Cutting back.

It has all the earmarks of a horrible good news-bad news joke. Just when the AIDS epidemic has reached the most hopeful period since the disease first appeared, AIDS organizations find themselves entering an era of dwindling donations and increased client loads. The result: critical budget shortfalls.

"We had hoped and prayed for years that people would stop dying, and they are," says Anthony Turney, executive director of the Names Project Foundation, which sponsors the AIDS memorial quilt. "As a colleague says, it's a silver lining that had one hell of a cloud attached to it. People want to wear a different-color ribbon these days. "

Forced to slash its $5-million budget by 30% in 1997, the Names Project Foundation has been one of the hardest-hit groups. One publication that follows charitable organizations has reported that the agency could face bankruptcy this year; Turney says such reports are "incorrect, untrue, and unfounded. "

The Names Project is hardly alone in its financial woes. Some AIDS organizations, such as AIDS Foundation San Diego, have folded altogether, while others, such as Stop AIDS in Chicago, have formed alliances with other groups to remain afloat. Even high-profile agencies, such as AIDS Project Los Angeles, are finding the charitable waters chilly; the organization's 1997 AIDS Walk attracted 3,000 more walkers but managed only to equal the take from the year before.

Not only are donations down, but a debate is raging about AIDS "exceptionalism" -- the idea that AIDS receives special, even undue, resources that elude other diseases. So far the controversy has yet to have a strong impact on public support for fighting the disease (President Clinton wants Congress to increase funding for the AIDS Drug Assistance Program by $100 million for fiscal year 1999), but if that support begins to erode as a result of the debate, public funding for AIDS may no longer be kept sacrosanct from bean counters.

"My experience is that we have always had this debate, but it now has been brought out into a much more public forum," says H. Alexander Robinson, administrator of federal affairs for the Cities Advocating Emergency AIDS Relief Coalition, a group that lobbies for federal AIDS funding. "It's not surprising that, in an environment where there's a lot of talk about balancing the federal budget and state and local budgets -- as well as a discussion about the equity of spending on various health care issues -- this illness would receive a lot of attention."

But a lack of money isn't the only problem. "It would be one thing if the need were declining along with the budgets, but that's not the case," says Ronald Johnson, a spokesman for Gay Men's Health Crisis, the largest AIDS service group in New York City. "People are living longer, so there are more people in need of some level of services."

The prospect of a rough 1998 can only add to the headaches of AIDS organizations, many of which had a difficult 1997. Numerous groups trimmed their budgets and staffs to stay within their newly straitened circumstances. "The budgets of many of our member organizations are declining," says Daniel Zingale, executive director of AIDS Action, a Washington, D.C.-based advocacy group. According to Zingale, at least half of the 2,400 organizations that belong to the group had to slash their budgets in 1997.

For most groups, the single biggest factor creating the budget crunch is a decline in charitable contributions. "The dollars are not coming in as fast and as heavy as we would like or need," says Johnson. For GMHC, the result has been a painful acknowledgment that its reach had exceeded its grasp. "We've had to revise the budget in light of some fund-raising shortfalls," says Johnson. "It did involve some layoffs of staff. So far we've been able to revise the budget and make some cutbacks without having too adverse an impact on our core client services." The cutbacks are distressing, though, coming just as the agency was preparing to move into new headquarters. Other problems also have made the agency look financially shaky. For example, an unanticipated hike in health insurance costs-from $250 per employee per month in 1989 to nearly $1,000 in 1997 -- forced GMHC to require workers to buy their own policies, for which they are partially reimbursed.

Other organizations have had problems similar to GMHC's -- or even worse. Robinson, who also serves on the board of the National Task Force on AIDS Prevention, a San Francisco-based group that assists gay men of color, notes that the organization cut its staff. The Names Project experienced its first problems last spring. "That was when we had the first signs that there was change in the air," says Turney. The group's direct-mail contributions dropped by 25%. Turnout at quilt displays, where the group also sold merchandise, plummeted as well, creating an estimated $250,000 shortfall in sales. "We got slammed very seriously in a short period of time," says Turney. As a result, the group cut its $5-million budget by more than $1.5 million and eliminated half of its two dozen staff positions.

Yet money problems lingered. At Thanksgiving the Names Project sent a letter to contributors seeking $500,000 by year's end, warning that otherwise it "may be unable to continue its critical work." The group has also turned to less orthodox methods of fund-raising, such as establishing a 900 number that allows callers to have contributions charged directly to their phone bill. Turney says the long-term goal of the Names Project's fund-raising efforts is to establish a permanent memorial, perhaps in Washington, D.C., where visitors can be reminded of the toll taken by the epidemic.

Still, not all organizations are shrinking. Zingale notes that AIDS Action's budget is up slightly but attributes that largely to an increase in member organizations. The AIDS Resource Center of Wisconsin has had its budget grow from $7 million last year to about $8.5 million by merging with five smaller regional organizations. "There is not any question that it was time for us to make sure we were the most cost-effective in our operations," says Doug Nelson, the center's executive director.

Many donors are just plain tired, creating a phenomenon AIDS groups call "donor fatigue." "I would certainly say that for the folks who have been the major donors to AIDS efforts over many years, it's not apathy," says Robinson. "But there's a feeling of being. maxed out or being quite frankly bored with what they see as a relentless, unending need. They've funded the food bank for 15 years, and they know people still need to eat, but they want to do something different." If anything, argues Robinson, donors are stretched thin: "The folks who contribute to us are also contributing to other national organizations, a local one, and one in their racial or ethnic community."

James Loyce Jr., chief executive officer of APLA, notes that while donations at the agency have dropped off, the number of donors from high-profile fund-raisers has not. "At [1997's] danceathon, we had 100 fewer funded dancers than the previous year -- not a statistically significant number," he says. "Yet the end result was $250,000 less. That says there was a lower amount raised per dancer. People who might have been willing to give $10, $15, or $25 in previous years are now giving $1, $2, or $5." As a result of such disappointments, APLA cut its projected budget last February by 5 % and laid off 20 staffers.

Loyce says the fact that donors are only reducing their giving but not stopping altogether is a hopeful sign. "As long as they haven't walked away completely," he says, "it means there's still an opportunity for us to craft messages to sustain those donors and maybe get them to increase the amount they're giving. "

Robinson argues, however, that not enough has been done along those lines. "It concerns me that we haven't been as aggressive as necessary in educating our donor base," he says. "We're much more engaged in the discussion around donor apathy. Part of our job is to say the changes require a new commitment and to energize our constituency. "

There may not be much time to do so. Complicating the already-tight fiscal situation is the ongoing debate that AIDS may be getting special, undeserved treatment. Publications as divergent as the New York Post and The Atlantic Monthly have questioned the idea of AIDS "exceptionalism." "AIDS victims deserve more than a child with leukemia and no hair?" wrote Marianne M. Jennings, a professor at Arizona State University and the mother of a child with a genetic disorder, in an opinion piece in the [Salt Lake City] Deseret News. "AIDS patients deserve more than the victims of Alzheimer's who spend their final years of life confused about their own identity and that of their families?"

While support in polls for AIDS funding remains strong, advocates are worried that the high-profile debate may erode that backing, leading to the possibility of reduced government money. "It's a tremendous concern," says Nelson. "It's very unfortunate terminology. We have worked for so many years to gain the attention and then the commitment of public officials. AR of a sudden we have this perception that AIDS is treated differently. I'm very concerned that we correct that perception and that we don't lose ground because of it."

So far, at least, the argument does not seem to have made much of an impression on Congress. "It hasn't made substantial inroads," says A. Cornelius Baker, executive director of the National Association of People With AIDS, a Washington, D.C.-based advocacy group. "There are members who never supported us, but fortunately they are few. Members see this issue in their district, so they understand the need." However, Baker adds, "I do think there are subtle warning signs" that a shift could take place.

"To tell you the truth, the signs from Capitol Hill [in 1997] were good," says Zingale. "We had the highest levels of AIDS funding across the board. I think 1998 presents an entirely new set of challenges."

If the future looks difficult, it is not the first time AIDS groups have had to struggle. History may be on their side once again. "AIDS has always been a challenge, because as soon as we thought we had something figured out, we discovered another challenge," says Robinson. "I'm hopeful, because we've always met them in the past."