Special Report: Public Support Growth Beats GDP by 309 Percent

November 1, 2002       Craig Causer      

The philosopher Plato might as well have been referring to the Form 990 when he said, "A good decision is based on knowledge and not numbers."

The numbers show that, in comparison with FY 2000’s top nonprofits, NPT 100 organizations collected $2.4 billion in additional public support during fiscal 2001. The knowledge is that the 11 percent increase was a step down from last year, when the top 100 grew in the category by $3.3 billion, or 18 percent.

The FY ’01 jump occurred within an environment that consisted of a 3.4 percent increase in the gross domestic product (GDP). The GDP increased by $335.2 billion to reach $1.02 trillion. With many nonprofits’ fiscal years coming to a close midway through the year, September 11 figures did not factor into the results. While the overall economy was showing signs of sloth, it had yet to reach its post September 11 crawl enabling nonprofits to grow, even if at a slower rate.

Public support numbers, at a glance, were solid for the civic/cultural organizations that made the list. As a group, income rose from $1.2 billion to $1.5 billion, despite the number of cultural organizations in the study dropping from 13 to 12.

A closer look reveals that the gain, taken as a whole, is misleading. The civic/cultural boost was almost singularly the by-product of a $421 million fund transfer by the Metropolitan Museum of Art in New York City.

The museum reported a public support tally of $499.2 million — a gain of $384.3 million — a 335 percent vault compared to FY ’00. Without the large transfer, the public support category would have had a gain of $2.1 billion, or 9.8 percent, still beating the GDP.

The large increase at the museum was almost entirely due to the dissolution of the Lila Acheson Wallace Fund and the transfer of that fund’s assets to institutions that were already receiving support.

The Lila Acheson Wallace Fund was set up during the 1980s when the founders of Readers Digest decided to form independent foundations to support different groups, explained Jeff Russian, deputy vice president for finance and planning at the Metropolitan Museum of Art. "Those funds have been supporting these organizations for a long time and they have also grown in value over the years as the stock grew," Russian said. "First it went public and the value of the stock had grown, and then some of it had been sold."

In the museum’s case, the balance transferred in FY ’01 was approximately $421 million. According to Russian, that figure is not really additional public support, it’s simply a transfer from a trust that had previously supplied support. The increase is realized when the entire principle is moved over into public support.

This multi-million dollar boost is a one-time event that clouds the figures a bit, Russian said. "In fact, our support went down when you leave that number out. It would be $80 million from about $114 million the previous year."

Another New York City cultural nonprofit expanded in public support, with the Metropolitan Opera Association’s 75 percent leap from $97.7 million to $171 million. But all was not caviar and hummus in the arts world. The Museum of Modern Art (MoMA) took a 53 percent plunge to $42.1 million in the second year of its current capital campaign. Fiscal year 2000 was the first year that the capital campaign had a full year of fundraising. It was such an extraordinary year in terms of the pledges received that 2000 was considered the exception rather than the rule, according to James Gara, MoMA’s chief operating officer.

Percentage-wise, the National Gallery of Art in Washington, D.C., has the dubious distinction of falling the furthest from its FY ’00 numbers. Plunging 77.8 percent, or $79.6 million, the gallery reported $22.7 million in public support. Officials were tight-lipped about the drop, with Chief Press and Public Information Officer Deborah Ziska only offering that the organization had "… several large bequests that came in the previous year. It’s coming back to earth following an out of the ordinary year." Figures from FY ’99 back Ziska’s claim as the organization reported $22.4 million that year.

The public support culture shock continued in the Midwest where limited construction projects stunted the data for the Art Institute of Chicago. Construction being the volatile industry that it is, organizations that receive a significant portion of funds to erect buildings are bound to take a hit when there are no structures to be built.

"The Chicago Park District, as part of a program in conjunction with several museums here in the city of Chicago, will literally help support different construction and renovation initiatives that we will undertake," said Tom Hallett, vice president of finance at the institute.

"Basically, it’s like a bond draw where as we incur the expenses they will, in effect, pay up to 50 percent of the project. So, as the construction expenditures occur we do our draws. In a particular year we could have a large amount of public support and the next year go down because we didn’t have the construction and the support that goes with it," said Hallett.

In some instances, nonprofits proved that numbers could continue to surge even in an environment when bread and butter fundraising is down. The American Red Cross (ARC) produced numbers that were driven by planned giving, including legacies, bequests and perpetual trusts, explained Jack Campbell, chief financial officer at the Washington, D.C.-based human services organization.

Campbell admitted that the ARC saw an approximately $48 million decrease in disaster relief revenues (ARC’s fiscal 2001 numbers did not include September 11) but that beside disaster relief, the other public support contributions realized an 8.5 percent gain. Despite the disaster relief shortcomings the ARC collected an additional $25.9 million for a total of $663.6 million in the category.

The United States Fund for UNICEF was consistent in its campaign gains. Major gifts increased by $600,000, the direct mail program collected an additional $2 million over fiscal ’00 and Non-Governmental Organizations’ contributions were up $800,000. But the most significant growth came with the arrival of two grants.

"The real reasons for the change were two significant things," said Ed Lloyd, chief financial officer at the New York City-based relief establishment. "One was a million-dollar grant from McDonalds for our MNT (Maternal and Neonatal Tetanus) program. The other one was a $15 million contribution from the Gates Foundation for our IDD (Iodine Deficiency Disorders) program."

Gifts In Kind International’s (GIKI) chief communications officer described its $75.7 million jump to $677.6 million as "nice but certainly not out of the ordinary." GIKI even pointed to a report that could spell an increase in public support that may top the $700 million level.

"The Conference Board put their report out not too long ago (referring to 2000) and it said that out of all the

contributions that corporate America is making about 33 percent now is in non-cash donations through product philanthropy," said Mike Kelly, spokes-person at the nonprofit’s Alexandria, Va., headquarters. "That is climbing as corporations are taking a look at product philanthropy as a way to contribute to the nonprofit world."