Recession will change nonprofits

[Editor’s note: A longer version of this article, with details from the surveys cited, appeared in the Cohen Report, a publication of The Nonprofit Quarterly.]

Rick Cohen
Rick Cohen

Rick Cohen

Despite the diversity of the nearly two million registered tax-exempt organizations in the U.S. ranging from mammoth universities to tiny neighborhood associations, they share the pain of the recession.

Budgets are dipping into the red, reserves are being depleted, government and foundation funding is shrinking, and nonprofit staff are signing up for unemployment benefits.

Based on surveys by nonprofit associations in six states, and by United Ways serving seven metro, areas, common trends include:

* As the economy went into a tailspin, many agencies ended 2008 in the red.

Almost half of agencies responding to the survey by Twin Cities United Way in Minnesota for example, finished the year over budget, and 47 percent of respondents to the survey the Minnesota state nonprofit association survey had reduced their budgets by the end of 2008.

* Large numbers of nonprofits report increasing service demands, although the sources of the cuts vary.

Forty-four percent of respondents to the survey by Atlanta’s United Way, for example, reported revenues decreasing over 10 percent, with another 26 percent reporting smaller reductions.

And 45 percent of groups responding to the Michigan nonprofit association reported they raised less in 2008 than in 2007, with arts and entertainment groups hit hardest.

* The big losses are predictable — government funding, foundation and corporate giving, and individual donations.

With the stimulus, government funding might not nosedive hugely, but the charitable and philanthropic revenue sources do not look like they are going to quickly return to past, higher levels.

Over half of United Way groups, for example reported decreases in individual donations, almost half reported decreases in corporate and foundation giving, and 43 percent decreases in government funding.

* Even before enactment of the $787 billion stimulus package, the omnibus spending bill with $7.7 billion in earmarks and a possible second stimulus package that might be passed in the first or second quarter of 2009, many nonprofits anticipated smaller budgets.

Most agencies responding to the state nonprofit association survey in Minnesota, for example, report reducing their 2009 budgets, particularly legal/civil rights groups (80 percent), arts and culture groups (62 percent), and human services groups (62 percent

* For most nonprofits, by far the largest budget item is personnel, making it a necessary target for reduction in times of fiscal stress.

Twenty-one percent of agencies responding to the United Way survey in Atlanta, for example, report that they have laid off staff, and 20 percent have reduced staff hours, with roughly the same proportions anticipating those actions in 2009.

The numbers may differ from place to place, with nonprofits in one region feeling the crunch more from government cutbacks, and suffering philanthropic retrenchment in another.

But nearly all nonprofits are contemplating some package of staff cuts, salary freezes and operating reserve calls.

And there is a common theme to many of the surveys.

Despite these dire economic circumstances, the majority of respondents express confidence in their organizations’ resilience and survival through the recession.

Is it bravado? Posturing for the sake of fundraising? Or a sense that despite the difficulties ahead, their members, constituents and donors will in the end carry them through?

However it turns out, the depth and projected length of this recession promises that the nonprofit sector will be fundamentally different after the “recovery”.

Rick Cohen is national correspondent for The Nonprofit Quarterly.

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