Business Charitable Donations Drop : Several Orange County Firms Buck Trend, Increase Giving

After increasing for three consecutive years, charitable giving by Southern California companies fell slightly in 1988, reflecting a national trend that poses a major fund-raising challenge for charities already coping with government cuts in social spending and federal laws that reduce the tax advantages of some donations.

Total giving by 108 of the area’s largest corporations and private foundations dropped to $263.1 million from $266.8 million in 1987, according to an executive summary of a report to be released later this month by the Southern California Assn. of Philanthropy. Both total giving and the percent of money given to Southern California organizations decreased for the first time since the survey began in 1984.

“When one is running a nonprofit organization--whether dealing with the problems of the homeless or drug abuse--this is not good news,” said Lon M. Burns, president of the philanthropy association. “Corporate philanthropy is one of the major sources of financial support for charitable groups. That support is shrinking and that should be of some concern.”

At least nine members of the philanthropy association are in Orange County. And two of those corporate members contacted Thursday said they are bucking the trend and are giving more to charity in this year, not less.

The Fieldstone Co., major Southern California home builders based in Newport Beach, said it is giving more than $1 million to charity this year, a 20% increase from last year, while Carl Karcher Enterprises, owner of the Carl’s Jr. restaurant chain, is donating about $640,000. A Karcher representative said the figure was an increase over last year, but did not say by how much, adding that the company routinely sets aside 2% of its pretax earnings to charity.

70 Mergers Last Year

Nationally, business enterprises, including foundations created by corporations, donated $4.7 billion in 1988. That is a 3.2% rise over 1987 but, after adjusting figures to account for inflation, corporate giving showed no growth, according to a study released last month by the American Assn. of Fundraising Counsel, a New York-based organization that tracks philanthropic contributions.

The slowdown in corporate giving, experts say, stems from the wave of corporate mergers, acquisitions and leveraged buyouts sweeping the country, experts say.

In California last year, there were 78 mergers or acquisitions valued at $10 million or more, according to W.T. Grimm & Co., a research group in Schaumburg, Ill. Nationally, there were a record 369 mergers in 1988 valued at more than $100 million--a 22% increase over the 301 mergers in 1987.

“When two companies merge, it is often followed by layoffs and a decline in matching gift programs” with employees, said Nathan Weber, a vice president with the American Assn. of Fundraising Counsel. What’s more, Weber added, acquired “companies also become heavily indebted and often don’t have (the resources) to keep operating two separate” charitable foundations.

Although nearly a dozen of the 108 California companies and foundations that were surveyed have been involved in a major acquisition or merger since 1985, none of six companies reached by The Times said they had reduced the level of charitable giving after such transactions.

“Our merger with Crocker Bank hasn’t affected our level of giving at all,” said Ron E. Eadie, president of the Wells Fargo Foundation, whose parent company, Wells Fargo Bank, acquired Crocker National Bank in 1986 for $1.07 billion. “In fact, we’ve increased our giving from $4.6 million in 1986 to $6.4 million in 1988,” Eadie said.

But in some cases, mergers can have a dramatic effect on giving.

Tax Changes a Factor

Early this year, for example, three corporate foundations were eliminated after Commercial Credit Corp. acquired Primerica Corp. in December, 1988, and renamed itself Primerica.

The diversified New York-based financial services group, which operates a number of units in California, including offices of its Smith Barney, Harris Upham & Co. investment house subsidiary, eliminated about $3 million in annual donations provided by the Smith Barney, Primerica and Commercial Credit foundations, according to Dee Topol, the recently hired chairman of the Primerica Foundation.

Topol said in 1990 the foundations will be consolidated and will resume making donations based on a percentage of Primerica’s corporate income. But she said the amount of money, initially, will probably not exceed $3 million.

Besides mergers, experts also expect the 1986 Tax Reform Act to have some impact on giving.

The reforms discouraged some philanthropic contributions by eliminating charitable deductions for taxpayers who do not itemize. The law also reduced the tax advantage, for business and individuals alike, of donating property that has appreciated in value.

Some Haven’t Felt It

Nevertheless, with the nation in the midst of a seven-year-long economic expansion and the California economy especially strong, many experts are surprised that corporate giving would be slowing.

“I’m somewhat surprised,” said Amy Damianakes, spokeswoman for the Pacific Telesis Foundation. She added that it is important for businesses to be generous in good economic times because when “business is having a hard time, no doubt the communities will be too and that’s the last time we want to turn our back on community needs.”

So far, many charitable groups and organizations--including the United Way of Los Angeles, which got two-thirds of its $83.5 million in donations last year from worker payroll deductions--say they have yet to feel the impact of the drop in corporate giving.

Education Attracts Funding

But Alan H. Woo, president of the Asian Pacific Community Fund of Southern California, said if the trend persists, it will increase competition for funds among charities and affect the operation of many service groups.

“What’s going to happen is that . . . those organizations with the best boards and the most famous celebrities will get all the money and raising funds will become harder, especially for those of us in the ethnic community,” Woo said.

The six-page executive summary of corporate philanthropy in Southern California found that members who gave more than $10 million are, for the first time, accounting for a smaller share of total giving.

Just five donors gave $10 million or more in 1988, accounting for 37.6% of charitable contributions in 1988, the survey found. More than half of all donations were in amounts ranging from $1 million to $10 million.

Among all donors surveyed, education continues to be the most popular category, accounting for 36.8% of expenditures. That was followed by social services (21.8%); arts and humanities (17.4%), and health and hospitals (14.6%).

DONATIONS BY SOUTHLAND FIRMS

Below is the annual amount of charitable funds donated by Southern California’s largest corporations and private foundations since 1985. Figures in millions. 1985: $199.5 1986: $244.7 1987: $266.8 1988: $263.1 Source: Southern California Assn. for Philanthropy