Suffering a drop in donations, local nonprofits are enacting hiring freezes and taking other measures to survive an economy in turmoil. Most nonprofit executives are asking themselves how the economy will affect services.
For example, Lyric Opera San Diego is struggling with its $22,500 a month mortgage payment on the Birch North Park Theatre, which underwent a $10.5 million remodel three years ago. The local chapter of the American Cancer Society laid off six employees this month and Lord’s Fitness Community Development Center in Southeast San Diego closed its doors last month after not being able to raise enough money to cover expenses.
There are more than 9,000 nonprofits in San Diego County and according to Illinois-based Giving USA Foundation, a publisher of data and trends on charitable giving, an astonishing 82 percent of nonprofit support comes from individual donors with another 12 percent from foundations. Corporate support amounted to 5 percent.
“There are statistics that show that with every 10 percent drop in the economy, such as in stocks, there is a 4 percent to 8 percent drop in charitable giving,” said Bob Kelly, top executive at the San Diego Foundation.
The foundation, with an endowment valued at $540 million, receives and manages charitable assets for distribution to those programs serving the region.
Kelly said investment returns are lower not just for individual investors but also for businesses and other foundations.
“All foundations, not just here in San Diego but throughout the U.S., are impacted with regards to their investment returns, which then results in the grants that can be granted out to the community,” he said.
Last year, the foundation handed out $62 million in donations and grants. According to a recent study by the University of San Diego, total county foundation assets are valued at $2.29 billion.
Monitoring Income Levels
Nonprofits are closely watching their investments and future government funding levels as well as year-over-year donations.
He said it was too early to say that giving is in a crisis, but he is certain it will be a significant issue in 2009.
“Indications right now are that we will see a big drop,” said Kelly.
Kelly said nonprofits are conservative in spending and nonprofit executives are incredibly nervous.
Big Brothers Big Sisters of San Diego has already seen a slight decline in donations in 2008.
“We’re holding our own, but it’s been more challenging as the economy has affected some of our donors,” said Paul Palmer, top executive at the nonprofit that pairs 1,600 area children with adult mentors.
For example, revenues generated at its annual golf outing this summer were down 15 percent compared with last year, he said.
Palmer said he anticipates that 2009 will continue to be challenging.
He is hoping to make up the slowdown in donations and dip into profit from the annual summer golf event at the organization’s 46th annual dinner later this month in La Jolla.
The dinner is one of the nonprofit’s largest and most well-attended fundraising event of the year. He has already sold 450 tickets at $450 each, or $6,000 to $10,000 for a table of 10.
Some nonprofits are benefiting from increased donations so far this year.
Doug Sawyer, top executive at United Way of San Diego County, said the agency ended its fiscal year on June 30 up $200,000, or 1.2 percent, to $21.58 million in revenues over the previous fiscal year.
“Historically, there is not a correlation in a down economy translating into a down United Way campaign,” said Sawyer. “At times of stress in the company, many United Way chapters nationwide actually see an increase in their campaigns.”
However, they’re not out of the woods with more than 98 percent of revenues coming from fundraising efforts.
Layoffs May Hurt Revenues
The county’s United Way chapter is concerned that layoffs could mean a reduction in revenues. The nonprofit, which sets up donations through the payroll department of local companies, lost 500 donors when HSBC Auto Finance’s office in Kearny Mesa laid off 70 employees in May and 400 in August.
Sawyer said United Way has trimmed expenditures by curbing employee training and monitoring travel. In addition, the agency has stepped up fundraising activities.
“We are making sure we get in front of donors at companies and let them know of the additional need in the down economy,” said Sawyer.
Despite the slowing economy, Chris Marek, a spokesman for the San Diego/Imperial Counties American Red Cross chapter, said there is no off-season for the nonprofit, which focuses on emergency preparedness and disaster relief.
The American Red Cross’s revenues are derived largely from donations, with some revenue coming from fundraising, plus the sale of classes such as CPR training, and other products, such as first-aid kits. The agency hasn’t determined if the economy will lead to a drop-off in donations.
“I don’t think we are going to see some of the lasting effects of this down economy for another three months or so,” said Marek. “People are just now starting to tighten their belts because of the down stock market over the past few days.”
The chapter employs 75, not including its Women, Infants and Children program, which is funded through government grants.
