Election Section

California nonprofits hurting from state budget cuts

By Louise Chu
Saturday September 21, 2002


SACRAMENTO — More than a year after they first reported funding losses, California’s nonprofits are still feeling the crunch. 

A survey conducted last September by California Cares, a coalition of the state’s nonprofits, found that nonprofits have faced dramatic funding losses and increased demand since the stock market decline and the Sept. 11 terrorist attacks. 

After managing to break even by the end of the year, they now have another money concern: the California state budget. 

The state’s plan for the new fiscal year chops about $7.5 billion from state programs, affecting thousands of nonprofit organizations throughout the state. Nonprofits on average receive about 30 percent of their money from the government, according to the California Association of Nonprofits. 

Child Welfare Services, for instance, had to let go of 500 social workers after losing $49.5 million in state money, and the California Arts Council cut its budget by 40 percent. 

Ken Larsen, public policy director of CAN, said the cutbacks have especially affected areas of aging, developmental disabilities and mental health. 

Last December, California Cares released a report claiming an estimated year-end $25 million drop in donations for the state’s nonprofit organizations, who were also experiencing a 20 to 40 percent increase in demand for services. 

The startling figures prompted California Cares to launch a statewide ad campaign, urging donors to continue giving. A follow-up survey released in June reported that most nonprofits ended up receiving the same, if not more, money than they had projected. 

But there may be more tough times ahead. 

Adding to the recent budget woes, Californians seem to be continuing to keep a firmer hand on their pocketbooks during these economically lean times. 

The Napa Valley Wine Auction, touted as the world’s largest charity event, raised almost $6.2 million for local charities last June, but the total was a significant dip from the event’s all-time high of $9.5 million raised in 2000 at the peak of the dot-com wave. 

“People are a little more cautious right now,” said Jeri Hansen, a spokeswoman for the Napa Valley Vintners Association, which organizes the annual wine auction benefiting various local charities. 

Foundations have also been reeling from the stock market plunge. 

“As recently as two years ago, some of our work was in the stratosphere,” said Sterling Speirn, president of Peninsula Community Foundation. “Now we’re down into the atmosphere.” 

Speirn said the state’s community foundations have also taken on the extra burden of closing the gap for nonprofits left by the government cutbacks. 

Many have been forced to cut their grant-making to nonprofits by 20 to 30 percent, Larsen said. But some, including PCF and the California Endowment, the state’s largest health care foundation, have opted to absorb the financial difficulties. 

“At this point, we’re committed to maintaining the same level of grant-making,” said Julie Tugend, chief executive officer of the California Endowment. “We have a very diversified portfolio, so we’re already been seeing some rebound.” 

Investment experts have said the David and Lucile Packard Foundation should do the same. Almost entirely invested in Hewlett-Packard stock, the Los Altos-based foundation has seen its $13 billion asset base cut in half since 1999, when HP’s stock slide began. This year, it expects to award $250 million in grants, down from $450 million in 2001. 

Meanwhile, nonprofits have relied more heavily on fund-raising events rather than government or grant funding, Larsen said. Some have also looked into entering partnerships or mergers to stay financially afloat. 

Despite uncertain futures for California’s nonprofits, Speirn remains optimistic. 

“When times are hard, it inspires more giving,” he said. “People who weren’t giving at a certain level are now giving ... because they can really see where it makes a difference.”