HAWAI'I'S NONPROFITS
Hawai'i's developing charity crisis
By Kelvin H. Taketa
A perfect storm is brewing. At the state and county levels: Our elected officials are facing tough decisions that may determine the fate of many nonprofit organizations that provide critically important services throughout our Islands.
What they might not recognize is that other economic factors are hurting charitable contributions that would might otherwise help to mitigate those impacts.
According to the Hawai'i Community Foundation's study, "Hawai'i Nonprofits 2001," government grants and contracts account for well over half of nonprofit revenues. In some sectors, such as health and human services, the percentage of government support is even higher. As a result, significant cuts in public financing represent dollar amounts that dwarf the amount of charitable contributions.
In addition, charitable contributions in Hawai'i already account for nearly 20 percent of total nonprofit revenues, which is nearly double the national average of 10 percent. HCF's 2002 "Hawai'i Giving Study" reported that an amazing nine of 10 households contribute money or goods to charity.
With the people of Hawai'i clearly giving at or near the limit of their abilities, there is no doubt that the work of nonprofits is deeply woven into our community. But there is no way that the generosity of our residents can close the gap of public-financing cuts.
At the same time, many foundations will be reducing their grant budgets as a result of the decline in assets because of the poor performance of the stock market.
Most foundations calculate their payout based on five percent of their assets, often calculated as the average value of their assets over the past four or five years. As a result, foundations are still including the market highs of the late 1990s-early 2000s in their averages.
As time progresses without any significant appreciation in the market, the average will decline along with the payout. We have already seen several major foundations with ties to Hawai'i, such as the David and Lucile Packard Foundation, the Doris Duke Foundation and the Casey Family Program, cut their grants and program budgets.
The road ahead will be difficult. What we can't forget is that many of these nonprofit agencies are providing critically important services to many of Hawai'i's residents; these services were once the province of our government but have increasingly become the responsibility of nonprofit agencies as a result of public policy that recognized the efficiency or effectiveness of using such groups.
While we can continue to impress upon our elected officials the importance of these organizations, the value of their services, and the impossibility of maintaining programs and services with a hoped-for increase in charitable dollars, it is also time to think about a different paradigm.
Government agencies need to think about how else they might develop contracts and grant awards in a manner that can help these agencies cope with increasing demands and fewer dollars. In concert with the nonprofit agencies, they need to redefine rules that currently foster competition and instead look at how groups might share information and collaborate to provide more effective and efficient services.
Finally, nonprofit organizations need to look at their core missions and competencies and defer things that are tangential or can be handled better by others. In these times, leadership requires new and often difficult choices.
Kelvin H. Taketa is president and CEO of the Hawai'i Community Foundation. Reach him at kelvin@hcf-hawaii.org. HCF's 2002 "Hawai'i Giving Study" and "Hawai'i Nonprofits 2001" are at www.hawaiicommunityfoundation.org.
