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Red Cross announces another round of staff cuts as revenues drop

Faced with declining individual donations and investment income, the American Red Cross Twin Cities Area Chapter announced Wednesday that it had laid off 15 staff and would phase out a longstanding transportation program serving low-income people.

It is another blow for the blue-chip nonprofit. This is the Twin Cities Red Cross’ third round of staff cuts in three years. It had staff cuts after the 2006 merger of the Minneapolis and St. Paul chapters. Then in 2007, the Greater Twin Cities United Way announced it would cut Red Cross funding by $1 million, meaning more cuts.

The 2008 budget was $10 million, and the 2009 budget has been reduced to $7 million.

Prior to the 2006 merger, the Minneapolis and St. Paul chapters had a combined staff of roughly 130. With this latest round of cuts, the Twin Cities Area Chapter is down to 48 staff, or about 37 percent of the pre-merger total.

Another leadership change
The Red Cross also is going through its second leadership change in months. Chief Executive Officer Jan McDaniel resigned in October. Carol Grant took over as interim CEO. She left in late October because of a family emergency, said Sue Richter, the new interim CEO. Richter, a Red Cross executive who last served in Omaha, was brought out of retirement to fill in until a permanent replacement is named.

Richter said that lower-than-expected individual donations are the primary cause of the latest financial problems. The Red Cross’s fiscal year starts July 1. By October, it was clear that individual donations were “down very significantly” compared to the budget projections — i.e. the individual donations were 70 percent under budget from July to October.

“The good news is that things have turned around for the holidays,” Richter said, but it wasn’t enough to make up the losses in the first part of the fiscal year.

Further, the value of the Red Cross’ endowment (now approximately $4.3 million) has dropped 24 percent, she said. It is generating less interest income to support the organization’s day-to-day operations. (The drop in interest income was not immediately available.)

Transportation program cut
In a prepared statement, board president Dick Niemiec said: “The first step to achieving financial stability, and ensuring the continuation of our life saving programs and services to our community, is reducing expenses.”

The Red Cross is making core services a priority, such as disaster relief, service to military families and health and safety training. (The Red Cross Blood Service is run separately, has its own staff and was not affected by the cuts.)

The transportation program is the only program being eliminated. Richter said it provided 76,520 rides in the past year to low-income people for a variety of reasons. Some needed to get to medical appointments; others needed help with grocery shopping.

Most other Red Cross chapters do not offer such a transportation program, Richter said. The program had its strongest use in St. Paul. It got financial help from foundations, government grants, hospitals and fee-for-service. But revenues didn’t cover costs, estimated at $16 per ride. “We were subsidizing that program to the tune of about $10,000 a month,” Richter said.

The Red Cross will phase out the transportation program by the end of March. That gives clients time to find other transportation and the Red Cross time to find other organizations to pick up the service.

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