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A Little Less of the Pie: Economy, Rising Prices, Crimp Charitable Giving

Economy, Rising Prices, Crimp Charitable Giving

In the slumping economy, more people are turning to charity for food, shelter, medicine, and other basic human services. Nonprofit organizations providing the services are now feeling the pinch as individuals, companies, and other funding sources slow their donations in tight times.

Lines have grown substantially longer at the Harvest Hope Food Bank in Columbia, S.C., for example, as working-class families, stung by the souring economy, the housing crisis, and rising gas and food prices, look for help.

"Our refrigerator is bone dry," said gas-station cashier Robert Anderson of Hopkins, S.C., whose family sought food from Harvest Hope for the first time in late May. Rent and utilities eat up much of his $270 weekly paycheck. "With only one paycheck coming in, food is like the last thing on my mind," he revealed. 

In an average year, Harvest Hope provides nearly 1.2 million meals to nearly 300,000 families in 20 counties via soup kitchens, senior centers, shelters, and after-school programs. So far this year and in 2007, however, things have dramatically changed. In the first four months of 2008, monthly demand at Harvest Hope increased between 32 and 39 percent over the same period in the already demanding year of 2007. Executive director Denise Holland also knows that right behind spikes in demand for food, the food bank experiences a drop off in donations. 

"The downturn in the economy, the price of gas and food, doesn’t discriminate; it hits us all," said Holland, who is hustling to keep the donations coming in to meet the summer busy season, when children go without school lunches.

The pain is nationwide, affecting Meals on Wheels programs from Detroit to Austin, Texas, free medical care in South Florida, and food pantries in New England. Requests for rental-related assistance has almost doubled—seemingly overnight—in Fairbanks, Alaska, while new homeless shelters are being erected in Midwestern locales.

The One-Two Punch

"They [human-service groups] are caught in a one-two punch," said Carol DeVita, senior research associate at Washington, D.C.’s Urban Institute Center on Nonprofits and Philanthropy. She explained that charitable organizations are slammed by two simultaneous strains: "The demand increases while funding sources decline," she explained. In the best-case scenarios, she said, "Even if funding is steady, they feel more demand."   

Slower economic times mean leaner coffers for many of the nation’s 1.4 million nonprofits, from need-based services to educational and cultural organizations. Private giving reached $295 billion in 2006, double the amount in 1996. Of that, individuals gave the majority, or $223 billion, followed by foundations and corporations, according to the Urban Institute.

Annual giving in non-recession years increased 4.3 percent, according to the Center on Philanthropy at Indiana University, but giving has fallen an average of 1.3 percent in the five national recessions since 1973. In the 2001 recession, giving fell 2.2 percent and was down 1.4 percent the following year, after the recession was over.

"We’re not in a recession," said Patrick M. Rooney, the center’s research director, "but [it] looks like recessionary growth" with unemployment going up and a decline in new jobs. But as the data from 2001–2 show, giving levels are lagging indicators of a recession. Official statistics are grounded in one- to two-year-old data. Even the center’s Philanthropic Giving Index, which surveyed fundraising executives last fall, reported the fundraising climate remained fairly stable in the second half of 2007.

"Giving generally follows the economy," noted Sharon Bond, the spokesperson for the GivingUSA Foundation. And anyone can tell you the economy is hurting.

Among nonprofits, human-services organizations typically feel a slowing economy first, and not only with increased demand for services. They often rely on a combination of government funding and individual support. They tend not to be as well funded as educational or cultural organizations, and government is quick to pull back funding in down times, as most states are required to balance their annual budgets.

Arizona, for example, is facing a nearly $2 billion deficit for the fiscal year starting July 1, according to Patrick McWhortor, president and Chief Executive Officer of the Alliance of Arizona Nonprofits. Arizona nonprofits dodged a bullet earlier this year when state lawmakers had to address a roughly $1 billion shortfall in January. This time they won’t be so lucky.

"They will have to touch essential services," McWhortor said. "Social and human services are bracing for some significant impact." He adds that corporate support is down significantly. Meanwhile, nonprofits that are better suited to weather downtimes include those relying on foundation funding, often committed in advance and tied to stock market performance.

On the Ground

On the ground, nonprofits—especially human-services organizations, which tend to be the canary in the coal mine among nonprofits—are feeling the impact of the slumping economy. 

"The Christmas season of ‘07 was the first signal that there was a sign of a downturn," reported Major George Hood, the Salvation Army’s national community relations secretary. Last fall, donations during the busy season increased less than 1 percent, whereas giving increased 3 to 4 percent annually each of the last five years.

Another telltale sign: Donations of household items have been off by 20 percent so far this year, while sales in Salvation Army thrift shops are up 20 percent. Even in the face of the Myanmar cyclone, China earthquake, and devastating tornadoes stateside—disasters often get people to open their pocketbooks—charitable giving and donations are noticeably off.

"The foreclosure rate is hitting people hard," Hood said. Foreclosure rates in April were up 65 percent over those in April 2007, according to RealtyTrac.com.

Utility and housing assistance and help with food and clothing are among the biggest needs. While the need stretches nationwide, "We’ve seen the heaviest impact in the Midwestern states," Hood said. He reported increased demand for homeless shelters in places like Nebraska and talked about people from middle-class Kansas communities seeking food and clothing.

While the nation’s United Way organizations report "no major shift" in funding yet, the charity’s spokesperson, Sally Fabens, said, "We expect to see some downturn in certain sectors, like finance and banking or construction—both in corporate and individual giving."

In Florida, where the foreclosure crisis is among the worst in the nation, the bad economy is a major factor in the recent closing of MediVan Health and Community Services Inc., a Broward County nonprofit that provides free health care and medicine to older uninsured and low-income residents. In previous years, two vans outfitted with volunteer nurses, doctors, and translators used to complete 1,800 patient visits a year in neighborhoods throughout the county.

"We’ve seen funding cutbacks… People aren’t donating," said Pamela Carre, MediVan’s executive director. Getting volunteers has also become harder. "Because of the major cutbacks, it [the closing] will impact a lot of people in the community."

"The demand for food has gone up incredibly and [food pantries] are having a hard time meeting demand," said Michael Ripple, operations director of the Massachusetts Council of Human-Service Providers. Nearly half the state’s human-services provider organizations depend on state contracts for more than half their revenue. In a slowing economy and in a state committed to insuring all of its residents, Ripple said, "there is a lot of competition" for funds.

Moreover, $4-a-gallon gas has held back volunteers who do Meals on Wheels and other programs, according to Sandy Markwood, CEO of the National Association of Area Agencies on Aging.

"We’ve got waiting lists for people who want to get on the [Meals on Wheels] program," said Paul Bridgewater, president and CEO of the Detroit Area Agency on Aging. At the same time, "we’re losing volunteers, because many of the volunteers are on fixed incomes" and can’t afford gas.

Scrambling

Nonprofits are working hard to provide services amid the increasing demands. Harvest Hope, for example, recently kicked off an "extra-mile campaign," looking to the business community to pick up the slack in individual donations. Meals on Wheels and More in Austin, Texas, is trying to rework transportation routes to limit fuel expenses, which (for institutional buyers) have jumped 38 percent this year.

In order to counter the expected falloff in donations, United Way of America is targeting other sectors that are not experiencing downturn. Energy, health care, high tech, and some pharmaceutical firms, for example, can still provide support. United Way is also diversifying revenue into categories, such as foundations, megagifts, and planned giving, and providing opportunities for people who are stretched financially, to help volunteer and to advocate.

"There are people in trouble, people in serious trouble," said the Salvation Army’s Hood. "We need the support of the American public."

Will Gas Prices Halt Meals on Wheels?

Dolores Rodriguez, age 80, of South Austin, Texas, has depended on daily meals from the local Meals on Wheels and More "since my husband passed away in 1999." It’s more than the food she looks forward to: "companionship is very important to a person living by themselves," she asserted.

Meals on Wheels and More’s president and CEO, Dan Pruett, worries about how rising fuel prices will hamper his organization’s ability to provide meals to Rodriquez and 3,000 other area clients. Gas prices for his fleet of 15 vans have jumped 38 percent this year. He pays $15,000 to $20,000 more this year for gas. Moreover, he depends on his 3,500 volunteers to foot the price of gas for their meal deliveries.

"I’m really worried about the increases we’ll get in the next six to eight months," he says. On top of that, Pruett expects food prices to increase by 6 percent in the year ahead. His funding levels don’t go up nearly as fast. He asked, "How do you continue to provide services then?"

Meanwhile, Rodriguez says, "Meals on Wheels has been a life saver."

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