Hawai'i's nonprofit organizations are finding tough going on Wall Street as a historic market decline hits billions of dollars of investments they've made in stocks.

Nonprofits ranging from Kamehameha Schools to the Hawai'i Medical Service Association have seen the value of their stock holdings decline in recent weeks.

Wall Street's tumble has led to cuts at the Contemporary Museum in Honolulu. Along with Hawai'i's economic slowdown, the falling markets may result in strained budgets for other nonprofits.

"It's never fun when the economy goes down," said University of Hawai'i Foundation President Donna Vuchinich, who's worked for college endowment groups through three downturns.

Nonprofit groups interviewed by The Advertiser declined to say how much their stock portfolios had declined but acknowledge there have been losses as markets sank. It's unknown how many nonprofits have Wall Street investments since more than 5,000 exist in the state, according to a study for the Hawai'i Community Foundation.

The nonprofits range from small groups with operating budgets of less than $25,000 annually to Kamehameha Schools, which has assets of more than $9 billion. Coming into this year Kamehameha Schools' investment portfolio included more than $2 billion in common and preferred stocks.

Hundreds of millions more in stock investments are scattered among nonprofits here. Such investments help boost returns during good times. The UH Foundation, for example, had a fiscal 2007 return of 15.4 percent after averaging 12 percent increases in several previous years.

But markets rise and fall, with the recent turbulence producing an almost unprecedented skid.

Through the first 10 days of October neither the Standard & Poor's 500, a much-used yardstick of market performance, and the Dow Jones Industrial Average, the most quoted market index, has had a positive day.

The Dow had its steepest slide in its history last week. Through Friday the Standard & Poor's 500 Index had plunged almost 39 percent this year.

Looked at another way, you would have $61 left of a $100 investment made in an S&P 500 Index fund on Jan. 1.

"We've basically had a very significant series of events that have unfolded over the last 60 days that I don't think anybody would have projected," said Kirk Belsby, Kamehameha Schools vice president for endowment.

ENDOWMENT FUNDS

The Hawai'i Community Foundation, which uses investment income off a $400 million endowment for grants to other nonprofits, is like other groups in investing a portion of its endowment in stocks. Foundation President and Chief Executive Officer Kelvin Taketa quipped he doesn't want to take a look, much in the same way he doesn't want to know what's been happening to his 401(k) retirement account.

"I used to joke it's a 201(k)," Taketa said. "I don't think it's even a 201(k) anymore."

Kidding aside, the plunge in stocks doesn't automatically translate into bad things for the nonprofits with investments. That's because most employ professional money managers who spread investments among bonds, real estate, Treasuries and other vehicles. Moreover, they say they invest for the long-term and generally can wait patiently for recovery.

"People who panic in markets like this will get punished the most in the long run," Belsby said.

"It's really a long-term commitment to fiscal discipline that will win the day."

Unfortunately some can't wait for markets to make up lost ground.

The Contemporary Museum in Makiki Heights had a budget meltdown when markets went south for its $5 million endowment. In good years it was able to draw up to 7 percent of the endowment, or roughly $350,000 at current levels, to help with the museum's budget.

This year it won't draw anything as it tries to preserve the corpus. Instead, the museum is laying off about about half of its staff and cancelling a planned exhibit.

It's unknown how many other nonprofits here may be in a similar situation.

Kamehameha Schools, the Hawai'i Community Foundation and Punahou School (about a $180 million endowment) also structure the way they harvest money so there are no year-over-year swings for operational budgets. At Punahou that means taking a 4.5 percent of the five-year average market value of the endowment.

"It helps us from a budget standpoint," said John Field, Punahou chief financial officer. "In a climbing market we (the contributions) tend to rise a little more slowly."

That means they also should have a slight decline when this year's endowment value is added to the four previous years to come up with an average. Field said Punahou had been averaging 12 percent to 13 percent investment returns in the previous five years.

"Obviously the return over the last year hasn't been nearly as great," Field said.

SPENDING STRATEGY

Kamehameha Schools, which has been criticized for not spending enough of its endowment in the past, will draw $273 million from its investments this year. It's strategy of spending between 2 percent and 6 percent of the endowment is proving its worth in the current environment, Belsby said.

"You don't spend high when times are good," he said. "You want to have something during the low periods."

It's unknown how much nonprofits have lost in investments during the downturn since they declined to furnish numbers, but it most likely is in the tens of millions of dollars.

At HMSA, securities make up about 35 percent of the $754 million in investments the state's largest health insurer had last year. The remainder is in conservative investments like bonds and certificates of deposit.

Investment returns in recent years have helped offset some of HMSA's operating losses.

"We just have to sit tight and see what happens," said HMSA Senior Vice President Cliff Cisco. "We're not going to make any dramatic moves."

The market downturn also may be a double whammy for nonprofits that rely on donations from individuals.

Hawai'i's economic malaise, combined with the market plunge, may chill charitable contributions. Nationally, the Chronicle of Philanthropy reported earlier this month that financial anxiety is making some individual donors wary and that some foundations are responding to investment losses by cutting back on grants.

FUNDRAISING FOCUS

At the UH Foundation, Vuchinich said it will be months before they know if giving is down, but that its fundraising efforts aren't solely focused on donations since it wants people to be engaged and active with the university.

Hawai'i Community Foundation's Taketa said demand for social services that many nonprofits provide is counter-cyclical to the economy, rising when things slow.

State and federal governments that make up about half of such giving also are having difficult budgetary times given lower-than-expected tax revenues in Hawai'i and a $700 billion rescue package from the federal government.

In 2002 his foundation did a study that found charitable giving in Hawai'i was resilient following the Sept. 11 terrorist attacks and through the deflation of the tech stock bubble on Wall Street.

But current conditions are different, said Taketa, who said his organization will give away $20 million in grants to other nonprofits this year. Plans for 2009 call for trying to give away as much as it can. He said he doesn't know what's happening with the rest of the state, though.

"It's too early to tell, although giving and special events revenue in Hawai'i is down," Taketa said.

"Our hope now is that the people who are in a position to give in our community will understand that the community needs them and give even more now."