With $6 million shortfall, United Way alerts nonprofits they'll be getting less

Greater Twin Cities United Way officials spent much of Thursday telling 150 nonprofits that their funding soon will be reduced or cut, as the large charity confronted a $6 million shortfall in its 2016 revenue.

President and CEO Sarah Caruso said that Twin Cities United Way had exceeded its 2016 fundraising goal by $2.2 million, raising a total of $87.6 million.

But that was still $11 million less than was raised in 2015, a drop of 11 percent, marking the second straight year that revenue had declined. United Way's revenue in 2016 was the lowest in seven years.

Caruso attributed much of the shortfall to the fact that more donors were designating specific charities rather than letting United Way decide how to spend their money.

"People are as generous as ever, but they want a clear line of sight between their passions, their philanthropic giving and their volunteer time," she said.

Overall, she said United Way-directed initiatives will be reduced this year by 9 percent. Every nonprofit and organization recipient will feel some of the pain.

"Every part of our giving portfolio is being affected at some level," Caruso said. "We are aware these cuts are causing real challenges."

She said that Twin Cities United Way will grant more than $75 million to Minnesota nonprofits this year. According to its website, it spends about 12 percent of its budget on marketing and administration.

Perspectives, a human services charity based in St. Louis Park, got the call Thursday that it will lose nearly $105,000 in United Way funding in the next 90 days. The cuts will eliminate $100,000 for the "Reading by 3rd Grade" program, which helps low-income children with literacy, and $5,000 for a supportive housing program for adults.

"I've been around for 35 years so I am used to the ebb and flow of dollars," said Perspectives CEO and President Jeannie Seeley-Smith. "I understand you can't take blood from a turnip, but I don't understand why you cut children's programs. That to me is a very poor decision when we are looking to the future and prevention. You just cut one of the most vulnerable areas."

Nine United Way staff members were laid off last week and executive pay was frozen, amounting to an 11 percent reduction in expenses. Caruso declined to say which staffers were cut, or how much donors gave as designated contributions.

"The financial problems arose quickly and we were not made aware of it until early February," she said.

Twin Cities United Way is the largest among 1,200 chapters in the United States. The charity is best known for its workplace giving campaigns, where it partners with companies to urge employees to give and then converts the money into grants to more than 300 programs at more than 150 nonprofits.

According to Caruso, more than 105,000 individuals and organizations contributed through workplaces and direct donations.

The United Way reported $98.6 million in 2015, down 3 percent from the previous year, and 177 staffers.

Caruso said the big drop between 2015 and 2016 was anticipated, because goals had been raised in 2015 for the United Way's centennial year celebration.

Caruso said they are now exploring ways to better meet the growing demand for customized giving. Among other things, United Way is looking to broaden its fundraising efforts with the use of more social media and "digital engagement."

"We are adapting our work to match donor choices and interests," she said.

Staff writer Patrick Kennedy contributed to this report.

Shannon Prather • 612-673-4804