks and the tsunamis. He said that he can think of only one reason why: “In difficult times, people tend to gravitate toward the familiar.”