Posted on May 30, 2002

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Sputtering Economy Continues to Hurt Nonprofit Funding

Faced with a falloff in donor contributions and reduced investment income caused by a declining stock market, universities, arts groups, and other nonprofits are having to adjust to tighter budgets, the Associated Press reports.

Cost-cutting moves adopted by nonprofits around the country include employee layoffs, operation cutbacks, and the delaying or cancellation of bricks-and-mortar projects. The Pittsburgh Ballet Theater, for example, has trimmed musicians' salaries by 10 percent and put its production staff on unpaid leave for six weeks in response to a decline in the investment income from its $8 million endowment, which had generated average annual returns of 11 percent during the previous five years. Donations from wealthy individuals, philanthropies, and corporations also have fallen significantly. "It seems clear to us major institutional funders are right now struggling with making commitments that are six, seven, and eight figures," said Steve Libman, the company's managing director.

According to the National Association of College and University Business Officers, colleges and universities lost an average of 3.6 percent on their endowment investments in the fiscal year ending in June 2001, compared with a 13 percent gain a year earlier. Institutions with assets heavily invested in stocks were hit even harder. Boston University, which had about 85 percent of its assets invested in equities, saw its $913 million endowment shrink by almost 25 percent last year.

Further compounding the problem, charitable donations from corporate foundations that depend largely on the value of the parent company's stock are expected to be "flat at best" this year, after growing at double-digit rates during the 1990s, said Steven Lawrence, director of research at the Foundation Center.

Hayashi, Yuka. “Nonprofit Organizations Feeling Sting of Stock-Market Downturn.” Associated Press 5/29/02.

Primary Subject: Philanthropy and Voluntarism
Location(s): Pennsylvania, Pittsburgh

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