In my four decades of working with nonprofit organizations in the United States and overseas, this is the toughest time I’ve seen for the sector as a whole.
Beginning in September 2008, a wave of economic shocks devastated the nonprofits and foundations that relied on some of Wall Street’s former financial titans. When Lehman Brothers closed its doors, the nonprofits that benefited from its $12 million in giving annually were immediately impacted, and by extension the people they serve. Harlem Children’s Zone, a pioneering nonprofit that invests in the education of poor inner-city children, had been receiving $1 million annually from Lehman Brothers. Another major domino to fall was the insurance giant, AIG. In addition to affecting the charities funded directly by AIG, the Starr Foundation saw its assets tumble. Previously the 16th largest grantmaker in the U.S., Starr was created by the founder of AIG and AIG stock represented about two thirds of Starr’s holdings.
Throughout the fall, every day brought fresh news of fallout from the worsening economic situation, and then just in time for the holidays came the Bernie Madoff scandal. In addition to devastating some modest family philanthropies, the fraud wiped out the Picower Foundation whose $1 billion in assets had been managed by Mr. Madoff. At the same time, the precipitous decline in the stock market reduced the asset base of almost all the nation’s private foundations. When we add to these calamities the slower but inexorable decline in charitable giving from corporations, local businesses and individuals, nonprofits are in for a very difficult few years. While there may be some federal stimulus funding available to cushion the blow, most state and local governments will be forced to cut back on spending for education, health and human services, and funding for arts programs has probably already been stripped from government budgets. Read the rest of this entry »
