September 10, 2008 / 8:13 AM / 11 years ago

FEATURE-U.S. charities feel chill from weak economy

(Corrects Bank of America intended donations in 20th paragraph to $2 billion from $1 billion)

By Carey Gillam and Andrew Stern

KANSAS CITY/CHICAGO, Sept 10 (Reuters) - The Newhouse shelter in Kansas City has helped thousands of abused women and their children over the past 37 years. But last month, the women were forced to move out and the staff started looking for new jobs.

The reason was simple. While the need was there, the money was not. Dwindling charitable contributions tied to a broad U.S. economic slowdown mean fewer resources and hard choices for charities across the country.

"People are holding tight to their money," said Newhouse President Leslie Caplan, who estimated charitable contributions were down $200,000 this year compared to last year. That, combined with cuts in government grants, has severely squeezed the center’s $1.3 million budget.

"If you’re paying $4 a gallon for gas and $4 for a gallon of milk and you’re hearing you possibly are going to be laid off, you just start panicking. That is what we are seeing," Caplan said of the shelter’s donors.

As Americans struggling with rising unemployment and home foreclosures turn to charities for help, charities themselves are running into financial difficulties as donations dwindle. They are being forced to increase their outreach, hold more fund-raising events and seek out new donors to make ends meet.

"We’re doing a lot of praying in the not-for-profit world," said Judith McIntyre, executive director of the Chicago Christian Industrial League, which provides job training and shelter for about 800 homeless people annually.

"The people who used to give us small amounts, $10 or $15, that is going away. The people who have a lot of money still are able to give, but they are more selective in their giving," McIntyre said. "It’s getting bad out there."


Americans gave $306 billion to charities last year, up 3.9 percent from 2006, according to the Center on Philanthropy at Indiana University. But the center’s Philanthropic Giving Index, which measures prospects for charitable donations, has dropped to 83 on a scale of 100 from 88 in December 2007, its lowest point since 2003.

Rev. Cecil Williams noticed that donations to Glide Memorial United Methodist Church in San Francisco began falling off earlier this year, forcing him to cut meals, child care, and health care to the poor by up to 15 percent. Meanwhile, the lines for help grow longer.

"We just didn’t have (donors) responding as they usually do. A lot of folks have been affected themselves," said Williams. "We’ve had to call them, and some people we count on are saying ‘we can’t work with you anymore’."

The Salvation Army, which serves tens of millions of needy Americans with its $3.3 billion budget, has seen donations start to decline in the last six to eight months, said spokeswoman Melissa Temme. Concerns are building for the cold, winter months, she said. "It will be really telling to see how Christmas goes."

Roughly two-thirds of individual donations to U.S charities come from wealthy households, those with at least $200,000 in annual income or $1 million in assets. While those people are generally less affected by the weakness in the economy, the impact is leaving charities feeling pinched.

Hundreds of thousands of home foreclosures and lost jobs along with rising prices for everyday goods have made the economy a top U.S. election-year issue, with both Republican John McCain and Democrat Barack Obama pledging to fix the economy.


Melissa Perez of La Habra, California, hosted a Brazilian student last year under the auspices of the Center for Cultural Interchange, a Chicago-based nonprofit that arranges for families to house and feed foreign students.

"Everything’s hard. We’re very much pinched," said Perez, who cannot afford to do it again this year because her family’s manufacturing business is in trouble. Such experiences mean the Center for Cultural Interchange has not been able to find enough volunteers.

It is not just individuals who are cutting back on giving.

In 2004, U.S. corporations donated an average of 1.5 percent of their pre-tax profits to charity, but that portion has since declined to 0.7 percent, said Mark Shamley of the Association of Corporate Contribution Professionals.

Among charitable groups feeling the pinch from corporate donors is Cincinnati-based Bridges for a Just Community, which serves the city’s poor. It expected to raise $470,000 from its annual dinner in June, mostly from corporate donors, but collected $350,000.

"Business is not as good and they feel the pressure and that leads to a decline in giving," said Bridges board member Inayat Malik.

Bank of America said it intends to donate $2 billion over the next decade, maintaining its current pace regardless of profits, but it is targeting its recipients carefully.

"When the economy is more fragile we have to be more thoughtful about our philanthropy," said Kerry Sullivan of Bank of America’s charitable arm.

The United Way, a network of 1,300 charities, said its major donors had not pulled back on pledges, but it is focusing its solicitations to less hard-hit industries.

Meanwhile, foundations, which are required to give away 5 percent of the value of their assets each year, are also expected to retrench. One in four expect to make fewer or smaller grants due to declines in investment returns, according to a survey by the Foundation Center, which studies philanthropies.

The next few months will be a barometer of the economy’s toll on giving, said Melissa Berman, president of Rockefeller Philanthropy Advisors, which helps nonprofit groups.

"How much people give depends on how secure they feel," Berman said. "I think we’ll see an impact on personal giving this fall and winter, which is when most charitable organizations depend on generosity."

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