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Slow economy and United Way fund raising

As I See It

It’s that time of year again: United Way organizations across the nation will begin their fall fund-raising campaigns soon.

What impact will the slow economy have on charitable fund raising this year? Though the answer won’t be known until early next year, it’s likely to be disappointing.

The 1,400 local United Way chapters across America raised $3.9 billion in the year ended June 30, an increase of $140 million — or about 3.8% — over the year before, according to Ellie Ferdon, chairwoman of United Way of America. It is the fifth consecutive year that giving increased faster than inflation. Notwithstanding that stellar record, there are signs that the fund-raising drives this year will face major obstacles in continuing that trend.

The modest growth in donations to the nation’s largest private financier of social services comes as demand for those services is rising and as President George W. Bush promotes the idea that charities are better suited than government to provide many social services. However, the economy has dealt fundraisers a tough hand to play this year.

In San Jose, Calif., gifts of appreciated stock dropped 90% in the first three months of 2001; a result attributed to the drop in the technology market, reports Greg Larson, the president of the Silicon Valley United Way. Further, Mr. Larson said that 45% of gifts last year were designated for specific charities, up from approximately 37% in prior years. Alarmed at the growth of donor-designations, several United Ways, following the lead of the statewide United Way in Delaware, have stopped promoting designations as a giving option.

Another sign of coming woes tied to the sluggish economy comes from the Rochester, N.Y. area. Its spring campaign fell $1.8 million short of its $38-million goal. That shortfall is attributed to layoffs at several major employers in the Rochester area.

United Way chapters traditionally depend on workers — especially factory workers — giving through payroll deduction to support social service agencies from the Boy Scouts and Girl Scouts to the Red Cross and other nonprofits. In the last decade, that support has slipped because of layoffs at the largest corporations and a trend toward small workplaces that are costly to organize. Further, the United Way’s reputation was tarnished in 1992 by the disclosure that William Aramony, longtime president of United Way of America, was living a lavish lifestyle and embezzling money. Mr. Aramony’s probable release from prison in the next month or two will likely rub salt in the old wound.

The number of United Way donors has dropped more than 25% over the last decade. But the steady decline in payroll giving has been offset by a growing emphasis on major gifts from the wealthy. Donations of $10,000 or more will admit one to the prestigious Alexis de Tocqueville Society. Such large gifts have grown 167% since 1995; a period when overall giving rose just 24%.

If the United Way’s fund-raising success mirrors the economy, there is no doubt that programs will be cut. This is particularly disappointing since the United Way has shifted its method of allocation in recent years to more clearly reflect the priorities set by the community itself.

I agree with President Bush that charitable organizations are generally more effective at providing social services than government. However, I don’t buy in to the idea that government funds should be given to charities to enhance their operations. The result will be a new emphasis away from curing society’s ills toward lobbying for government funds. Not a pretty sight. To remain effective, charitable organizations need to continue relying on the voluntary support of the community and stay away from entanglement in government bureaucracy.

From personal experience, I can vouch for the United Way in the Jackson area as being effective, efficient and responsive to the community. Since the need for social services increases in hard times, it will be a shame if their efforts are frustrated by a sluggish economy.

Here’s hoping for the best this fall.

Thought for the Moment

The journey is the reward.

— Professional golfer Greg Norman

Joe D. Jones, CPA, is publisher of the Mississippi Business Journal. Contact him at cpajones@msbusiness.com.

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