Charities Bracing for Donation Downturn as Market Fluctuates
Investors aren’t the only ones watching the tumultuous stock market with concern. Charities are worried that shrinking stock wealth will dampen year-end donations and cut into investors’ willingness to give next year.
Some nonprofit groups say they have yet to feel much fallout from the market’s rough ride this year. A few--including the Salvation Army and United Way locally--say giving is actually up for the year.
Likewise, a sampling of Southland companies found that most are giving about the same amount to charities this year as last. And at least one, Irvine pharmaceutical firm Allergan Inc., said it nearly doubled its charitable contributions this year, earmarking $1.1 million to 106 recipients.
But some charities say donations are starting to fall off, and some investors say they are curtailing their generosity.
“I’m actually a bit shell-shocked at the moment after watching my net worth drop to less than half of what it was at the beginning of the year,” said Joe Lauer, an education consultant with Hewlett Packard in Anaheim. He said he has shelved plans to give away appreciated stock this year--in part because the shares he planned to give away are no longer worth what he paid for them.
Until this year, charities have reaped the benefits of an expanding economy and ballooning stock profits. The nation’s largest charities raised 13% more from private donors last year than in 1998, according to a survey by the Chronicle of Philanthropy, a trade magazine for nonprofit groups. That marked the third consecutive year the top 400 charities experienced double-digit gains in giving. Corporate donations also expanded by 12% in 1999, continuing a four-year expansion trend, a Chronicle survey showed.
But with the stock market on pace to have its worst year in almost two decades, it’s becoming more likely that individuals will rein in their generosity.
Encino investor Robert T. Cook is one of those who is cutting back. Cook said he and his wife Ana doubled their charitable contributions in 1999 thanks to “the fantastic run-up in our wealth from stocks.” Until a few months ago, the Cooks were also planning to donate $200,000 to a charitable trust--plans that are now on hold.
1999 was “an exceptional year,” Cook said. “But now much of that wealth has vaporized and we no longer feel we have excess wealth.”
Some charities have yet to feel the pinch. Payroll donations, cash gifts and stock contributions are all up at the United Way of Greater Los Angeles, said President Joe Haggerty.
The value of stock donations alone is up nearly 20%, to $1.1 million, from the same time last year, Haggerty said. The charity expects stock donations to exceed $6 million by the end of its fiscal year on June 30, 2001, compared with $5.1 million last year and $345,000 in 1995.
“Many people still do have appreciated stock” and are looking for a year-end tax break, he said. Property that has increased in price, such as appreciated stock, gives many donors a tax break equal to the contribution’s fair market value. By donating the stock, the givers also avoid having to pay capital gains taxes on the run-up in value.
Southern California donations to the Salvation Army are also on the rise. Contributions to the ubiquitous red kettles are up about 2.5%, compared to last year, while direct mail contributions are up 14%, said spokeswoman Kamara Sams.
Charities that depend on numerous small donations often do better in bad times than those that depend on wealthy givers or corporations, said Joann Schellenbach, spokeswoman for the American Cancer Society in New York. The cancer society’s average contributor gives less than $100, and donations this year haven’t been affected by the market, she said.
But other nonprofits say their coffers aren’t quite as full as last year. The California Community Foundation, which makes grants to local charities, said its collections from corporations and individuals are down somewhat this year, although spokeswoman Catherine Stringer attributes some of the blame to donors who diverted their money to political causes.
“Election years are always off-years,” Stringer said. “The fluctuation in the stock market has had some effect [on donations], but not as enormous an effect as you’d think.”
Still, philanthropy overall will almost certainly suffer if the stock market declines further or the economy slides into recession, said Sung Won Sohn, chief economist for Wells Fargo Bank. People take the adage “charity begins at home” to heart by trimming their giving and boosting their savings, Sohn said.
Retiree Robert Haage of Montclair hopes things won’t get that bad. Haage said the punishment his investments have taken have left him “feeling a bit less charitable than is usually the case.” But Haage, 76, has been through enough market cycles to hope that he won’t have to scale back his contributions for long.
“The market will recover,” Haage said. “The future will surely seem a good deal less restrictive than is the case right now.”
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Times staff writer Marc Ballon contributed to this report.
