November 19, 2008
Perfect storm for charities— contributions go down and requests go up
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The questions many nonprofits are asking aren't about the length of this economic downturn -- it's clear nobody knows the answer to that -- but rather what they should do now, and how should they prepare for a number of grimmer possible futures.Even as organizations are re-evaluating expenses, trimming fat and making do with less, they also must seek ways to stand out, philanthropy experts say, and to excel at their stated mission.
"You have to make your case: Why now, why us?" said Steven Windmueller, dean of the Los Angeles campus of Hebrew Union College-Jewish Institute of Religion.
Paul Schervish, director of the Center on Wealth and Philanthropy at Boston College, said agencies need to be creative with donors and focus on long-term pledges that are heavier on the back end or contingent on stock market improvements.
Gary Tobin, president of the Institute for Jewish & Community Research, said there is no shortage of money in Jewish foundations.
"There are still tens upon tens of billions of dollars," he said, and many nonprofits are encouraged by research by the Giving USA Foundation that historically philanthropic giving has actually increased during hard times and even in recessions, to the tune of 6.2 percent in noninflation-adjusted dollars.
The explanation is that people who have the means will dig even deeper, because they know the needs are that much greater.
"It is also important to remember that even when they have lost 10, 20, 30 percent of their value, Jewish foundations still have a lot of money to give away," Tobin said.
To secure these dollars, Giving USA recommends nonprofit professionals and campaign volunteers start with board members to ensure they will continue support; develop and follow a fundraising plan; focus on renewing gifts from current donors, and expand the tactics in their fundraising portfolio.
It remains to be seen, though, how start-up nonprofits and Jewish innovators will weather the storm.
More than the citadels, these nonprofits are being talked of as expendable, or at least non-essential. And this has young Jews concerned that their programs will find once-available funding elusive. (See the Op-Ed on Page 8.)
JDub Records, one of many successful cutting-edge Jewish nonprofits, has been fortunate.
The New York-based organization encourages Jewish identity through music. Revenues from CD and event ticket sales finance half its budget; the other half comes from individual donors and foundations. The record company expected revenue to dry up down the line -- but then Steven Spielberg's Righteous Persons Foundation stepped up and offered a two-year grant to cover operations and build capacity. This followed a $45,000 grant from The Andrea and Charles Bronfman Philanthropies, JDub's second, and a $250,000 grant from the Jewish Community Foundation to expand its Los Angeles office and events.
"It's not business as usual. We are definitely taking everything into consideration as we plan things," said Jacob Harris, JDub vice president. "We've taken a look at all of our books and made sure we are being even more responsible than we had been. We're making sure we are able to keep producing music and serving our community. That is the good word."
Bronfman Philanthropies is, in particular, a good place for innovative nonprofits to turn. The foundation publishes "Slingshot," an annual guidebook on such organizations and is a "spend-down" philanthropy.
"We are going out of business for 2016, and our effort for the next seven years is to make sure the programs we've funded have a life long beyond ours," said Jeff Solomon, the foundation's president. "It would be great if everybody could be spending more at this time, but my sense is there are few foundations that are."
But foundation endowments, even those invested conservatively, are suffering under the decline of the stock market.
Even Harvard, which has a larger endowment than any other university and, according to the Boston Globe, earned 8.6 percent for the fiscal year ending June 30 while the Standard & Poor 500 lost 13.1 percent, reported last week that its endowment had plummeted by about 30 percent -- shedding $11 billion.
"The larger problem for nonprofits is not their giving, it is their endowment," Schervish said. "If you are a small nonprofit, you could hardly make up the loss of your endowment."
At this point, Jewish organizations are playing endowment losses close to the vest. Fishel said The Federation's $70 million endowment is "not ahead of the game for last year, but we didn't have major losses."
Jewish Community Foundation, which has assets of $797 million, including about half in donor-advised funds for 1,200 people, declined to provide information about how well its investment were doing.
"The foundation faithfully reports its financial results based on the calendar fiscal-year-end and to do so any other way, particularly during such wild fluctuations in the capital markets, does not allow for an accurate 'apples-to-apples' comparison," Marvin Schotland, president and CEO, said in a prepared statement.
"While we vigilantly monitor the economic climate," he added, "it is business as usual, consulting with our existing donors on a broad range of issues, while reaching out to prospective new donors, as well."
There are no signs of a speedy turnaround. Many economists believe the worst may be to come. Holiday spending will be one indication of whether the U.S. economy will skid from slow down to reverse.
"Have you been in a mall lately?" Schervish asked. "I was in one the other night buying a friend something. And it was empty. I mean: Nobody. There was nobody there, and it was in a wealthy area of Boston."
That's a bad indicator. But regardless of where the economy is headed, Jewish communal leaders are confident the Jewish community will respond to the needy, with those who can giving more and those who can't contributing when they're again able.
After all, no tribe is more accustomed to hard times than the Jews.
"We do crisis well," Diamond, of the Board of Rabbis, said. "I wish there were more lag periods between the crises. But we do crisis well in the Jewish community, and our organizations and synagogues know how to respond."
