Giving affected by stock market decline

In Little Rock, Ark., a 75,000-square-foot warehouse that distributes food to 450 food banks is nearly half empty. Corporate food gift cutbacks are to blame, and the donations that do come in are mostly junk food rather than eggs, cheese, canned vegetables and produce.

In Miami, a nonprofit support and education group for people with HIV and AIDS just lost $100,000 in government funding, forcing it to solicit individual donations from people who say they can't afford to give.

And in Chicago, the local United Way chapter predicts its 2002-2003 campaign will bring in $7 million to $8 million less than last year's $93 million, a drop of 9 percent.

The shaky economy, stock market drop and government cutbacks have created a huge funding challenge for nonprofit organizations around the country.

As they go forward trying to raise money, groups that depend on donations worry that charitable giving will decline this year for a second year in a row when adjusted for inflation. Fund-raisers and experts on charitable giving point to three key problems:

Many foundations have had their endowments hit hard by the huge stock market decline, meaning they will have less grant money to dole out.

Corporations are under intense pressure to improve profits.

And individuals -- who give 75 percent of all charitable donations in the United States -- have had their wages frozen, lost jobs or seen their stock market holdings plunge in value.

Not a good time

"In recessions, what happens to corporate and philanthropic giving is the same thing that happens to family budgets," said Jon Van Til, an urban studies professor at Rutgers University at Camden who follows trends in charitable giving.

"Charity and philanthropy is nice to do if you're in a time when you can comfortably do that, but you're not going to let it get in the way of paying mortgages or food bills," he said.

The trend started last year, when the economy went into a recession and the stock market tanked for the second year in a row.

Total giving by individuals, corporations and other groups was $212 billion, up 0.5 percent from 2000, according to an annual study conducted by Indiana University's Center on Philanthropy for the American Association of Fund-raising Counsel.

But adjusted for inflation, giving dropped 2.3 percent because of the recession. The only reason the drop wasn't worse was because of an outpouring of charitable giving following the Sept. 11 attacks.

Now, as the stock market continues to wallow, experts worry that charitable giving might decline again in 2002 when adjusted for inflation. It would be the first back-to-back annual decline since the recession of 1990-91.

Similar to 1980s

For Brian Hassett, the United Way president in Chicago, the current fund-raising climate is similar to the dismal early 1980s in Cleveland, when he worked for the city's United Way and one big industrial manufacturer after another went out of business.

This year, one of the Chicago United Way's most important donors -- accounting firm Arthur Andersen and its employees -- essentially disappeared after the company was convicted of an obstruction of justice charge linked to the Enron scandal.

"Even with our stable employers, there's so much pressure on the shareholder value that you see many of the somewhat strong companies going through a reduction in force," Hassett said.

Nationally, a recent survey of 333 foundations and corporate donors conducted by the New York-based Foundation Center found most planned to maintain stable levels of giving in 2002 but were worried about their ability to adequately fund programs in 2003 and beyond.

Nine of the country's top 10 private foundations saw their endowments shrink by a total $8.3 billion from Dec. 31 through June 30, mirroring the stock market decline, according to The Chronicle of Philanthropy.

Only the Bill & Melinda Gates Foundation, which is heavily invested in bonds and other nonstock assets, had an increase in its endowment, the publication said.

At the Pew Charitable Trusts, the loss amounted to $271 million. The foundation plans to reduce new grants to $160 million in 2003 from $180 million this year, said Pew president and chief executive Rebecca Rimel.

"Like so many other investors, we are feeling the impact of the fluctuations in the financial markets," she said.

And the Robert Wood Johnson Foundation, which lost $900 million in the same period, is also planning to give less in 2003 than the $592 million it will give this year, said treasurer Peter Goodwin.

However, if the stock market recovers, "We will take the handle on that faucet and open it up a little more," he said.

Some can't afford it

Most individuals give in the last quarter of the year, but some have already decided they can't afford it.

Traci Mitchell, assistant director of student media at the University of Mississippi, gave $500 last year to her local United Way and $240 to the university. But she won't making similar donations this year because her expenses rose, her salary didn't and the value of her retirement holdings sank nearly 40 percent.

"It makes my stomach hurt, but I can't give at that level until more income is coming in," Mitchell said.

And Roy C. Conner, a licensed clinical social worker from Miami Beach, Fla., won't give anything this year for the second year in a row.

Conner used to give between 10 percent and 15 percent of his annual income away, mostly to groups that help people with HIV or mental problems.

But his retirement nest egg has plunged in value by 75 percent, meaning "there's no sense of security left," Conner said. "The whole matter of the fact is that at middle age I need to give back to myself."

Among the groups no longer getting Conner's donations is the Center for Positive Connections, a Miami-based AIDS support group that lost $100,000 last month for its $287,000 budget.

Now Pat O'Reilly, the center's volunteer development director, is appealing to individuals, businesses and foundations for donations to bridge the gap. But the outlook is grim.

"The foundations invest their money and their money's been depleted," she said. "Wealthy individuals kind of say they're waiting to see if things improve toward the end of the year and they can't make any promises."

In Little Rock, the Arkansas Food Network is feeling the pinch of a 14 percent decrease in corporate food donations.

"Not only do we have less food, but we have at least 10 percent more need then 10 months ago because of layoffs, families not getting raises and hours being cut," said food bank spokeswoman Robin Henson. "Soups, stews, vegetables, peanut butter, it's all hard to come by now."

Junk food donations are still coming in because they have a short shelf life and it's difficult for companies to resell them, but gifts of more nutritious foods have declined. Companies such as Wal-Mart Stores Inc. and Kmart Corp. have cut back on food donations, Henson said.

"Companies are finding more ways to be efficient and instead of donating their products that would normally be unsellable they're reselling them to secondhand stores," she said.

Jobs eliminated

While experts say few charities and nonprofit groups have had to shut their doors or make severe program cuts because of the funding crunch, many have already eliminated jobs and adopted other belt-tightening measures.

In Chicago, the Erie Neighborhood House -- which offers day care, teenage and adult education and an emergency food pantry for predominantly poor, working Hispanic immigrants -- has eliminated nine of its 118 jobs and instituted a wage freeze.

Meanwhile, the group has "an increase in demand for our services precisely because of the economic problems," development director Lisa Galicia said.

Elvia Sanchez, a machine operator who sends her two young children to the group's day care program, says she worries that a continued charitable giving decline could mean the loss of the benefit.

"I'd have to get help from the church, or from somewhere else to be able to survive, or leave my children home alone," she said.

On the Net:

American Association of Fund-raising Counsel: www.aafrc.org

Center for Positive Connections: www.positiveconnections.org

Center on Philanthropy at Indiana University: www.philanthropy.iupui.edu

Foundation Center: www.fdncenter.org

Pew Charitable Trusts: www.pewtrusts.com

United Way Chicago: www.uwonline.org