Local
Charitable endowments shrink as economy falters
By: Bill Myers
Examiner Staff Writer
December 29, 2008
Think tanks might be in trouble, but it’s only one index of a larger crisis in the nonprofit world, experts say.
The average endowment has lost between 30 and 35 percent of its funds because of the poor economy, according to estimates by The Council on Foundations. This is happening just as the same poor economic conditions cause donors to cut back on charitable giving.
For example, the collapse of mortgage giants Freddie Mac and Fannie Mae has deprived anti-homeless charities of $47 million in foundation grants, said Steve Gunderson, the council’s president and chief executive officer. “That’s a real challenge in this area.”
Donors are also becoming more fickle, said Stacy Palmer, the editor of the Chronicle of Philanthropy.
“It’s something every charity faces. Donors tie more strings. They want to earmark their money. They want to hear reports of results,” she said. “They will go to another charity if they can’t get what they want.”
As a result, Gunderson predicts there will be a lot of mergers among food banks and other small nonprofit groups that don’t usually focus on their own survival. Unlike think tanks, those groups lack long-term plans and sustained financial support, and have high overhead, he said. Palmer said she believed think tanks may be better positioned in the bad economy than other nonprofit groups. “A think tank doesn’t take as much money as, say, a football stadium at a college,” she said. “Your money can go further in achieving something.”
There are limits, though, Palmer said, acknowledging that donors are diverting their money to social service groups, which “are making the case that really, people are pretty desperate.”
“That’s the kind of thing that people see and read about and want to help with,” she said.
“Think tanks have always been a small slice of the philanthropic pie,” said James McGann, who studies think tanks and charities at the University of Pennsylvania. “More importantly they are affected by economic crisis, since donors are more likely to support other causes [such as direct service programs and churches] in times of a financial downturn.”
The average endowment has lost between 30 and 35 percent of its funds because of the poor economy, according to estimates by The Council on Foundations. This is happening just as the same poor economic conditions cause donors to cut back on charitable giving.
For example, the collapse of mortgage giants Freddie Mac and Fannie Mae has deprived anti-homeless charities of $47 million in foundation grants, said Steve Gunderson, the council’s president and chief executive officer. “That’s a real challenge in this area.”
Donors are also becoming more fickle, said Stacy Palmer, the editor of the Chronicle of Philanthropy.
“It’s something every charity faces. Donors tie more strings. They want to earmark their money. They want to hear reports of results,” she said. “They will go to another charity if they can’t get what they want.”
As a result, Gunderson predicts there will be a lot of mergers among food banks and other small nonprofit groups that don’t usually focus on their own survival. Unlike think tanks, those groups lack long-term plans and sustained financial support, and have high overhead, he said. Palmer said she believed think tanks may be better positioned in the bad economy than other nonprofit groups. “A think tank doesn’t take as much money as, say, a football stadium at a college,” she said. “Your money can go further in achieving something.”
There are limits, though, Palmer said, acknowledging that donors are diverting their money to social service groups, which “are making the case that really, people are pretty desperate.”
“That’s the kind of thing that people see and read about and want to help with,” she said.
“Think tanks have always been a small slice of the philanthropic pie,” said James McGann, who studies think tanks and charities at the University of Pennsylvania. “More importantly they are affected by economic crisis, since donors are more likely to support other causes [such as direct service programs and churches] in times of a financial downturn.”
