Philanthropists (from left) Dean Schooler, Thomas Murphy ’50, and Carmel Shields ’81, with moderator and conference convener Paul Schervish. Photograph: Gary Wayne Gilbert

Toward the end of an annual conference at Boston College on the state of philanthropy, sociologist Paul Schervish paused to reflect. During last year’s conference, held in October, the Dow Jones stock market index dropped 500 points, he told the audience. Schervish asked if anyone knew today’s market report.

“Down 65,” someone in the room called out.

Schervish, who directs Boston College’s Center on Wealth and Philanthropy (CWP) and its multidisciplinary research into charitable giving, looked momentarily disappointed. “I was hoping maybe this time, because of our conference, it would go back up 500 points,” he mused.

Not missing a beat, the audience member answered: “Flat is the new up.”

The remark captured the sense of altered expectations among the 80 nonprofit professionals who gathered under the cosponsorship of the BC Center and the Association of Fundraising Professionals to assess “Wealth and Giving in the Current Economic Crisis,” on June 9–10 in the Heights Room.

“We’ve probably just lived through the worst financial collapse that we will see in our lifetimes,” said David McCabe, a vice president of Eaton Vance, an investment firm that was a financial contributor to the conference. On a panel that provided an economic overview to open the discussion, McCabe noted that an estimated $11 trillion in net worth was lost in 2008. In early 2009, he recalled, no one knew how bad the financial meltdown would be. “I have never in my career experienced such hopelessness and despair as we saw in February and March of this year,” McCabe said. Jonathan Ashworth, an economist with Barclays Wealth, said his firm expects economic contraction of the U.S. economy in 2009 will be the most severe since the World War II years. Yet Ashworth also suggested there will be a “gradual upswing” in the economy during the second half of this year.

Nearly everyone who spoke testified to the effects the recession has already had on the budgets of nonprofits. “We’ve had to make fairly significant cuts to get through this,” said Hans Dekker, president of the Community Foundation of New Jersey. “We know we have to be asking for a lot more money to be receiving a lot less,” said Crista Martinez Padua, director of Families First Parenting Programs, in Massachusetts. Padua said her organization’s endowment lost 20 percent of its value, adding, “We felt good that we only lost 20 percent.”

The effects of the downturn are already visible in the levels of aggregate giving for 2008. Melissa Brown, a researcher at the Giving USA Foundation, summarized the findings of that organization’s new report, which had been released the day before the conference. According to Brown, charitable giving fell by 2 percent last year, which is only the second decline that Giving USA has seen since it began producing annual reports in 1956. (When adjusted for inflation, the decline represented a 5.7 percent drop, the largest that Giving USA has recorded.) That falloff represents about a $7 billion loss to charities—from an estimated $314 billion in total giving in 2007 to about $307 billion last year, Brown said.

The two factors that most influence charitable giving are income levels and net worth, explained John Havens, CWP’s senior researcher. “This is a wealth recession, more than an income recession,” he said. Havens’s calculations show that the nation’s wealthiest households from 2007 through 2008 have lost more than 20 percent of their net worth. A year ago, there were about 11 million “millionaire households”; now there are about 8 million, Havens said. The loss in asset wealth has been even more dramatic—in percentage terms—at the bottom of the wealth scale. Households worth less than $100,000 lost 82 percent of their wealth, Havens found. With more of their wealth in real estate, and a tenuous hold on their investments owing to a higher rate of debt, such families were “losing value every which way,” he said, and some slipped into negative
net worth.

Nor have the nation’s philanthropic foundations come through the recession unscathed. About 40 percent of foundations reduced their giving in 2008, according to Steve Lawrence, director of research at the New York–based Foundation Center. Based on a recent survey, foundation assets are down about 22 percent, said Lawrence. “That’s almost $150 billion in charitable dollars that is gone,” he said.

Several speakers noted that recessions don’t affect charities equally. Because the need for stepped-up social services is more apparent, some donors may give more generously. Giving to religious institutions did not decline last year, Brown noted.

A few attendees—especially those who have seen a new sense of urgency among socially concerned donors—described their fundraising outlook as “cautiously optimistic.”

Yet others suggested that this year and next will be even more challenging for fundraisers. Because many grants and gifts were already in the pipeline before the worst of the downturn, 2008 budgets didn’t feel the full brunt of the recession. “Foundations are going to be cautious,” Lawrence said, predicting that giving will be down this year and down even more in 2010. Havens developed an economic model that predicts a low-growth economy will result in a 7 percent decline in giving during 2009.

All of this means more competition among fundraisers. There was much discussion among conference participants of the need to assiduously cultivate donors for the long term. “This is a contact sport that is getting more contact-y,” said Scott Nichols, a vice president for development at Boston University.

Interviewed at the close of the conference, Lisa Rowan-Gillis, MSW’91, vice president of development at the Home for Little Wanderers in Boston, offered a ground-level view of how the recession has affected her organization, which is the largest child welfare agency in New England, with an annual budget of $43 million.

Her office sent out about 50 more foundation grant applications in the recent year than in the year before. Though the agency met its goal in the annual fund drive, Rowan-Gillis noticed a decline in smaller donations from the agency’s base of 40,000 donors. The hole was filled by two fortuitous million-dollar gifts. She echoed the sense that harder times are still to come. “We feel that 2010 is going to be worse than 2009,” she said.

“We’ve been invited to apply to a new, fairly well-known foundation as of last year,” she explained. “And then they called midyear and said, ‘Sorry, we’re not going to ask you to apply until January 2010.’” Rowan-Gillis spoke of another donor she had been cultivating. Recently the donor told her, “I’m just going to be honest with you, I’m stalling.”

Asked if she could describe herself as cautiously optimistic, she hesitated. How can anyone be sure that the economy really is improving? she wondered, noting that a lot of very smart people were taken by surprise when the financial sector imploded. “Cautiously optimistic? Yes. With the emphasis on the ‘cautiously,’” she said.

For his part, Schervish said he detected “an increasing sense of optimism that we won’t be taking another tumble.” And an imminent recovery? “Is flat the new up,” he asked, “or is ’slightly up’ the new up?”

Dave Denison is a writer in the Boston area.