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Hard times hit the United Way

As the housing industry collapses around her, Mesa United Way President Carol McCormack finds herself struggling with one of the oldest headaches in her business:
/ Source: The Associated Press

As the housing industry collapses around her, Mesa United Way President Carol McCormack finds herself struggling with one of the oldest headaches in her business:

How do you raise money when your donors are suffering, too?

It's a tough question in Mesa, a cash-strapped Phoenix suburb that's been hitched to the housing industry from boom to bust.

For years, charitable construction workers, architects, real estate agents and engineers pumped millions of dollars into United Way. The organization then handed that money over to soup kitchens, nursing homes and other groups that form the backbone of the city's social services network.

That money has dwindled this year as home builders cut staff. McCormack said she's raised $350,000 less than she did at the same time last year.

"This is what keeps us up at night," she said.

Some United Way affiliates across the country still expect to boost collections this year, but McCormack and some of her counterparts in other hard-hit states say they're seeing the first signs of trouble.

"If we really do go into a serious recession, all charitable contributions will contract somewhat," said Rick Belous, United Way of America's vice president of research.

In Florida, which has been reeling from high windstorm insurance rates as well as the national housing slump, United Way directors say collections are down a few percentage points. Local campaigns reported that they weren't raising the money they expected "as the national economy started to look a little gloomier," said United Way of Florida President Ted Granger.

United Way of Southern Nevada, which relies on donations from the gaming industry, is seeing many of its smaller donors hold onto their wallets.

"Those who were giving $500 are giving $300 now," affiliate chief Dan Goulet said.

United Way's almost 1,300 affiliates, which together form the largest nonprofit in the country, typically don't see a drop in giving until well after a recession begins, Belous said.

It takes an extended period of hardship before people decide they can no longer help out. And many wait until the end of the year to give money, so if a recession begins earlier in the year, the organization doesn't realize it has lost support until later, he said.

It wasn't until 2002, for example, that United Way felt the pinch of the 2001 recession. United Way of America figures show that donations across all of its affiliates dropped 6.1 percent, or $240 million in 2002, compared with the previous year.

The organization's national leaders say most affiliates will fare better this time, thanks to a six-year effort to seek out a wider range of donors.

Though it still relies on traditional payroll contributions, United Way of America President Brian Gallagher said he's urged affiliates to reach out to wealthy donors and untapped groups such as women, young professionals and private foundations.

By diversifying, United Way makes itself more recession-proof, Gallagher said. In return, United Way offers individual contributors a chance to direct where their money should go and develop strategies for improving the community.

"It just connects them to the work," Gallagher said. "For instance, our women's leadership initiatives around the country have gotten very focused on education issues, early childhood development issues."

McCormack said she's trying to follow that advice.

'We're going to ask him for more'
On a recent afternoon, McCormack and her marketing manager hovered over a small laptop in a brown stucco building that serves as Mesa United Way's office. They were about to approach a CEO for cash and needed just the right message.

"He's already been a major donor in the past," McCormack explained. "We're going to ask him for more."

On the screen, Power Point text boxes popped up with talking points, reminding her of "the futures we shape, the lives we change."

McCormack remembered that the CEO spoke about using his money to "keep families together." An ambiguous goal, but one that McCormack was sure she could oblige.

They decided to bring along another wealthy donor who, through the United Way, was able to volunteer his time at a nearby elementary school. A lot of United Way donors don't realize that they can tailor their gifts to specific issues, McCormack said.

"He can go in and say, 'This is what I've done. These are the changes I've seen,'" she said.

Though this may be time consuming, Mesa United Way needs to balance its collections with more individual donors like this one, McCormack said.

Pledges and donations
The bulk of its $5.8 million budget comes instead from large employee payroll campaigns, a traditional United Way fundraising tactic that asks workers in major companies to pledge donations from their paychecks.

One such company, the Farnsworth Companies, recently trimmed more than 100 people from its staff because of the weakening home building market.

As a result, its employee payroll campaign has pledged $4,398 less this year. The company also will give United Way a corporate grant of $47,500 this year, $7,500 less than 2007.

"No question, that this is as hard of times as we've seen in 15-20 years," said Chad Coons, who runs one of Farnsworth's subsidiaries.

If McCormack can't make up for those lost pledges, there will be pain in Mesa. Like all United Way affiliates, McCormack's agency works like a mutual fund for charities, investing its donations in food banks, homeless shelters, centers for abused children and a variety of other services.

Donations become lifelines
Those dollars have become a lifeline for many of those agencies, especially as the city and state governments scour their own coffers for extra cash.

Arizona's state budget is projected to be short $1.2 billion this year, primarily because of the housing industry's woes and reduced consumer spending.

Mesa also is struggling to keep a balanced budget after collecting $16 million less than expected in taxes. City leaders already have cut back on social services and trimmed staff. They've asked the police and fire departments, libraries and other city agencies to find ways to cut spending by 5 percent.

Few organizations in Mesa depend more on United Way than the Gene Lewis Boxing Club, a nonprofit gym tucked inside a squat cinderblock building in the industrial heart of the city. The club offers boxing instruction and workouts to hundreds of young adults.

United Way money provides more than half its $26,000 budget, buying mouth guards, uniforms, first aid kits and just about everything else in the gym. The United Way even gave the club a van so boxers can travel together to tournaments, and it helps pay for the insurance, gas and registration.

"Without the United Way, it would be as difficult as I can imagine," Joshua Benjamin, the boxing school's director, said. "We'd be on the verge of closing the doors."

A few miles to the south, United Food Bank chief Robert F. Evans Jr. also is bracing himself for a tougher economy. His organization provides food for soup kitchens, homeless shelters, after-school programs for children and other programs that serve a combined 850,000 people each year.

"It's a spooky time right now," Evans said.

Evans said he expects about the same or slightly increased budget this year. But that may change. The city of Mesa will likely give Evans less money this year.

Evans also expects his supplies to be stretched to the limit as the economy puts more people in a pinch.

It already feels a bit like the recession of 2001, Evans said.

"The resources seem to be worse than they were in 2001, and the demand (for food) is higher," Evans said. "The difference is the housing market hadn't gone into the tank in 2001. We weren't involved in the Iraqi war in 2001."

A universal rule
If there is a universal rule to charity giving, it's that agencies like United Way and United Food Bank are needed most when the community has the least to donate. Fundraisers always have to hustle, McCormack said. In fact, the city's Welfare League, which turned into the Mesa United Way, was created 80 years ago when the cotton market collapsed.

And while working as a United Way fundraiser in South Carolina in the mid-1990s, McCormack's payroll campaigns suffered tremendously after thousands of jobs were eliminated at the Savannah River Site nuclear weapons complex.

But United Way in South Carolina was able to keep helping the community even then, McCormack said, because organizers convinced others that tough times are the best times to open their wallets.

"We're all optimists over here," McCormack said. "We'll hopefully work our way out of this."