Crying Time Again? Economic Crisis Reaches Non-Profit Sector

By John L. Fischer, Personal Finance Writer   

The current economic downfall is enough to make you cry. And when it comes to the future of non-profit organizations, like Ray Charles once sang, it may not be long before, "It's crying time again."

With overall economic conditions as tough as anyone has seen in nearly 70 years, there could be tears shed in the non-profit world, but for different reasons.

Because many non-profit organizations (like the Advertising Council, Save the Children and Habitat for Humanity) depend so heavily on fund-raising, the less money there is available, the tougher it is to find charitable donations.

According to the New York City-based Foundation Center (recognized among the nation's top philanthropists — "good deed doers"), a weakening economy and troubled credit markets have already begun to affect donations to non-profits in large metropolitan areas like New York, Los Angeles and Chicago. In fact, many of them have been nearly wiped out by the financial crisis.

According to a recent article in The New York Times, the nearly 10,000 New York City-based non-profit agencies pump some $50 billion annually into the region's economy and employ at least 500,000 people.1 The problem is that about 85% of those organizations have annual budgets less than $3 million — and many of them don't have enough cash reserves available to keep them running.

In fact, New York City Mayor Mike Bloomberg expressed his alarm about the effect that the current economic crisis will have on charity groups.

"I think petrified is a much better word," Bloomberg told the New York Daily News. "We have talked about ramping up our philanthropic gifts this year, but we can't make up for all of the organizations that have been doing so much to make this world a better place, particularly here in New York City."2

The good news is that non-profits are very resourceful. And since so much of what they do depends on fund-raising, even in dire economic times (like now), people are more likely to open their wallets for non-profits — over other causes and needs.

So if non-profits want to avoid the crying towels, they'll have to hope that generosity trumps practical needs, especially going into the last part of the year — always the busiest time for overall fund-raising efforts.

Footnotes

1 "Economic Downturn Hits New York City Non-profits," Philanthropy News Digest, Foundation Center, October 9, 2008

2 "New York City Mayor Worried Over Non-Profit Fund-raising," New York Daily News, October 10, 2008