Ahead of Holidays, Charities Worry They'll Have Less to Offer

By Philip Rucker
Washington Post Staff Writer
Sunday, November 23, 2008

Charities are hurtin'.

After nearly a decade of record growth, U.S. nonprofits are getting hit from all directions. Some foundations are scaling back on awarding grants as endowments shrink in the stock market meltdown. State and local governments -- facing falling tax revenue -- are slashing budgets and cutting back on funding. Individuals, too, will probably hold back on giving this holiday season, experts say, as withered 401(k) accounts and sunken home values take a toll.

Add to that the troubled state of Fannie Mae and Freddie Mac. The mortgage finance giants have long been the Washington region's biggest corporate benefactors and gave a combined $47 million to charities last year. As a result of the federal takeover, Fannie and Freddie could decrease or halt their giving altogether, reshaping the area's philanthropic landscape.

In response, many area nonprofits have trimmed overhead costs, frozen hiring and are anxiously considering cutting programs and laying off staff members in a struggle for solvency and survival. The hardship comes just as they face rising demand for services from people hit by the crumbling economy.

"Things are brittle and delicate," said Diana Aviv, president of Independent Sector, a national coalition of charities. "I don't think nonprofit organizations can be confident for next year. They don't have cushions. . . . We could see the extinction or demise of a lot of organizations whose missions and whose works have been essential to society."

Steve Gunderson, president of the Council on Foundations, said the economic volatility boils down to this: "The needs in the community are probably as great as they've ever been, and the resources of philanthropy to meet those needs are probably as challenged as they've ever been."

Despite all the gloom, charitable giving tends to weather economic downturns. Over the past four decades, charitable contributions have fallen during recessions an average of 1 percent a year, adjusted for inflation, said Patrick M. Rooney, interim director of the Center for Philanthropy at Indiana University. In typical nonrecessionary years, giving grows by about 4.3 percent, Rooney said.

"The good news for charities is that it's not a precipitous decline," Rooney said of the historic trends. "Households don't make these wild swings and say, 'Okay, now we're no longer going to give because the economy's slowing down.' "

Yet this time, there are signs of trouble. Three-quarters of the region's leading foundations and corporate giving programs suffered a decline in assets because of plummeting returns on investments over the past year, according to a survey conducted in October by the Washington Regional Association of Grantmakers. About one-third of the respondents said they reduced grant budgets from 2007 to 2008, and about half of the organizations said they plan to award fewer grants in 2009 than they have this year.

The weakness in the financial and housing markets could not come at a more precarious time for charities. Nonprofit organizations rely on the generosity of Americans during the holiday season for as much as half their annual operating revenue, so many groups will not know the full impact of the economic downturn until they count receipts in January.

Last year, U.S. charitable giving reached a record $306 billion, according to Giving USA, and the surge in philanthropy has been accompanied by a growth in the number of nonprofit organizations. In the Washington region, more than 7,600 area nonprofit groups create a formidable force, employing tens of thousands and contributing an estimated $9.6 billion to the local economy, according to a recent report by the Nonprofit Roundtable of Greater Washington.

"Our sector was built on extra," said Robert Egger, president and founder of D.C. Central Kitchen. "We use extra food, extra time, extra money, and we're looking at the end of the era of extra."

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