Charities are bracing for funding declines of more than 25 percent and facing the prospect of layoffs and program cuts even as the need for services such as food, shelter and financial help is skyrocketing.

The Institute for Human Services, for example, which runs two emergency homeless shelters on O'ahu along with job and meal programs, has seen a 30 percent drop in donations so far this year from businesses and individuals. The nonprofit is expecting further declines in government aid and foundation funding, said spokeswoman Kate Bepko.

Meanwhile, she said, more people are seeking food and shelter.

"We're just being really careful with the funding that we have and we're hoping the community comes through," said Bepko, adding that no layoffs are yet planned.

"We're just trying to take things one step at a time."

More than 50 leaders of nonprofits gathered yesterday to come up with strategies for drumming up more support in bleak financial times. They will meet again on Dec. 10 with members of Gov. Linda Lingle's Cabinet to discuss the outlook for state appropriations and grants.

"It's hard times," said Maile Takashima, Aloha United Way marketing director.

With the state facing a mounting deficit, Lingle has already warned nonprofits receiving state contracts or grants to brace for the worst. Last week, mental health providers got a taste of what's to come, when the state Health Department announced it would slash more than $25 million this fiscal year in spending on mental health services.

Josh Levinson, executive director of Community Links Hawaii, which provides development programs to nonprofits and sponsored yesterday's meeting, said nonprofits must take a hard look at the programs they offer and decide which are central to their mission — and which aren't and should be cut.

"There will be casualties," Levinson said. "It's getting tougher every day."

SERVICE CUTS PREDICTED

Some nonprofits that serve Hawai'i's neediest say they have already seen funding declines of 25 percent or more this year. Most are bracing for disappointing results from their winter donation drives, which for some raise most of the money they need to operate in the coming year.

Other nonprofits don't yet know what their financial pictures for 2009 will look like.

Brian Schatz, executive director of Helping Hands Hawai'i, said community donations so far this year are about the same as 2007. But the nonprofit's holiday fundraising drive just started. "We're hoping they (donors) will find it in their hearts to give," he said.

Susan Chandler, director of the Public Policy Center at the University of Hawai'i and former head of the state Department of Human Services, has been polling charities and said many are preparing for 15 percent to 20 percent cuts in government funding in the next fiscal year.

She said those cuts could leave big gaps in services for needy families.

She said she hoped the cuts "will be done in some reasonable way."

The meeting yesterday, at the Hawai'i State Art Museum, centered around what nonprofits could do to head off a financial crisis that could mean shutting down. That's a real concern, especially for grassroots organizations.

"We're going to see multiple sources of funding dry up," said nonprofit consultant Trisha Kehaulani Watson yesterday at the Community Links meeting. "The concern is what organizations can do ... to keep existing staff and programs."

Beulah Olanolan, a Bank of Hawaii assistant vice president who manages business portfolios for several nonprofits, said charities are reeling.

"Grants are down. Sponsorship is down," she said.

And several nonprofit leaders pointed out that nonprofits were operating with tight budgets even before the financial crisis. Cutting back programs, they said, will undoubtedly mean layoffs and less critically needed help to low-income families throughout the Islands.

STATE STIMULUS URGED

Michael Groza, who spoke at yesterday's meeting and worked for decades in the nonprofit sector on the Mainland, said charities should take steps now to improve their finances. Those steps can include becoming more efficient, scaling back programs that are not vital and working with other nonprofits that serve the same population.

"You have increasing need and diminishing resources," he said. "I've been through several downturns, recessions, cutbacks. What I think makes this one a little bit different is that no one knows the extent of it. They just don't know how far this is going to go."

Alex Santiago, executive director of PHOCUSED (Protecting Hawai'i's Ohana, Children, Under Served, Elderly and Disabled), which represents nonprofits, said cuts made today could mark the beginning of a years-long scaleback of health and human services programs. More than ever, he added, these programs are a priority.

"A community can only be measured by how it treats its most vulnerable," he said.

Santiago said the governor's five-point plan for economic recovery, which includes increasing tourism outreach, investing in infrastructure improvements, lowering business fees and attracting outside investment, should also include stimulus for nonprofits.

There are about 5,000 charities in the Islands, nearly 1,800 of which reported annual operating budgets of $25,000 or more in 2006, according to the National Center for Charitable Statistics. In total, the organizations represent about 8 percent of the state economy, generate about $4 billion a year and employ more than 50,000 people, according to state figures.