Editorial feature: The humane community can handle hard times
From ANIMAL PEOPLE, October 2008:
(Actual publication date 11-5-08.)
Writing only for SPCA Los Angeles, SPCA/L.A. president Madeline Bernstein might have spoken for the whole humane community worldwide in an early October 2008 appeal expressing deep concern with the state of our economy, food costs, gas prices, Wall Street woes and its negative trickledown effect.
SPCA/L.A. is struggling to feed and tend to the ever-increasing number of homeless animals in our care, Bernstein said, many a direct result of foreclosures and financial hardship. Worse, fewer adoptions are occurring for the same reasons. This puts us in the untenable position of having to bear higher costs while donations, corporate funding and even the bestowal of in-kind gifts is shrinking. Natural disasters and an expensive presidential election have also put a claim on limited resources. The bottom line is that there is less discretionary and disposable income for charities less funds to give and more difficult choices to make.
SPCA/L.A., with an annual budget of $6 million and estimated assets of $16 million, according to IRS Form 990, is among the most affluent 1% of all humane societies.
Yet as American SPCA executive vice president for national programs Steve Zawistowski recently remarked, being among the most affluent 1% of all humane societies requires only being about as big as an average car dealership.
Humane work has rarely claimed more than 1% of all the money donated to U.S. charities. This 1% is shared among more than 6,000 organizations, including more than 3,000 that operate shelters or sanctuaries. Even at the best of times, the available resources have often seemed slim compared to the urgent needs of animals in distress.
Recently even the relative handful of humane societies that have accumulated significant reserves like SPCA/L.A. have seen their assets vanish like the Cheshire cat.
SPCA/L.A., for example, had $14 million in cash and investments two years ago, but more than 80% appears to have been potentially at risk. The risks appeared slight relative to the rates of return, at the time, and SPCA/L.A. was only following standard financial advice in pursuing the investment strategy that it did. Unfortunately, instead of having assets to fall back on when fundraising falls off and needs expand, most humane societies that followed standard advice in trying to prudently manage their assets are now finding themselves with many investments that can only be sold at a substantial loss. These humane societies remain better off than the 99% who have never managed to put anything aside, but hopes of having longterm security and fiscal liquidity have often proved illusory.
Humane societies that have paid off their physical facilities are well ahead of everyone else, yet may still be struggling to make payroll. Humane societies that were heavily in debt before the present financial crisis are wondering how to survive the winter, in hopes that spring will bring an economic turnaround.
With the best and brightest on Wall Street uncertain about when the turnaround will come, and how rapidly the money markets will recover, ANIMAL PEOPLE cannot predict how long hard times will last, how tight money will become, or what programs and organizations will not survive. Much will depend on the combination of determined and persuasive leadership, donors who continue to support humane work even with their own situations uncertain, and just plain luck.
We can state, however, from having monitored the financial filings of humane societies worldwide for 20 fiscal years now, that humane resources are now in jeopardy in large part for reasons very different from the unrestrained greed and reckless risk-taking that evidently afflicted Wall Street and other investment markets.
For decades the humane community has sought ways to reinvest inherited financial portfolios to obtain high returns while avoiding investment in animal use industries. This is no easy task in view of the size and scope of animal agriculture and the ubiquitousness of animal testing in almost all branches of manufacturing.
In the years preceding the high-tech stock crash of early 2001, pro-animal foundations, charities, and concerned individuals tended to become heavily invested in high tech. Many moved into this sector at a time of very fast growth, even before developing their own e-mail communications and web sites, because electronic high tech looked like the least potentially animal-abusive place to invest, and the growth potential of the e-commerce sector appeared to be unlimited.
When the inevitable shakeout came, the humane community was perhaps the hardest shaken part of the the nonprofit sector, and was already feeling economic whiplash long before the terrorist attacks of September 11, 2001 brought a further jolt.
Following the 2001 experience, humane societies that acquired something to invest tended to recall Scarlett O Hara s conclusion in Gone With The Wind that only real estate endures. By mid-decade ANIMAL PEOPLE was noticing in IRS Form 990 filings a tendency for humane societies to diversify their portfolios by mixing stocks with buildings, land, and investments in mortgages. This was precisely what mainstream financial advisors were telling individuals to do with their personal assets.
Despite declining real estate values, the investments in buildings and land will probably pay off in the long run. Humane societies usually prefer to avoid the risks and stresses of becoming landlords, with good reason, but those that have managed to rent out inherited property until market conditions warrant selling have historically tended to do well.
Humane societies mortgage investments, unfortunately, collapsed with the rest of the mortgage industry. Now we are seeing some national charities losing assets faster than gamblers in a card game, even though they had no intention of gambling at all. We are seeing some charities holding worthless paper now when they believed they had secure reserves. We are seeing foundations that generously supported animal charities having to cut back abruptly, because suddenly there is far less than the predicted return on investments or none at all.
We are seeing some former individual high donors to humane work losing the ability to donate. Some retirees who have lived for years on their investments and have generously supported animal charities are suddenly looking for employment, with obsolete skills and at ages when their chances of finding steady jobs with decent benefits are slim.
Every charity feels the pinch, but animal charities are among the most hurt.
So what do we do about it?
First of all, don t panic.
Because humane work consists primarily of helping distressed and frightened animals, often with limited resources, most people in the field are used to working in crisis mode. The present international economic crisis has increased the difficulty of fundraising for animal work, but approximately half of all the animal charities in the world are less than 20 years old, and most of those are still led by people who remember starting with nothing.
Difficult as obtaining the funds needed to keep going may be, it is not more difficult than raising the funds to do something that has never been done before, in a place where nothing like the project has ever existed, and few people understand much of anything about it.
Fundraiser Paul Seigel of Direct Mail Systems offered some worthwhile and to some extent comforting advice in the June 2008 edition of ANIMAL PEOPLE.
Raising money during crises is an area that I have had a particular interest in since college, Seigel wrote. While recessions have a definite impact, historically charitable giving, overall, has not declined. Different sectors of donors and potential donors react differently, Seigel explained, and different types of charities are affected differently. Nothing dampens giving to religious causes. Planned gifts are largely unaffected, because decisions to make such gifts are usually made long before a crisis occurs. Foundation support has actually quite dramatically increased during poor economic times, Seigel observed.
Though foundations are not yet giving more during the present crisis, foundations with conservatively managed portfolios tend to cut back their giving during the first phase of a crisis, then give more when their managers believe they see better times ahead.
Corporate giving tends to even out, Seigel said, because giving is tied to profitability, but is usually not cut back.
Corporate giving in times of economic crisis does tend to shift away from giving money, toward giving unsold merchandise and allowing charities to use vacant property. This can be particularly beneficial to humane societies if they happen to need new vehicles, with dealers throughout the U.S. struggling to move late model vans and light trucks, or need office or storage space. By way of precedent, the 2001 economic downturn had a catastrophic short-term effect on cash contributions to dog and cat sterilization programs, but helped several programs to significantly improve their locations and mobility, enabling them to markedly pick up the pace of their work during the next several years.
Small donors do hold back, Seigel wrote, but can be effectively persuaded with the argument that The animals need our help just as much, perhaps even more, in difficult times. New small donors are more difficult to acquire but this does not mean one should not continue prospecting to counterbalance file attrition it simply means that one should be more vigilant about costs, by mailing reduced quantities, testing less, or simplifying packages.
Donors at every level can also be attracted in hard times by going back to basics and re-emphasizing personal contact. Charities in good times tend to drift away from activities involving direct personal contact because it is easier to send out mailings than to organize public events, and easier to hire staff than train volunteers. Yet studies of donor behavior show time and again that the most enduring donors and those most likely to leave bequests to charities are those who have become personally involved in the charities work at some point, if only briefly. Typically donors who attend events and contribute labor will continue to give money for years after their personal participation declines. Often, if they suffer financial misfortune, such as losing a job, they welcome the opportunity to resume personal involvement if they are asked.
The main reason people don t give, Seigel concluded, is because they aren t asked to give.
Asking for donations by direct mail or e-mail is relatively easy, and appears to bring satisfactory rates of return, once a list of responsive donors is developed; but the list development process is notoriously inefficient.
It is worthwhile to notice that the fastest-growing animal charity of the past 15 years has been the Best Friends Animal Society, whose mailings and e-mailings build on a fundraising approach which has always emphasized donor acquisition through tabling, participating in community events, and visiting the Best Friends sanctuary in Kanab, Utah.
Best Friends now has a highly productive mailing list of hundreds of thousands of names because not so very long ago, having no money to invest in fundraising, the founders set out to personally make friends on behalf of their animals. It is no accident that now almost everyone involved in pro-animal work of any kind knows someone at Best Friends.
Nor was what worked for Best Friends ever any kind of secret. Salvation Army street corner bands, Scouting groups selling cookies, Greenpeace door-to-door solicitations, Mormon missionaries, and countless representatives of other charitable causes demonstrate the advantages and importance of person-to-person contact.
Foreign humane societies that have come to depend on donations from the U.S. may be at a disadvantage, but the present situation may encourage some overseas charities to develop donor opportunities closer to home.
Local animal charities may gain a chance to become much more successful in fundraising competition with national and international groups, because they can organize dog-walks, dog-dips, adoption days, and other participatory events more effectively than outsiders. People who cannot just quickly write a check may be attracted to participatory events, including young families looking for low-budget outings, who will become the donor and volunteer bases of the future.
Regardless of where a charity is located and how it operates, this is a time to make extra effort to express appreciation of donors, even when their levels of contribution have fallen off. Many donors are giving less simply because they have less to give, and will be happy to resume helping their favorite charities more generously when their circumstances allow. The more appreciated they feel in hard times, the more they are likely to give when they again have the means.
Worth a mention here is the often controversial practice of charities sending small gifts to donors. Many donors feel that their contributions are wasted when money is spent to buy and mail merchandise; but merchandise that serves a purpose in helping to publicize the services provided by the charity, and helps to remind donors to give, can more than pay for itself. In hard times, especially, businesses may be willing to donate small items suitable for use as donor gifts.
Explaining to recipients that these items were donated will be worthwhile, and can be an opportunity to present a wish list of other in-kind items that the charity can use.
Announcing budget cuts can also be a fundraising opportunity. Animal charities may have to cut back or eliminate some programs that have been attractive to donors but cannot be sustained. Donors who may be having to readjust their own budgets will understand the problem, will appreciate honest explanations, and will help if they can to enable their favorite charities to avoid further cuts.
The charity making cuts must emphasize the effort it is making to avoid reducing the most essential services it provides, just when animals and the community most need help.
Among the hardest questions to answer is whether now is a good time for charities to take on new projects, especially those involving capital acquisition such as land and buildings. Since donors tend to respond most enthusiastically to new projects, there is a theory that hard times are when charities should announce new projects but prudence suggests that most animal charities will do best to limit new projects to extensions of existing projects and services, and to avoid doing things that look as if they might lead to getting over-extended.
With property values low, this may be a good time for U.S. animal charities to buy land and buildings, if they already have the resources to make substantial down payments and secure mortgages at low interest rates.
Less well endowed organizations almost certainly will not be able to borrow as readily as in the past, if at all. This raises the risk that small animal charities may become more inclined than ever to lease or rent premises in inappropriate locations. Many making this mistake lose their investment in site improvements when obliged to relocate or quit operating. Some lose their donors, volunteers, and good reputations as well when they fail to maintain effective programs and good animal care in ill-chosen quarters.
Traditionally, animal charities begin with a rescue focus, and tend to try to make the jump from home-based fostering to operating a shelter or sanctuary as quickly as possible, to accommodate more animals in need.
Unfortunately, animal charities that try to establish shelters or sanctuaries before raising or inheriting the resources to build or buy in just the right place, on secure terms, have an astronomical rate of failure, with frequently catastrophic consequences. ANIMAL PEOPLE has often pointed out in recent years that failing shelters and sanctuaries annually burden the rest of the animal protection community with the equivalent of Hurricane Katrina in terms of animals needing care and placement and that was before the economy took a downturn.
Now more than ever, the urge to help must be tempered by good sense. An effective fostering network can help far more animals than a badly located shelter that fails to attract visitors, volunteers, and funding; and setting a compassionate example at the neighborhood level is infinitely more helpful than making the evening news as the latest crazy cat lady or dog man found in squalor.
Henry Bergh s example
The humane community must remember and learn from the mistakes made in past economic downturns that it is always a mistake to sacrifice ideals for institution-building.
Among the most notorious errors, the Massachusetts SPCA became overextended in building Angell Memorial Hospital just before the U.S. entered into World War I. To avoid losing the marble hospital, the MSPCA cut back the Bands of Mercy and Jack London Clubs, whose 1914 tent meeting in Kansas City a few blocks from the childhood home of Walt Disney attracted 10,000 teachers and ministers to learn about humane education, and 15,000 school children to hear the lessons.
Though there is no record of Disney attending, he emphasized the themes of the tent meeting throughout his life. We can only wonder how many talented young people might have been comparably inspired, had the MSPCA opted to promote ideas as founder George Angell emphasized over building a monument to Angell s memory, against Angell s own advice.
Even more catastrophically, the U.S. humane community responded to the economic stresses of the Great Depression and the recessions that followed World War II and the Korean War by turning, in waves, to taking community animal control contracts. These contracts obliged the humane societies to kill homeless dogs and cats en masse, by gassing and decompression and often required them to sell animals to be used in biomedical research.
The moral impetus of the mainstream humane movement atrophied, defensive insularity and secrecy replaced effective outreach, and the animal cause did not regain momentum until bitter internal splits produced the animal rights movement and the no-kill sheltering movement.
Henry Bergh founded the American SPCA, the first U.S. humane society of note, in the midst of the economic chaos that followed the U.S. Civil War. Many of the other most enduring U.S. humane societies, including the MSPCA and SPCA/L.A., were organized within the next decade, amid continuing economic uncertainty. They remain with us because they responded to urgent needs, and persuaded donors that they were worthy of support, even when banks were failing.
Bergh, a tall man to begin with, always wore a top hat, even when top hats passed from vogue. He explained that this was so that everyone could see where he stood, so as to stand with him. Then he would take off the top hat and pass it. It always came back with enough donated money inside to keep the ASPCA alive, when the whole humane movement was still barely more than a dream.