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July 23, 2008

The Struggling Economy Spells Doom and Gloom for Charities

Daniel Gross, business columnist for Newsweek and Slate, turned his eyes towards the latest victim of the economic downturn in his most recent column, cheerfully titled “The Coming Charity Crisis.” His tone is appropriate. Thanks to the sluggish market, fundraisers from splashy celebrity galas to Salvation Army clothing collection bins and the charities they support are all feeling the pinch of declining donations. And while large impressive multi-million dollar gifts usually get most of the press, Gross points out that mega-gifts make up only 1.3% of all donations. The bread and butter of nonprofits in America is smaller donations from individuals who support the cause, accounting for 75% of all donations in 2006. So as wages flag, and gas prices dig in, and the health of the upper-middle-class consumer starts to show fatigue, we can expect donations and nonprofit budgets to take a big hit.

The mysterious guru over at the Don’t Tell The Donor blog has taken a rickety time-machine in to the future and agrees. But you don’t need a time machine to predict this decline—the writing has been on the wall for some time. Giving USA Foundation and the Center on Philanthropy at Indiana University reported individual and corporate giving actually declined in 2007 when adjusted for inflation. Target Analytics reported yesterday that revenues had declined in the first quarter for 60% of the nonprofits in their study.

At Materials Matter, we can confirm that with our own anecdotal evidence. Not only are donations down, but our ability to afford to pick up and deliver in-kind donations has dramatically decreased with diesel soaring to new price-heights. Around here we call it the “new math.” When a donor calls in with some extra windows and doors, or some leftover hardware from a construction project, we have to calculate pretty quickly how much it will cost us to pick it up in our fuel-inefficient truck using the donation’s current whereabouts, the size of the donation, and whether it’s on route to or from another pick-up. Then we have to decide whether the value of that donation will be worth the cost of transportation. It’s put a huge dent in our “always say yes to a donation” philosophy.

Corporate giving has also declined, and we are currently surviving on a lean staff and the revenue from our social enterprise store. As predicted, a home improvement outlet that offers 50-80% off retail on cabinets, flooring and everything else is not a bad business to be running when the housing bubble bursts and the economy slows down. Still, our Board of Directors is sweating. And it’s not from lack of air conditioning. Though that might be the next to go if gas prices continue to rise.

What to make of this new, gloomy philanthropic landscape? The experts agree on one thing: it will take some time for the economy to recover. This isn’t a normal recession, but the unraveling of a massive credit bubble, and a $300 stimulus check won’t help the 30 million people being foreclosed on. (If you haven’t heard it yet, by the way, you should give an hour to listening to the This American Life special on the credit crisis called The Big Pool Of Money.) Charity giving will most likely slump this year and the next. To stay afloat, we all have to nurture our social enterprises and return to the time honored strategy of asking friends, face-to-face, to support the causes we care about most.