Values under siege

Second Harvest chief Jaynee Day said the outlook for ’09 is tough: "The resources are down and the demand is up." Matthew Williams/The City Paper

You're not likely to hear them grumble about the sad state of their stock portfolios. Most of them probably own no securities at all. And yet the market's decline threatens to leave them more insecure than anyone else in the community.

They are the hungry, the homeless, the frail, the abused. They are the people who depend on the charity of organizations that, in turn, depend on funding from Nashville-area foundations.

With some market indices showing that U.S. stocks have lost half their value since January, few if any of Nashville's scores of private foundations and similar organizations are likely to experience growth in their assets in 2008. The Frist Foundation, one of the largest, has outperformed the market — by losing only 20 to 25 percent of its asset value this year, according to President and CEO Peter F. Bird Jr.

"This is a nowhere-to-run, nowhere-to-hide investment environment," Bird said.

Menacing times for large investors translate into a fearful atmosphere for agencies that receive foundation funding. Program fees and donations by the general public may account for much of their total dollars raised, but nonprofits grow accustomed to the reliable flow of funds that a long-term relationship with a foundation can normally provide.

Now that stream of money may be slowing, just when economic conditions are making it harder to raise cash elsewhere.

Expecting scarcity

Most of Nashville's foundations operate quietly, but their economic impact is immense. In 2006, the last year for which complete data is available, Middle Tennessee foundations had aggregate assets approaching $3 billion and made more than $200 million in grants, according to the publicly available annual reports they are required to file with the Internal Revenue Service.

Defining what constitutes a foundation is a slightly tricky matter. Most foundations file a different type of report with the IRS than other nonprofits file, but there are major funding providers that file the standard IRS Form 990. This story focuses on nonprofit organizations that provide significant funding to other, unrelated nonprofit causes. Thus, some well-known local entities that have "foundation" in their names but exist mainly to benefit a single cause are not included in the accompanying tables.

Although the Frist Foundation directs a majority of its giving each year to the Frist Museum for Visual Arts, it also gives millions toward other charities. Bird says the foundation initially budgeted $8.5 million in total giving for 2009, but that later there was internal consideration of giving as much as $11 million. The swoon in the markets, however, took any notion of a raise off the table.

"Right now, we're trying to gauge: Should we try to stay at that $8.5 million level, or will we have to drop a little from that?" Bird said. If any cut is necessary, he expects it will not be "precipitous."

Even so, the sense many charities are getting from foundations lately is that they had better expect money to be scarce.

"I've talked to a number of nonprofits that are simply not going to ask for funds right now," said Lewis Lavine, president of the Center for Nonprofit Management. The Center has recently hosted local charity leaders for "Weathering the Storm," a series of seminars on managing during the economic crisis.

“We've been told by foundations that next year, our gift probably will not be as large as it was in the past," said Jaynee K. Day, president and CEO of Second Harvest Food Bank of Middle Tennessee. Donations from the general public, meanwhile, are not matching last year's levels.

"The resources are down," Day said, "and the demand is up."

Hardship on the rise

Second Harvest exists to feed the literally hungry. A family unable to feed itself through its own resources or any other assistance program can receive an emergency allocation of food no more than three times in a six-month period. Lately, though, needs in Middle Tennessee have been more than the organization can meet.

"People have been coming back consistently, saying 'I can't survive on what I'm making,'" Day said. "We have to send them to other resources, because we don't have the food to keep feeding them."

Statistics reflect a sharp increase in need among the people Second Harvest serves. In the Nashville area, emergency requests for food in August 2008 ran about 10 percent above the August 2007 rate. September's year-over-year increase was 13 percent. October's rise was 21 percent. For November, the charity is on track to receive at least 25 percent more food requests than it saw in the same month a year ago.

And in some of the outlying counties of Middle Tennessee where the organization operates, demand is up by 50 to 60 percent.

"Many of these folks are first-time users of our services," Day said. Most are, or were until recently, employed. Many have two jobs. A cutback in hours, a spike in utility bills or a hospitalization, among other causes, can force a family to seek stopgap food aid.

William T. Cheek III, an attorney at Bone McAllester Norton and veteran nonprofit board member, expects the nonprofit community to step up and address the needs of agencies like Second Harvest.

"The song that I'm hearing, all across the board," Cheek said, "is that people need to be focusing on nonprofits that help poor people," as opposed to cultural, educational or medical nonprofit efforts.

Bird said the Frist Foundation will place a priority on funding "organizations helping the people who are most vulnerable in tough economic times." But he also sees an advisory component to its mission, and he expects to spend a lot of time counseling the charities that the foundation supports.

"I am worried about agencies dying next year," Bird said. "In a tough economic time, every agency needs to ask itself: Do we have the luxury of expanding our facilities, adding new buildings and capital structure, at a time when our very survival may be in question?"

As local nonprofits manage through the economic crisis, some will face staff cuts, Cheek predicts.

"It's going to be really tough," he said. "You've got people who really dedicate themselves to an organization, who are willing to work harder than they normally would in the private sector and make less money. But nonprofits will have to take a long, hard look at them as they decide who stays and who goes."

HOW YOU CAN HELP

Information on and links to many Nashville-area nonprofits are available at GivingMatters.com, which is operated by the Community Foundation of Middle Tennessee.

For those involved with nonprofit organizations: Coping tips are available at the CNM’s "Nonprofit Connect" blog. Go to blog.cnm.org.