What the nonprofit world will face in a new year
Charities that rely heavily on government grants
and contracts will find little relief in 2010. The recession continues to take a bite out of tax revenues, and
the recent climb in the unemployment rate will make
The National Governors Association’s prognosis is
bleak: States are in for a “lost decade,” it says, thanks
to the recession’s severity, the projected slow recovery,
and future demands to meet neglected needs.
“Leaders of nonprofits must get engaged in the policy process because this problem is not going away,”
says Tim Delaney, president of the National Council
BEHIND THE TREND:
State spending cuts. More than 40 states have reduced spending on services, including health care, education, and help for the elderly and disabled, in this
fiscal year—which for most states ends on June 30—as
they struggle to close shortfalls totaling $190-billion,
the Center on Budget and Policy Priorities reports.
End to stimulus money. Federal economic-stimulus money to help states pay for Medicaid and avoid
drastic budget cuts eased some of the pain this year.
But the lion’s share of that money will end on December 31, 2010.
County and local budget crunches. More than
80 percent of both counties and cities expect to see
shortfalls in the next fiscal year, according to recent
surveys by the National Association of Counties and
the U.S. Conference of Mayors.
As a result, more cash-strapped local governments
may try to seek money from nonprofit groups, steps
some cities have already pursued in 2009.
Strains in the
While the economy is improving, the recovery from
the recession is expected to be long and difficult. Charities can anticipate a continued surge in requests for
food, housing, and many other social services as people
struggle with job losses and other problems triggered
by the downturn. The prolonged financial strains on
individuals and families are also expected to lead to
spikes in crime, domestic violence, mental illness, and
“In our 42-year history, we have never seen a demand for our services like we are seeing now—hunger
relief is truly a growth industry,” says Josh Fogt, public-policy manager for Northwest Harvest, a Seattle
BEHIND THE TREND:
High unemployment. In October, the unemployment rate rose above 10 percent for the first time since
1983, according to the U.S. Department of Labor. Some
states are worse off, with Michigan facing the nation’s
highest unemployment at 15. 1 percent. While the labor market is improving, a full recovery is probably
several years away.
The new poor. The number of Americans who lack
access to adequate nutrition rose to 49 million, one in
seven people, the U.S. Department of Agriculture reported last month. That is the highest level of “food insecurity” since 1995, when the agency began tracking it.
Many charity leaders worry that nonprofit groups will
not be able to keep up with the rise in demand.
A Full-Court Press
for Modest Gifts
As charities face cutbacks in state aid, as well as
in grants from foundations and corporations, they
are turning more intently to individuals—and focusing most seriously on small and medium-sized donations. While some signs of an uptick in giving are encouraging fund raisers, overall giving isn’t likely to
return to its pre-recession levels until at least 2012,
after more people get jobs and the economy becomes
much stronger, according to the scholars who compile
BEHIND THE TREND:
Stock. As the stock market has improved, charities are reminding donors of the tax savings they can
achieve by donating securities. The Fidelity Charitable Gift Fund, for example, has seen a “big pickup” in
gifts of stock since they ground to a halt following the
financial meltdown in the fall of 2008, says Sarah Lib-bey, the fund’s president. Last month alone, she says,
gifts of securities were 275 percent greater in value
than those received in November last year.
Online donations. Network for Good, an online
charity portal, said the number of gifts it processed
from January through the end of October grew 92
percent compared with the same time in 2008. The
amount raised in that 10-month period was almost
$57.6-million, compared with $40.3-million the year
before. But the average gift size during that period was
down, to $72 in 2009 compared with $96 in 2008.
Employee giving. The Combined Federal Campaign in the Washington metropolitan area, the fall
fund-raising drive for federal employees that raises
the most nationwide, is ahead of where it was last year
at this time and is on track to raise $64-million. That’s
up from $62.7-million in 2008. What’s more, the average gift has grown to $478, compared with $419 in
Mega gifts. While a few big donations have been
announced in recent weeks, and fund raisers say more
donors are willing to talk about big gifts, nobody expects gifts of $10-million or $100-million to resume in
any big way soon. The number of gifts of $1-million
or more totaled $3.4-billion this year for the period
between January 1 and November 20, according to
data compiled by The Chronicle, down from $11.6-bil-
lion during the same time in 2008. And fund raisers
predict another anemic year in 2010. Now fund raisers say they are getting excited as more-modest gifts
arrive. “What might have been just a ho-hum $25,000
or $50,000 or $100,000 gift is now a very special gift,”
Susan Paresky, a senior vice president at the Dana-Farber Cancer Institute, recently told The Chronicle.
Tax incentives. Congress is expected to extend
a law that allows people to donate to charity up to
$100,000 annually tax free from their individual retirement accounts. It is also expected to maintain
some kind of estate tax rather than let it expire in
2010 as planned. Studies have found that the tax motivates wealthy donors to give assets to charity rather than subject their estates to the tax. The Internal
Revenue Service predicts, however, that because of
plunging stock and home values, fewer estates will be
big enough to trigger the tax in 2010. Congress has
not taken up President Obama’s proposal to limit tax
breaks for charitable deductions as a way to pay for
a health-care overhaul, largely because of concerns
about how charities are weathering the recession.
Some individual senators favor a modified version of
the plan, though, so some nonprofit leaders remain
Hit hard by investment losses, many of the nation’s
largest foundations and corporations will probably
trim their giving next year or keep it steady at 2009
levels. But as problems like hunger and unemployment
continue, they will face greater public pressure to increase their grant making. Some foundations have
said they may close at a point in the near future and
spend the entirety of their assets in response to financial declines and the growing social needs.
“Foundations have been fundamentally reset. Even
though their portfolios are coming back, they were psychologically jarred,” says Mario Morino, chairman of
Venture Philanthropy Partners, a philanthropic fund
in Washington. “You’re going to see them be a little
more tepid in terms of the things that they do.”
BEHIND THE TREND:
Decreases in giving. Foundations often use a
three-year rolling average to calculate their grant
budgets, which means the investment losses suffered
in 2008 and 2009 will affect grant making for a few
years to come.
Twenty-six percent of 583 grant makers plan to
decrease their giving in 2010 and 50 percent plan to
maintain it at current levels, according to a Foundation Center survey. The research organization also estimated that foundation giving in 2009 will decline by
more than 10 percent.
Corporate-philanthropy challenges. The outlook for corporate giving is less clear, but is likely to
mirror that in the foundation world. Of 96 large companies that responded to a Chronicle survey this year,
16 percent said their giving would fall in 2009 and 53
percent said it would stay roughly the same.
Mounting pressures. Grant makers will be expected to give more to ameliorate growing problems
in the United States and abroad. Members of Congress
and state legislators will step up their calls for foundations to aid cash-strapped charities and to assist government programs facing budget shortfalls. For example, California lawmakers suggested in July that
philanthropic money should support the state’s health-insurance program for children, which at the time had
been cut by more than $100-million.
A Weakened Charity
Many charity employees will enter the new year
under conditions ripe for burnout: 2009 was marked
by layoffs, salary freezes, and other cutbacks in pay
and benefits. Employees who have retained their jobs
and taken on expanded workloads with no additional
compensation will present management challenges for
bosses as economic pressures continue into 2010.
Lester M. Salamon, director of the Johns Hopkins