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Gustav Relief Sends Red Cross Into Debt
With Three Storms Bearing Down, Nonprofit Plans Aggressive Campaign

By Philip Rucker
Washington Post Staff Writer
Saturday, September 6, 2008

The American Red Cross said yesterday that it is going deep into debt to fund a $70 million Hurricane Gustav relief effort, an unusual occurrence even as the nation's biggest disaster aid charity braces for a trio of powerful storms lurking in the Atlantic.

The Red Cross has raised less than $5 million toward its Gustav expenses, officials said. To recoup its Gustav cost -- most of it borrowed money -- the nonprofit organization plans to roll out an aggressive national campaign Monday.

In 2005, the Red Cross borrowed money for the first time in its 127-year history when it took out a $340 million loan to help pay for its $2 billion response to hurricanes Katrina and Rita. The nonprofit organization quickly raised the money to cover the debt.

But because Gustav weakened as it churned onto the Gulf Coast, Americans struggling in a soft economy have not responded with an outpouring of giving as they did three years ago when Katrina left indelible images of devastation and suffering. Gustav spared New Orleans the death and destruction that forecasters predicted but dampened donations to the Red Cross, which mounted one of its largest mobilizations in years.

Fundraising is "nowhere near the pace that we would need it to be," said Joe Becker, senior vice president of Red Cross disaster services. He called the situation "daunting."

"There's a sense that, 'Oh, wow, they dodged a bullet,' " he said. "But there's a large number of people with a lot of need there, and the Red Cross is going to be there for quite a while."

The gap between Gustav expenses and donations comes at a perilous time for relief groups. An unusually high number of U.S. disasters this year has taxed charities, from wildfires in California to tornadoes across the South. With their resources depleted, the same charities are mounting efforts for Tropical Storm Hanna, expected to become a hurricane before lashing the Eastern Seaboard this weekend, and Hurricane Ike and Tropical Storm Josephine, which are on uncertain but dangerous paths.

"They told us it would be a big hurricane season, and they were right. We're kind of in the soup here," Becker said. "We're resourcing Hanna, and we'll resource every brother and sister storm behind it. . . . The country needs a strong Red Cross."

Massive power outages in Louisiana have prompted the Red Cross to open more shelters in the New Orleans area and serve half a million hot meals each day.

"The 700,000 or 800,000 people without power is causing us to launch a tremendous feeding operation on a scale that's much bigger than we were thinking," Becker said. "We're borrowing the money. As hard as it might be to raise the $70 million that this one costs, now we've got Hanna and Ike and Josephine behind it."

Other nonprofit groups also prepared for the worst from Gustav and provided shelter, food and clothing for thousands of evacuees. The Salvation Army spent in excess of $1 million on Gustav, but it has raised just $30,000 to cover it. Save the Children, which spent more than $100,000 on diapers, cots and bassinets at shelters, has raised $35,000. Catholic Charities USA spent more than $200,000 and has taken in $10,000.

"Gustav, in damage, pales in comparison to Katrina," said Father Larry Snyder, president of Catholic Charities. "But with over 2 million people being evacuated and the expense incurred there, it's not a small disaster."

The charities could collect more donations in coming days, but with Gustav nearly gone from the headlines, some officials fear they might not break even.

"The attention of the general public moved off Hurricane Gustav so quickly," said Jeffrey Towers, Red Cross chief development officer. "People were expecting something so dramatic and vast relative to Katrina that, when the storm came to shore less than a category 4, the immediate response was, 'Oh, that wasn't so bad.' "

Maj. George Hood of the Salvation Army said, "We're being very taxed with these disasters this year in terms of responding and having a comfort level that the economics are going to work out."

The Red Cross has federal responsibility for providing relief to the nation's biggest catastrophes, but it operates largely on private donations and receives little government money.

"We're all a little confused about how we're supposed to pay for the damage wrought by national disasters," said Melissa Berman, president of Rockefeller Philanthropy Advisors. "I think a lot of people ask, 'Isn't this supposed to be what our government is for?' The Red Cross is in the strange and unique position of being perceived as sort of a private organization and sort of a public organization."

After facing sharp criticism for its fumbled response to Katrina, the Red Cross did not take a chance on Gustav, which had the potential to be the biggest disaster since. The organization dispatched more than 3,000 volunteers to the Gulf Coast, blanketing the region with supplies and setting up more than 500 shelters in 14 states.

The effort is expensive, and the Red Cross, whose disaster relief fund was depleted following the recent Midwest floods, took out loans. Forecasting catastrophic damage in Gustav's wake, Red Cross officials banked on Americans' generosity to recover their costs.

"What that creates is a wide gulf between the organizations that planned for the worst and expended resources and the donors who are holding back because they don't see as much of a need," said Eric Kessler, managing director of Arabella Philanthropic Investment Advisors.

Americans historically respond to major disasters by giving. About two-thirds of U.S. households donated to charities after the terrorist attacks of Sept. 11, 2001, and after Katrina, said Patrick M. Rooney, director of the Center on Philanthropy at Indiana University.

"We're pretty responsive to major disasters," Rooney said. "We're not so responsive to minor disasters."

Ellen Lee, president of the Greater New Orleans Foundation, said this is troubling. "If it takes mass death and destruction for people to give to relief efforts, I'm not sure that's the best," she said.

To donate to the American Red Cross, call 800-RED-CROSS or go tohttp://www.redcross.org.

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