Charities are struggling to meet skyrocketing needs for critical services — from emergency food to financial help — and are expecting the situation to worsen over the next year, leaders of nonprofits told members of the governor's Cabinet yesterday.

The meeting was called to discuss how to help the growing ranks of the needy at a time when nonprofits are seeing big declines in funding.

"We're panicking," said Joanne Lundstrom, chairwoman of PHOCUSED (Protecting Hawai'i's Ohana, Children, Under Served, Elderly and Disabled), which represents many nonprofits. "We are facing a real crisis."

Already, some nonprofits say, they are overwhelmed.

The Hawaii Foodbank, for example, is being forced to send less food home with families because of spikes in requests and is restocking shelves more slowly than in years past because of a decrease in donations, said Polly Kauahi, the food bank's director of development.

Aloha United Way's 211 service, meanwhile, saw a 60 percent increase in food pantry requests in October, compared with the same month last year, a 50 percent increase in requests for rent assistance and a 300 percent increase in utility assistance requests. The 211 service directs people to nonprofits that can help them.

Kauahi said the situation will only worsen as nonprofits cut programs and lay off staff to make up for anticipated state funding cuts, declining donations and smaller grants from foundations.

"We've got to pull a really big rabbit out of our collective hats" to continue to help all the families in need, Kauahi said.

Members of the governor's Cabinet, including policy adviser Linda Smith and state Department of Human Services Director Lillian Koller, couldn't provide nonprofits with information on how much the state wants to slash from appropriations or grants in the coming fiscal year.

But they did say that big spending cutbacks — and other measures — are needed to pare down a mounting deficit. And they couldn't promise that contracts to nonprofits for the current fiscal year will be spared from the chopping block.

"We know they (spending cutbacks) will have effects on some organizations," Smith told the officials from the nonprofits , adding that the state is trying to make sure those cutbacks won't hurt the needy. "We can appreciate there's a lot of concern."

Gov. Linda Lingle has warned nonprofits that receive state contracts or grants to brace for the worst, given continued economic woes and a projected state deficit of $1.1 billion by 2011.

Last month, dozens of mental health providers got a taste of what's to come, when the state Health Department announced it would slash more than $25 million this fiscal year in spending on mental health services, mostly on individual case management.

VICIOUS CYCLE PREDICTED

Several charities that serve Hawai'i's neediest say they are projecting declines in funding this year or next of 25 percent or more. They say that will translate into fewer programs and more layoffs, which will then mean fewer people being served.

Most nonprofits are also bracing for disappointing results from winter donation drives, which, for some, raise most of the funds they need to operate in the coming year.

Sandy Baz, executive director of Maui Economic Opportunity, which provides job training, youth programs and other services, said there also are concerns about the long-term effects of the cuts.

"Right now, we are worried about tomorrow," he said. "How are we preventing homelessness so that later on we don't have to do a clean-up on the beach. That's something we're worried about in the governor's next budget."

Others echoed those concerns, saying the situation could result in higher domestic violence and incarceration rates, more broken families, spikes in crime and substance abuse and increases in homelessness.

Ruth Quitiquit, CEO of Parents and Children Together, expressed concern about the volatility of the financial markets.

"It's so unclear, even about what's going to happen within next week," she said.

During part of the discussion yesterday, Smith and others tried to focus on ways to shore up nonprofit budgets with more federal funds or new ways of spending state money. Smith said the new Obama administration could mean new sources of funding, but that money won't start flowing immediately.

Others also said nonprofits need to do more to reach out to individual donors.

Susan Doyle, executive director of Aloha United Way, said the state and other entities should consider nonprofits as economic drivers — especially since they are seeing such an increase in demand — as part of a "reframing of the relationship of this sector" to the economy as a whole.

There are about 5,000 charities in the Islands, nearly 1,800 of which reported annual operating budgets of $25,000 or more in 2006, according to the National Center for Charitable Statistics.

In total, the organizations represent about 8 percent of the state economy, generate about $4 billion a year and employ more than 50,000 people, according to state figures.