Recession takes its toll on charities

October 13, 2008

The timing of the nation's financial crisis couldn't be worse for charities like Wheeler Mission Ministries, which typically raises 40 percent of its $6.5 million annual budget in the final three months of the year.

"We do get our share of year-end gifts and stock gifts from appreciated assets, which is almost a foreign term right now," Chief Development Officer Steve Kerr said.

Wheeler and other area not-for-profits are beginning to feel the sting of the year-old credit crunch, which has escalated into a full-blown financial crisis that's battered investors and likely pushed the nation into recession. The stock market, as measured by the S&P 500, has shed more than one-third of its value since October 2007.

Year-end changes in the stock market are "the single best predictor of changes in household giving," said Patrick Rooney, interim executive director at Indiana University's Center for Philanthropy. Economists have found that every 100-point gain or loss in the S&P 500 correlates to a $1.7 billion increase or decrease in households' itemized donations, he said.

Though the year isn't over, Rooney noted that the massive sell-off began just when families tend to make year-end giving plans.

"That might have a more pronounced effect ... than it would had this happened in January or February," he said.

Wheeler Mission's Kerr and other chief fund-raisers throughout Indianapolis are bracing for the most difficult quarter many of them have seen in years, perhaps since Sept. 11, 2001. Some are lowering their expectations, while others say they'll simply work harder to find donations.

Wheeler won't sacrifice its core mission of providing food and shelter to homeless men and women, Kerr said. "We're not going to turn people out in the cold; it's not going to happen."

Founded in 1893, the ministry has built up a huge base of active donors--65,000 people who give on average $54.50.

"We're trusting the Lord in this difficult time," Kerr said, "and we're trusting our history in this community."

Charities also are ready to cut their administrative costs. Shepherd Community Center Executive Director Jay Height hopes that by forgoing raises and leaving staff positions open, the organization will show contributors that it's a good steward of their money.

Shepherd raises $4.1 million a year to give east-side kids meals and education programs, and as much as $2 million is raised from October through December. Height said he began his fiscal year in September by reducing the average spending per person from $1,700 to $1,100, a 35-percent cut.

"If we execute our plan--and we even are adjusting things this week--we can hit it," he said.

At the Julian Center for abused women, Executive Director Ann DeLaney said regular donors are warning that they'll scale back their annual contributions.

"That's happening at a time when demand is way up," she said. DeLaney said the center likely will cut back expenses, such as raises to employees, or domestic-violence prevention programs.

'Nothing but bad news'

Charitable giving started to slide long before this fall, when stocks suffered their biggest losses. "Since January, it's been nothing but bad news, really," noted Marian College President Daniel Elsener.

In constant solicitation for scholarships and operating money, the college has found small-time donors giving less because of gas prices and inflation. Nevertheless, Elsener said the college is on track to meet its annual goal. He believes it has to do with the school's commitment to minority and low-income students.

"People will do amazing things in terms of sacrifice, if they think it will really help somebody," he said.

But the Indianapolis Symphony Orchestra and other arts groups have found donors have their limits. Sean Dunlavy, the symphony's director of campaigns and major gifts, said individuals have been less responsive since spring.

"We track it month to month, and we were missing our goals," he said.

Now, Dunlavy is looking to make up for losses in corporate giving, too.

"In one case, a very significant donor, and a longtime donor said, 'We're not going to be able to support you in '09.'" He declined to identify the company.

Dunlavy said his cohorts in opera and dance are reporting the same cuts in corporate support.

"We're all going after the same people," he said.

It's a difficult time to approach businesses, since many are making less money or posting losses. Some also have less to give because they helped fund the city's successful 2012 Super Bowl bid. Private sources, mostly local businesses, committed $25 million to the effort.

Pushing for record

United Way of Central Indiana announced in September that it aims to raise a record $40 million--nearly $1 million more than last year--in the annual campaign that supports dozens of human-service agencies. The campaign centers on workplace giving.

Those in the financial industry have cut back their share in "very serious ways," UWCI President Ellen Annala said, but she won't accept that as an excuse for not meeting the goal. "Every year, there's something."

The local United Way has recruited 75 new businesses to run workplace campaigns, and it's helping others raise the level of participation.

"If a company has 20-percent participation, we try to help them get it to 30 percent," Annala said. "We have volunteers and staff who just get out and work."

After 9/11, United Way of Central Indiana fell short of a $38.3 million goal by $900,000. Annala said it's too early to know whether the current crisis and economic slowdown will hurt the United Way's 2008 campaign.

"We're still cautiously optimistic," she said. "It's going to take new businesses and new donors to do it."

Donations do decline during recessions, but not at the cataclysmic rate one might expect, according to a study the Illinois-based GivingUSA Foundation released in September. Over the last 40 years, the study found, giving during recessions declined on average 1 percent.

A small dip can be hard for not-for-profits to absorb because, during times of growth, they see average increases of 4.3 percent, Rooney said. "It's a five-point swing."

Rooney said organizations should forge ahead.

"There's absolutely no reason to say the sky is falling," he said.

Butler University set an ambitious fund-raising goal of $1.8 million in unrestricted gifts. The school has hit that mark only twice in the past seven years, said Mark Helmus, vice president of university advancement.

"It's going to be a challenging year," he said. "I wouldn't expect us to exceed our goals."

While Helmus doesn't expect the year to end in disaster, Butler is reaching out to alumni who might think they can't give when their investments are taking a hit.

Helmus noted that one piece of legislation tacked onto the $700 billion financial-industry bailout allows for tax-neutral giving. People who are at least 70-1/2 years old can send money directly from their individual retirement accounts to the charity of their choice.

Butler is culling its records for alumni who would meet the age requirement, Helmus said. "We will send lots of information to those folks."

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