Magazine article Newsweek

Fewer Friends in Need: With the Market Sagging and Lingering Doubts about Some Charities' Finances, Donations Are Dropping Sharply This Year

Magazine article Newsweek

Fewer Friends in Need: With the Market Sagging and Lingering Doubts about Some Charities' Finances, Donations Are Dropping Sharply This Year

Article excerpt

Byline: Daniel Mcginn

Betsy Isroelit has much to be thankful for. The 59-year-old resident of Hollywood, Calif., runs her own marketing company and has a loving husband and four children. But as she sits down to Thanksgiving dinner this year, Isroelit has one big regret: she's less able to share her good fortune with charities as generously as she has in years past. Usually she writes checks to a host of local and national disease-fighting organizations and do-gooders. But this year, with the stagnant economy and the flaccid stock market, she's cut back, axing groups like the Sierra Club, a local AIDS organization and former president Bill Clinton's library from her list of recipients. "I absolutely hate the fact that I did this," says Isroelit. Even the checks she's still sending out--to groups like the Los Angeles Philharmonic and the local Boys Club--are for smaller amounts; overall, her donations have dropped by 25 percent. "I'll never stop giving," she says. "But I wish I didn't have to narrow that list."

Santa won't be the only one checking and rechecking his list in the weeks ahead. Holiday cheer--not to mention the Dec. 31 deadline for chalking up tax deductions--makes this the homestretch in fund-raisers' race to meet their annual goals. But all evidence points toward something less than a banner year. Some of this slippage is to be expected: during a recession, charitable donations usually drop by 1.1 percent, according to the American Association of Fundraising Counsel. But last year, even with the $1.9 billion avalanche of donations to September 11-related causes, total charitable giving declined 2.3 percent to $212 billion, the first inflation-adjusted decline in seven years. And this year the drop may be even steeper, as the impact of the soft economy is compounded by the shrunken stock portfolios and the growing sense that some charities aren't managing their funds as wisely as they should. As a result, fund-raising pros say they're working twice as hard to get every dollar of donations as they did during the '90s boom.

Individuals, who account for 75 percent of charitable giving, aren't the only ones pulling back. Corporations cut their philanthropy by 14.5 percent last year. "As long as corporate earnings lag, then corporate giving will probably lag as well," says Eugene Tempel, executive director of the Center on Philanthropy at Indiana University. Foundations, which contribute 12 cents of every charitable dollar, managed to increase their spending last year, but they can't make up for the shortfall indefinitely. During the first half of 2002, nine of the nation's top 10 foundations lost a combined $8.3 billion as the stock market slid. "The foundations have said they will overspend a bit and hope they see a turnaround in 2003," says Foundation Center president Sara L. Engelhardt. But if conditions don't improve by midyear, she says, "a lot of foundations will have to bite the bullet and make deeper cuts."

For a look at how this disturbing confluence affects one charity, slip into a tux and saunter into the annual November auction benefiting the Boston-based AIDS Action Committee. …

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