Nonprofit Squeeze: Donations Down, Volunteers Up

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In Minnesota the United Way's Sue Moyer oversees 44,000 volunteers a year.

David Bowman for TIME

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For the past few years, Carl Anglesea gave about $400 each year to charity. But he lost his job as a software developer in August, and since then Anglesea, 54, of Chuluota, Fla., hasn't given a dime. What he has done, though, is triple his hours as a volunteer AARP tax counselor helping people fill out tax forms. "I'd like to give cash, but I can't," he says. "So I'm committing to more hours as a substitute."

This is a trade that works well for Anglesea and many like him. After all, time is money, and community-minded individuals may be happy to give whichever of the two they are better able to spare. But the time-money swap, which is washing over the charity world like a tidal wave during this recession, poses stiff challenges for nonprofits. They can't pay the rent with volunteer hours. One in two nonprofits says its funding has fallen, according to "The Quiet Crisis," a new report by Civic Enterprises, a social-issues think tank. When the economy was this rotten in the early 1970s, charitable giving fell more than 9%, adjusted for inflation. Experts believe something like that will occur in this recession too.

The projected budget shortfalls come at a time when nonprofits' services are most in demand. Last year the United Way saw a 68% increase nationally in the number of calls for basic needs, according to "The Quiet Crisis." The state of Arizona reported a doubling in the number of people who sought social services last year, and 70% of the nonprofits in Michigan reported an increased demand for services.

The good news is that volunteers are stepping forward as never before. For instance, applications through the AmeriCorps online system for volunteer service in February were up 208% compared with the same month last year. Multiple trends help explain the rush to volunteer. President Barack Obama has made community service a central issue. Baby boomers are hitting retirement age in record numbers, with many looking to make good on the idealism of their youth. Yet it's folks who have always given money but no longer feel financially secure enough to do so who may offer the clearest explanation. Some 4.4 million jobs--including a heart-stopping 651,000 in February alone--have been lost since the downturn began. Plunging stock and real estate values have led the way, with Americans losing more than $11 trillion in wealth last year.

Cash-poor, time-rich volunteers like Anglesea have every right to believe that what they are doing is just as valuable as handing over cash. Indeed, the charity world puts a cash value on volunteers' time--$19.51 an hour, estimates Independent Sector, a think tank for charities. But food banks still need supplies to distribute, and volunteers' shift toward time, not money, is only part of what threatens nonprofit budgets for years to come. Traditional bastions of financial support have plenty of their own problems. Corporations and foundation endowments have been crushed by the stock market. State governments, a key source of fee-based support, are seeing slumping tax revenues. On top of all that, Obama has proposed to reduce tax breaks for wealthy people's contributions.