Posted on September 10, 2008

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Hurricane Gustav Relief Effort Pushes Red Cross Into Debt

The American Red Cross has gone deep into debt to fund its $70 million Hurricane Gustav relief effort, much of which was financed with borrowed money, the Washington Post reports.

In 2005, the Red Cross borrowed money for the first time in its 127-year history when it took out a $340 million loan to help underwrite its $2 billion response to hurricanes Katrina and Rita. Because Gustav came ashore as a much weaker storm than predicted, sparing New Orleans the destruction that some had feared, the Red Cross has raised less than $5 million toward its relief effort and has rolled out an aggressive national fundraising campaign to help recoup the rest of its expenses.

After facing sharp criticism for its response to Katrina, the Red Cross did not take any chances with Gustav, which had the potential to be the biggest natural disaster in the United States since 2005. The organization dispatched more than 3,000 volunteers to the region, set up over 500 shelters, and has been serving 500,000 hot meals a day. Other charities also have been providing shelter, food, and clothing, including the Salvation Army, which spent over $1 million on its response to Gustav and has raised just $30,000; Save the Children, which spent more than $100,000 and has raised $35,000; and Catholic Charities USA, which spent more than $200,000 and has taken in $10,000. While all three can expect to receive more donations in coming days, some officials fear they may not break even.

The shortfall comes at a perilous time for the Red Cross, whose disaster relief fund was depleted by its response to widespread flooding in the Midwest earlier this summer. An unusually high number of U.S. disasters this year have taxed other charities as well. With their resources depleted, the same charities are scrambling to mount relief efforts for Hurricane Ike and Tropical Storm Josephine, both of which are on track for a U.S. landfall.

And though Americans historically have responded generously to major disasters, they tend to be less responsive to minor disasters. "We're all a little confused about how we're supposed to pay for the damage wrought by national disasters," said Melissa Berman, president of Rockefeller Philanthropy Advisors. "I think a lot of people ask 'Isn't this supposed to be what our government is for?' The Red Cross is in the strange and unique position of being perceived as sort of a private organization and sort of a public organization."

Rucker, Philip. “Gustav Relief Sends Red Cross Into Debt.” Washington Post 9/06/08.

Primary Subject: Human Services
Secondary Subject(s): Hurricane Relief
Location(s): National

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