L.A. Fund Drive Begins Thursday : United Way Faces Major Challenges

Nearly a decade into an era when government has retreated from providing social services, creating increasingly fierce competition for charitable donations, the Los Angeles area United Way on Thursday will officially launch its annual fund-raising drive.

United Way Inc., which serves Los Angeles County and recently expanded into western San Bernardino County, hopes to gather $86 million in pledges for 1986, the largest amount ever sought by a single United Way in the century-long history of federated fund raising in America.

‘Many-Fold Needs’

“We are asking people to respond to the many-fold needs of our community,” said Walter F. Beran, vice chairman of Ernst & Whinney’s 23 Western accounting offices and chairman of the Los Angeles area United Way drive. “United Way is a vehicle to ask the people who can to provide the means so that others can meet their basic needs in life.”

Meanwhile, thousands of volunteers working for the 17 other United Ways in Southern California are seeking another $58 million in pledges this fall, nearly three-fourths of which will come from individuals and the rest from corporations. (See chart on Page 9.)

The efforts by all 18 Southern California United Ways to raise $144 million are part of campaigns by more than 2,200 local United Ways nationwide to gather about $2.3 billion in pledges.

Nationally, these donations will help support 37,000 of the nation’s estimated more than 320,000 charities. The agencies that share in the proceeds provide direct services to about one in three Americans, whether they give or not.

About half of the money that United Ways raise nationally will go to two dozen agencies, including the Red Cross, health charities such as the American Cancer Society, youth agencies such as the Boy Scouts and the Salvation Army.

Assuming that this year’s $86-million pledge goal is reached, for the year ending next June 30, the Los Angeles area United Way’s three largest allotments of funds will be $10.6 million to the Red Cross, $9.9 million to operate United Way and more than $6 million to add to its surplus. These are the same three largest allotments as last year.

In recent years, United Way Inc.’s growth has been about twice the rate of inflation, allowing it to add new agencies, fund new projects and to allocate more money to reserves to provide for a rainy day.

Unique American System

The nonprofit organizations that share in this money form the core of a vast and uniquely American system that relies on private, nonprofit agencies, instead of government, to provide most health and social services.

The 1986 campaigns come as the United Way movement confronts growing challenges to find new legions of donors so it can mitigate government spending cuts and to adapt to meet the changing nature of American society, United Way leaders and critics both say.

Steady Decline Cited

A 1985 study by United Way of America, the movement’s national trade association, concluded that United Ways must undertake major changes in order to raise significantly more money and reverse a steady decline in the movement’s share of all donated dollars.

Allocating more money to a more diverse group of charities is widely seen by top United Way volunteers and executives as one vital change because it will give more people a stake in the financial health of their local United Way.

The graying of the populace, immigration and the growing number of families in which one or both parents work outside the home are creating demands for new types of social services and new charitable agencies.

These social changes are, in turn, increasing pressures on United Ways to change the practice of guaranteeing sums to charities that are longtime United Way members or partners. This practice locks in most of each year’s budget, restricts admission of new agencies and severely limits the sums that can be allocated to new members, regardless of changing social needs.

Locally, a committee of the Los Angeles area United Way, chaired by Terry W. McAdam, vice president of the Conrad N. Hilton Foundation, is studying future admissions of new member agencies, including how existing policies affect admissions.

United Way Inc. has admitted 73 new agencies in the past five years, including 18 in recent weeks, and expects to add more next April.

In Orange County, where more than a dozen United Ways have consolidated over the past 15 years into one United Way, 34 new agencies have been admitted since 1980.

‘Donor Option’ System

Complicating the picture is the growing number of individuals who take advantage of a “donor option” system, pioneered in Los Angeles, which lets donors specify which charities get their gifts.

Nationwide about 10% of all who sign up for United Way payroll deduction gifts choose donor option. In Los Angeles, the rate is about 6%, officials said.

While donor option prompts some people to sign up for payroll deduction gifts who otherwise would not give, it also means there is less money in the pool of undesignated gifts, United Way leaders note. It is these undesignated gifts that committees of United Way volunteers divvy up among many agencies in an effort to meet broad social needs.

“A community needs a system of services,” observed Francis X. McNamara Jr., president of United Way Inc., “inclusive of youth services, child care services, mental health and other health services and preventive care services.

“The benefit that a United Way provides is that it can present knowledgeably to volunteers all the resources that are available,” McNamara added. “Thus the dollars that are given through United Way can be allocated to bring balance as well as leverage to these resources and bring about the most cost-effective and program-effective system for the community.”

‘An Inadequate Job’

McNamara said most donors who designate pick one agency for which “they have great feelings.” He interprets this to mean that United Way has “done an inadequate job of bringing understanding that this is the only time that these other agencies in the campaign are going to make a request. . . . A community cannot exist with a single agency providing all services.”

In addition, shifting patterns of employment hamper United Way efforts to raise money through payroll deduction, which is the least expensive way to raise vast sums of money.

United Ways traditionally have focused on payroll deduction gifts by workers in large factories and offices. But most Americans now work in places with 200 or fewer employes.

McNamara said organizing such workplaces would increase fund-raising costs, which equaled 7.3% of pledges last year. He said that the Los Angeles area United Way has made few efforts to organize workplaces with 200 or fewer workers.

But this year the first steps toward organizing smaller workplaces are under way, campaign chairman Beran said.

“We are in the process of trying to put together an organizational structure that is wholly dedicated to this,” Beran said. “I think if we get a separate structure, with separate leadership with people who don’t have to do anything else in the campaign, over the next two or three years we can solicit many more people.”

Fastest-Growing Unit

Partly by aggressively organizing workplaces with between 20 and 200 workers, United Way of Ventura County has become the fastest-growing United Way in the country, averaging 24% increases in giving in each of the past four years. The organizing techniques pioneered in Ventura County rely heavily on well-trained volunteers, according to Thomas A. Ruppanner, the executive director.

Ironically, even if the estimated 50,000 campaign volunteers for the Los Angeles area United Way succeed in reaching their $86-million goal, many of the 391 nonprofit agencies that will share in the proceeds will still not be able to meet all the demands for their services. Partly this is because demands for many social services are growing much faster than donations.

Unmet needs can be as visible as the homeless Americans who once congregated almost entirely on Skid Row, but now panhandle on suburban streets. Unmet needs can also be less visible, as when children are not asked to join character-building youth groups such as Camp Fire, Boy Scouts and Girl Scouts because there simply are not enough money, staff and volunteers to serve them.

When United Way Inc. was formed in 1963, all 13 Los Angeles County chapters of the American Red Cross became partners in the fund-raising effort, sharing in the proceeds and the costs.

A Steady Decline

But since then the share of the Red Cross budget provided by United Way has slowly but steadily declined, a Red Cross spokesman said, forcing some lay-offs and cuts in services. (Red Cross blood bank services are financially self-sustaining and not affected by United Way fund raising, the Red Cross spokesman emphasized.)

The Red Cross is by far the biggest beneficiary of United Way fund raising, both nationally and locally. In Los Angeles, the Red Cross is budgeted to get $10.6 million or 19% of the money allocated to United Way Inc. agencies this year.

The Los Angeles area United Way ranks first in total dollars raised nationally, but despite steadily increasing fund-raising goals it ranks a distant 24th among the 25 largest United Ways in dollars raised per capita.

McNamara, the Los Angeles area United Way’s chief staff officer for 18 years, said he believes “we have been a community that has been under-funded in the voluntary health and welfare services for a long time. . . .”

Cleveland Rates First

If per capita giving in Los Angeles equaled that of top-ranking Cleveland, instead of seeking $86 million this year the Los Angeles goal would be $248.5 million.

At the average rate of the 25 largest United Ways, it would be $152 million. At Chicago’s rate it would be $136.5 million, at San Jose’s $131 million, and at the San Francisco Bay Area rate $113 million.

Only the New York City per capita rate of giving to United Way is lower among large United Ways.

At New York’s rate the $86-million Los Angeles goal would be $77.7 million, just above the $77-million goal that the Los Angeles area United Way almost reached in the 1985 campaign.

Since 1967-68, the seven separate fund-raising and service agencies that are now together as United Way have increased their fund-raising goal by 385% while costs have increased only 214%, McNamara said. During those years, the consumer price index in metropolitan Los Angeles has risen 318%, so in real terms funding has risen 21%.

If Angelenos, whose median household income is 26% higher than Cleveland’s, gave as generously as Clevelanders proportionate to their incomes, then the goal in Los Angeles this year would be $313 million.

‘Imagine What We Could Do’

“Just think how much we could provide the community if we were at that level,” mused Beran, the Los Angeles campaign chairman. “Given all the needs we have in this community in terms of minorities and people below the poverty level and all the health and welfare needs, the informational needs and recreational, imagine what we could do if we had that level of support.

“If you and I were to travel outside of the routines we normally travel to and from work, we would discover a lot of the needs of this community that we don’t see from the freeways,” Beran added.

“My job is to inspire enough people to meet our goal and our goal is an arbitrary number, reflecting only what we think we can raise based on past performance,” Beran said, adding that “if I had the ability to preach like (the Apostle) Paul, we could probably raise a quarter of a billion dollars.”

But even with the efforts to begin organizing smaller workplaces, Beran sees little prospect that the per capita giving rate here will rise to anywhere near those levels in the next few years.

“If you could tell me how we could do it, I would take early retirement and devote myself to the job for two or three years,” Beran said.

United Way Inc. presents its $86 million as an 11.6% increase over last year’s goal of $77 million.

Expands Into New Cities

However, United Way Inc. expanded recently by taking in the Chino, Fontana, Montclair, Ontario, Rancho Cucamonga, Upland and neighboring areas of San Bernardino County closest to Pomona. Last year the people and companies of that area gave nearly $2 million, McNamara said. This means that last year the same area’s pledges were $79 million and that in comparable terms United Way Inc.’s goal is 8.8%.

This year’s United Way Inc. allocations to members are based on last year’s level of pledges, but will be funded with money raised this year, McNamara said.

$55 Million in Allocations

Based on last year’s $76.45 million in pledges, the United Way Inc. board has allocated $55.2 million to its 391 partners, members and new members for the fiscal year ending next June 30.

The difference consists principally of:

--The cost of running the campaign, $5.6 million;

--Losses for unfulfilled pledges, known as “shrinkage,” $4.5 million;

--The cost of running United Way’s community planning, allocation, leadership development and other costs, including $317,000 for membership dues to United Way of America, totaling $4.3 million;

--Monies passed on to other United Ways, but collected by United Way Inc. often from companies headquartered in Los Angeles but with metropolitan or statewide operations, $4.3 million;

--Donor option monies designated for non-United Way charities, $4 million.

If the current campaign reaches its $86-million goal, it should include a surplus of more than $6 million, which would be consistent with United Way Inc.’s practice of building a steadily growing surplus.

McNamara believes it is prudent to keep a large surplus, partly to even out cash flow fluctuations, partly in case donations suddenly drop because the economy slips and partly in case huge sums are needed quickly because a major disaster occurs, such as the recent earthquake in Mexico City.

In line with this policy, United Way Inc.’s end of the year cash balance has risen from $13.9 million on June 30, 1982, to $24.2 million last June 30.

The United Ways in neighboring Orange and Ventura counties have adopted a different approach, keeping as little cash on hand as necessary so they can distribute their money to meet immediate needs.

The United Way of Orange County strives to keep a reserve of 10% of the most recently audited campaign’s proceeds, but seldom is able to hold onto that much cash, according to Norbert Paulus, executive vice president of United Way of Orange County.