Economic Outlook by Francisco Martinez

Reports surrounding the speculated impact of the worst financial crisis since the Great Depression on philanthropy have one common denominator: uncertainty and nervousness. While some outlets report that giving may shrink significantly, wreaking havoc on charities, others advise that, based on statistics, giving will rise (even if slightly). The harsh reality is that, at this point, there are not many concrete-or positive-answers for the nonprofit sector. As John Havens, a respected figure on empirical patterns in wealth and Associate Director of the Center of Wealth and Philanthropy at Boston College, suggests, a wealth recession is pretty much already happening, with his definition of it being "three consecutive quarters with a decrease in the real value of wealth."

Havens' predictions appear to be spot on. The New York Times reports that the wealth of many big individual and institutional has declined. Wealthy individuals are either shortening their list of grants, or cutting down on the amounts given to each of them, and they are definitely reluctant to make multiyear commitments. The Schwab Charitable Fund reports that contributions to their donor-advised funds "hit a brick wall in September," having gone down by 43% from between July and October. Many donors are still interested in giving, but their ability to do so is becoming more and more limited and their expectations of what they can give have significantly scaled back from what they thought even just a few months back. While some companies, like Wells Fargo and Exxon, are increasing grants thanks to their strong profits despite the economic crisis, they are by all means the exceptions-Exxon benefited this year from the abnormal fluctuation of oil markets, and Wells Fargo was relatively safe from the financial meltdown given that, for the most part, it was one of the few financial institutions that was reluctant to deal with subprime assets while its peers where revelling in them.

Like companies and individuals, many foundations are cutting down on giving and distributing more grants in smaller amounts. Many foundations have frozen grant decisions until the end of the year to see how the markets will react-and with good reason. The last few months have seen extreme stock market fluctuations, and foundation leaders depend on healthy assets to dispense greater amounts. "We've never seen this [economic turmoil] in our lifetime," says a spokesperson for the Council on Foundations. In a live discussion on the Chronicle of Philanthropy's website, Paul Brest, president of the Hewlett Foundation (the Nation's fourth wealthiest) said that his organization is being more focused when making new grant commitments, favouring programs with very clear goals and strategies. He also cautioned that organizations should keep their long-range strategies in mind before deciding on short-term ones to weather the economic storm. Vartan Gregorian, President and CEO of the Carnegie Corporation asked program directors on their Foundation side to create budgets that anticipated cutbacks of 10 and 20 percent. The Skillman Foundation, an organization that focuses on helping improve the lives of children in Detroit, has seen its assets decline to $460M from $580M at the beginning of the year, and it expects a further decrease of $10M by year's end. The March of Dimes has already instituted a hiring freeze and cut 5% of operation costs across the board and even large, wealthy educational institutions, such as Harvard and Amherst, are delaying expansion projects and salary increases.

Studies do show regional differences in giving. Charities in the Southeast and Great Lakes region report the highest declines at 39%, while New England and the Southwest report the smallest, at 30%. Giving has also varied by focus, with 41% of religious and health-related groups showing a decline, vis-à-vis just 29% of public-safety and research organizations. Sixty percent of all organizations, however, reported they had attracted fewer gifts, and that the gifts were smaller. All these statistics were measured against 2007.

A crucial consideration as we move forward will be, of course, the results of the election. Stocks, meanwhile, tumbled 10% after Obama became the president-elect, and many historians and political analysts say that "the economic challenges awaiting Barack Obama in the White House are second only to those facing Franklin Delano Roosevelt when he took office in 1933 during the Great Depression." Indeed, reality seems to be mimicking history: as income levels dropped and unemployment spiked up, people had less to give. Robert Sharpe, respected Memphis fundraising consultant, states that white collar unemployment is the most important factor to keep track of, stressing that charitable giving "will drop as surely as night follows day" if unemployment reaches 10% coupled with an income fall of 5-10%.

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