Posted on January 5, 2003

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The Year in Review: Perfect Storm Batters Philanthropic Sector

After 2001, a year in which a faltering economy, slumping stock markets, and the September 11 terrorist attacks combined to slow Americans' overall giving, nonprofit leaders were understandably leery heading into 2002. And with the economy and the markets failing to revive in a sustained fashion, their worst fears were soon realized, leaving many struggling to keep their organizations afloat while forcing others to adust their fundraising appeals and/or refocus their mission.

In January, nonprofits around the country began to report declines in donations, even as demand for their services continued to rise; by mid-year many of those same groups were delaying or abandoning programs, cutting back on services, and laying off staff. They were hardly the only ones to feel the pain, however, as state and local govern- ments nationwide began to see dramatic fall-offs in tax revenues and foundations, which had become accustomed to steadily rising endowments during the economic boom of the 1990s, experienced a second year of declining assets.

In fact, a Foundation Center survey of 333 foundations and corporate donors released in September found that while most grantmakers planned to maintain their levels of giving in 2002, many were worried whether or not they would be able to fund programs at the same level in 2003 and beyond. Indeed, several large foundations whose endow- ments are tied to the stock of a single company, including the David and Lucile Packard Foundation in Los Altos, California, and the Atlanta-based Turner Foundation, established by CNN founder Ted Turner in 1990, suffered significant declines in their asset bases, which in turn led to major changes in their programming, staff layoffs, and significant reductions in their grantmaking budgets.

Still, despite the gloomy forecasts predicting more of the same for the sector in 2003, there were people looking ahead to brighter days. "[Overall giving] isn't down very much considering you're talking about recession all year, plus 9/11," said Paul G. Schervish, who, with John J. Havens, co-authored the 1999 report, Millionaires and the Millennium. Schervish, director of the Social Welfare Research Institute (SWRI) at Boston College and a leading proponent of the intergenerational transfer of wealth theory, estimates that, despite the stock market declines of the last two years, between $41 trillion and $136 trillion will be passed on to baby boomers and their children over the next fifty years, with $6 trillion to $25 trillion going to charitable bequests.

Related news:

California Nonprofits See Drop in Donations, Rise in Demand for Assistance (1/03/02)

Pew Trusts Adjust Grant Payment Method to Minimize Investment Risk and Taxes (5/25/02)

Plunging Stock Values Lead to Reduced Charitable Giving (7/23/02)

Volatile Stock Market Pushes Charitable Foundations and Trusts to Reconsider Investment Strategies (7/29/02)

Foundation Endowments Shrink as Stock Values Tumble (7/30/02)

Packard Foundation Announces Major Changes, Cites Decline in Endowment (9/23/02)

Foundation Center Launches 9/11 Funding Database, Updates Report on Philanthropic Response (11/19/02)

Despite Weak Economy, Long-Term Outlook for Philanthropy Remains Positive (12/10/02)