Ministry foundations feel impact of recession but foresee turnaround

March 15, 2011

By JULIE MINDA

The recession has put a strain on a lot of wallets, and many people who once gave generously to philanthropies have had to cut back or discontinue their giving.

Hospital foundations around the ministry felt the pinch as givers scaled back, a sampling of foundation executives told Catholic Health World. Fund-raisers differ over prospects for the immediate future.

"People felt uncertain about where the economy was going to go," said Julie Holt, vice president for resource development at St. Joseph Health System of Orange, Calif. "And I'm hearing from many wealthy people that even though the economy seems to be improving in some respects, they still do not have the confidence that it will continue to improve."

Although many community members have scaled back, they have tried to maintain some level of support for their local hospitals and are expected to resume giving more down the line. Holt said, "People have said, "I'd like to do more, but this is what I can do for now.'"

Wait and see
A fall 2010 report from the Association for Healthcare Philanthropy confirms that the downturn has put a strain on foundations. The report found that donations to these nonprofits dropped by about 
$944 million from 2008 to 2009.

The foundation at Alexian Brothers Health System of Arlington Heights, Ill., is among those that saw incoming funds decline in 2008 and 2009 before experiencing an upswing last year. That foundation found donors reticent during the downturn to make multiyear pledges. Especially individuals and businesses that once gave at the $25,000 to $100,000 level were struggling, said Melanie Furlan, vice president of the foundation. "We have many generous business owners that give to us, and many of them were really waiting and seeing (whether things were turning around). Many were trying to make up for losses they had. Maybe they had a few business deals fall through that they were counting on so they needed to wait and delay a pledge payment or new gift given their financial circumstances."

"But," she said, "people were still extremely committed."

Cash crunch
Saint Thomas Health Services in Nashville, Tenn., also saw a decrease in gifts received during its 2009 and 2010 fiscal years, although that foundation was not hit as hard as others, according to Greg Pope, vice president for philanthropy at Saint Thomas and a former chair of the Association for Healthcare Philanthropy. Large gifts were down for Saint Thomas. This was in part because most large-scale donors had seen their own investment returns fall during the recession or had cashed some investments out only to see the interest on cash investments flatline, Pope said.

Terry W. Mohr, chief executive of the Bon Secours Richmond Foundation that is part of Bon Secours Health System's Virginia operations, said, "2010 was Bon Secours Virginia's most challenging year, especially in major gifts and planned giving."

Many donors who once gave major gifts were concerned about the health of their investments and about uncertainty in the tax code, Mohr said. There has been talk in recent years about the federal government decreasing allowable deductions for charitable gifts, and each of President Barack Obama's annual budget proposals has sought such changes.

Bon Secours Virginia also received fewer dollars from other philanthropic organizations whose investments took a hit during the recession.

Uneven terrain
Trinity Health's network of hospitals spans nine states, mainly around the Great Lakes, Midwest and West Coast. The downturn's impact on Trinity hospitals' foundations varied by location, said Eve Pidgeon a spokesperson for the Novi, Mich.-based system. She said some foundations saw a chilling effect from the recession, some took a significant hit, while others held steady.

Trinity foundations in hard-hit cities found many small donors especially have been "plagued by unemployment and financial hardships, [with] many others affected by sheer uncertainty and fear," said Pidgeon.

But Nashville's Saint Thomas found that donations held steady during the recession among people giving $1,000 and less. And Bon Secours Virginia found that except for major gifts and planned giving, donations were stable during the recession.

While many of St. Joseph of Orange's foundations saw a decrease in the size of donations, the number of donors held steady, or even rose at some ministries. Holt explained, "What we're hearing is that people still absolutely believe that their local hospital is important to them and to the community … and they're still committed to us."

Shock absorbers
Some foundations reported they barely felt the impact of the recession.

Evansville, Ind., for instance, didn't experience as much economic volatility during the recession as other communities, so giving was not as affected at Evansville's St. Mary's Medical Center as it was elsewhere, according to Tom Lilly. He is St. Mary's senior vice president of foundation operations and president of the Ascension Health Council on Philanthropy, a board that governs Ascension Health hospital foundations.

Also, Lilly said, giving can be more personal in smaller towns like Evansville. "You see people every day that you know, and you are much more aware of the services that are provided by the hospital. It's likely that if we cut back on our charitable efforts, it would impact somebody that you know or run into at the grocery store."

Foundations throughout Englewood, Colo.-based Catholic Health Initiatives also were largely spared during the recession. Jerry Bagg, president and chief executive of the CHI foundation, said nearly 70 percent of the foundations in the CHI system did better in 2010 than in 2009.

Bagg said the foundations' strong performances during the downturn were due in large part to the fact that CHI was rolling out a systemwide infrastructure of support for its foundations during the recession. Under the new infrastructure, CHI provides back office-type support for its ministry foundations so they can focus on targeted outreach to donors. This boosted them when the economy was down.

Bright spots
Even over the last two years, the number and size of smaller gifts has remained relatively consistent at Alexian, and that system began seeing an improvement in its philanthropic fortunes overall in 2010, according to Furlan. Alexian secured two seven-figure donations last year.

Another area of resilience: employees and physicians continued giving to foundations during the downturn.

Still, no one's cup is running over and the rate of economic recovery has been achingly slow, especially in areas of high unemployment.

Furlan cautioned, "I still think we're going to see some individuals hesitant as long as the jobless rates remain high." Furlan expects potential donors are saving more to provide an economic cushion for their families.

"So, I don't think this year is going to be a walk in the park. I think it's going to be slow to recover, and we're going to have to work harder to close gifts and will get less return on our efforts."

Cautious optimism
Fund-raisers tend to be optimists by nature, and several foundation leaders see improvements on the horizon.

Trinity's Pidgeon said, "Our ministry organizations report that things are looking up, and most are reporting slight increases in giving over recent months, a possible indication that our loyal donor bases are feeling more confident in giving again."

CHI's Bagg said, "We believe that the recession has brought about a greater awareness for the need for philanthropy."

Bon Secours' Mohr added that while the health care reform debate turned off some donors, "many more have come to see that the special fabric of a mission-driven, nonprofit health care model is even more needed now and worthy of support."

Mohr said, "We feel here at Bon Secours Virginia that the elements are in place for robust growth."

 

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