June 19, 2019; Insider Louisville
This story is not new. It has repeated itself in many cities, small and large, in the last few years. The bottom line, however, is that United Way, a reliable source of unrestricted (or less restricted) funds for nonprofits, is telling its grantees to expect cutbacks in funding. Those cutbacks won’t be small, and they may cause major tremors for the nonprofit grantees. That’s bad news—for these grantees, and for United Ways.
In Louisville, Kentucky, Metro United Way announced funding cuts of 30 to 50 percent to almost 100 nonprofits. The reasons, according to Metro United Way, were changes in fundraising trends, including a shift away from United Way’s traditional payroll-deduction giving and contributors’ desire to earmark donations for specific projects. All of this resulted in a 32 percent decrease in unrestricted dollars. While their hope is that these cuts will not cause any of their nonprofit partners to close, the cries from their partners may indicate otherwise.
Dollars from the municipality of Louisville and surrounding communities for social services are also expected to be cut this year. They need to share these dollars with the arts and education organizations who also struggle for a piece of this pie. These nonprofits are facing a double whammy.
Other cities have bumped up against this United Way dilemma as well. In 2016, the Greater Twin Cities United Way in Minnesota announced a $6 million shortfall in revenue to its 150 nonprofit grantees. Also that year, United Way of Silicon Valley stopped giving grants in order to consider reorganizing and merging with the San Francisco branch of United Way. Their workplace-based giving program was not producing the revenues needed to fund their grantees.
United Way of Cincinnati warned its grantees, in advance, in 2018 to expect cuts. Last year, United Way of Northwest Vermont reorganized its means of granting to nonprofits and some grantees who had been recipients for many years received no funds at all, leaving them to wonder how they would survive. In February 2019, United Way of Central Carolinas announced that it would no longer use its reserves to meet budget needs that were met by lackluster fundraising. It told its grantees they would all receive a 25 percent cut in their grants.
All of this points to a once-worthy organization with a fundraising model that has outlived its usefulness. It also tells an equally sad tale of nonprofits that built dependency on a funding source that’s not able to sustain its model. In Louisville, Theresa Reno-Weber, CEO of Metro United Way, sees much of the change due to changes in the corporate landscape in the city. “We know that there’s been mergers and acquisitions, and there’s been headquarter changes, and there’s been turnover. And there’s been retirements, and there’s a new generation in the workplace.”
“And,” Reno-Weber said, “there’s more competition in workplaces,” offering employees ways to donate more broadly instead of just to United Way. As workers retire, their workplace donations are not replaced by the younger workers who replace them.
The bottom line is that United Ways compete for charitable dollars from corporations alongside everyone else. They are up against the local nonprofits that make their own “asks,” as well as the national and global nonprofit “asks” that now are a part of most corporate giving portfolios. United Ways have changed, but perhaps not enough for this highly competitive philanthropic environment. And, as the nonprofits in Louisville struggle to replace the dollars that are no longer coming from that source, finding new sources of revenue will not be simple. The United Way model has lulled many into a stupor, and the wake-up call may be harsh.—Carole Levine