As USA Today puts it in the title of an article about the effect of the economic crisis on charitable giving, “It’s a hard time to be a charity.” In a nutshell, government and private contributions to charitable organizations are decreasing while demand for their services is on the rise. From the Red Cross and Doctors Without Borders to local food banks and homeless shelters, charities are feeling the impact of the economic downturn.
Drop in Contributions
Many charitable organizations depend upon contributions to support their charitable activities. Sources of support include: corporate donations and sponsorships; giving by individuals; federal and state government grants; and grants from private foundations. Because of the widespread impact of the current crisis, support from all these sources has decreased or dried up altogether.
�œ The Lehman Foundation, the charitable arm of Lehman Brothers, has provided significant support for Doctors Without Borders. USA Today reports that, after Lehman Brothers filed for bankruptcy in 2008, the amount of future support for the medical care organization is uncertain.
�œ Notwithstanding its increased fundraising efforts, the American Red Cross has received lower contributions from corporate donors and new donors, according to USA Today.
�œ The Chronicle of Philanthropy describes the impact of the crisis on the World Cares Center, a New York charity that trains volunteers to respond in disasters. In the past, Wall Street investors have generously supported the organization. Now, however, World Cares Center expects that their fundraising efforts for 2008 will yield only half of the funds raised in 2007. To make ends meet, the organization reduced the executive director’s compensation and froze staff salaries.
Demand for Services
As the credit and financial markets continue to decline, the growing number of jobless, homeless, and poor places an increasing demand on the safety network of local organizations that serve the needy.
�œ In Detroit, where charities depend heavily on the auto industry and its employees, calls to the 211 local assistance line during 2008 were five times the number of calls for 2007, reports USA Today.
�œ In El Dorado County, California, a food bank has experienced a 35 percent increase in the number of requests for assistance. As reported by The Ridge Review, a high school publication, the increased demand combined with a drop in food contributions and an increase in food prices may leave some of the poorest residents without sufficient food.
What Can Be Done?
In Nonprofit Issues, Don Kramer suggests two steps that Congress could take to reverse the erosion of support for charities. First, charitable organizations should be included in the stimulus plan along with for-profit businesses. A condition for receiving stimulus funds might be that state and local governments use part of the funds to assist charitable organizations in continuing vital public services. Charities, like for-profit businesses, provide jobs needed to get the economy moving.
Kramer’s second suggestion relates to the charitable contributions deduction. He proposes that Congress allow a double deduction for aggregate contributions to charities that exceed the amounts contributed by the taxpayer in 2007. Thus, individuals and corporations would be rewarded for increasing their former giving levels.
Charities face a challenge to provide more services with less support. American businesses and individuals face a challenge to supply the needed support notwithstanding their financial constraints. It seems inevitable that some charities will fail before the economy recovers. Hopefully, the surviving charities will weather the crisis and emerge in a stronger position to provide their essential services.
Kevin McCoy and Oren Dorell, “It’s a hard time to be a charity,” USA Today (Oct. 27, 2008)
Catherine Brock, “Financial Crisis Hits Charities,” MortgageLoan.com (Nov. 18, 2008)
Ben Gose, Paula Wasley, and Ian Wilhelm, “After the Fall,” The Chronicle of Philanthropy, Charity Navigator (Oct. 14, 2008)
DonKramer, “Besides cutting expenses and trying to generate more earned revenue or contributions, are there things that nonprofits ought to be doing to respond to the financial crisis that is so adversely affecting them?” Nonprofit Issues
Katie Callahan, “Local Charities Struggle to Overcome Economic Crisis,” The Ridge Review (Dec. 17, 2008)