Economic Crisis Hammers America’s Small and Midsize Nonprofits

(“small and midsize”= 93.7% of public charities spend less than $5 million annually; 82.3% spend less than $1 million annually;

“The slowing economy, a rising unemployment rate, spikes in food and fuel costs, and the decline in the housing market have social-services providers worried about their ability to raise enough money to meet demand. … Some charities have already had to reduce services or turn needy people away.” Candy Hill of Catholic Charities USA notes: “Some of our agencies are reporting the largest demands they have seen in decades for the most basic of needs, including food, shelter, and [other] help.” “Social-Service Charities Say Demand for Aid Far Outstrips Supply,” by Brennen Jensen,  The Chronicle of Philanthropy (Oct. 2).

♦ “FOOD PANTRIES DEPLETE: Record Numbers of People Are Looking for Food” – “All over Wichita, while recent news has been dominated by worries from Wall Street, the leaders of Wichita’s food charities have watched with growing fear as the number of people showing up for meals and food has set records.” Wichita (Kansas) Eagle (Oct. 14).

♦ “Food Stamp Participation Increases as Economy Lags” – “Almost a million more people participated in the federal government’s food stamp program for the needy between April and July … as a result of stagnant wages and rising prices for gas and other essentials.” Washington Post (Oct. 4).

♦ “Job Cuts Continue for Ninth Month” – “Employers slashed jobs at the fastest rate in five years in September [by 159,000 jobs – 2,269 employers each laid off 50 people or more], marking the ninth consecutive month of job losses [totaling 760,000 jobs] and providing another grim indicator of the deteriorating state of the U.S. economy.” Washington Post (Oct.4).

♦ “Spending Stalls and Businesses Slash Jobs” – “Layoffs have arrived in force, like a wrenching second act in the unfolding crisis. In just the last two weeks, the list of companies announcing their intention to cut workers has read like a Who’s Who of corporate America: Merck, Yahoo, General Electric, Xerox, Pratt & Whitney, Goldman Sachs, Whirlpool, Bank of America, Alcoa, Coca-Cola, the Detroit automakers and nearly all the airlines.” NY Times (Oct 26).

♦ “Cutbacks from All Corners” – “In response to the economic crisis, a quarter of U.S. companies polled expect to make layoffs in the next 12 months.” Washington Post (Oct.24).

♦ “At least 17 states have enacted or implemented cuts that will affect low-income families’ eligibility for health insurance or reduce their access to health care; at least 15 states are cutting medical, rehabilitative, home care or other services needed by low-income people who are elderly or have disabilities.” Policy Points (Oct. 20 ed.), Center for Budget & Policy

Priorities.

♦ “As jobs disappear and employers begin trimming expenses, we can foresee people losing health insurance, swelling the ranks of the medially uninsured. I don’t think the health care system can bear another five million or more people uninsured and economically fragile.  More people will crowd into nation’s emergency rooms when medical problems become too severe to ignore of there is not other access to basic health services. Such a trend will have a seismic impact on our health care system.” Dr. Irwin Redlener, President of Children’s Health Fund, in “Crisis on Many Fronts,” Bob Herbert, NY Times (Oct. 25).

♦ “In Phoenix, where the high rate of foreclosures has left a surplus of single-family homes and a dearth of low-cost rental apartments, the homeless shelters run by Central Arizona Shelter Services (CASS) are routinely filled beyond capacity. As many as 170 people a night now sleep on an asphalt parking lot adjacent to one of the charity’s downtown shelters. Facing budget constraints, the City of Phoenix cut its annual support for CASS by $110,000 this year.” “Social-Service Charities Say Demand for Aid Far Outstrips Supply,” The Chronicle of Philanthropy (Oct. 2).

[N]onprofits accustomed to generous grants from banks and financial services firms, especially those in housing and community development nonprofits [followed by education and youth groups] should all be prepared for some long, hard efforts to make up for some potentially prolonged fundraising shortfalls.” Rick Cohen, The Cohen Report, Nonprofit Quarterly (Sept. 27).

♦ “Foundations and Charities Harmed by Economic Turmoil” – “Some foundations are responding to investment losses by cutting back on grant making, although others say they plan to maintain or increase their giving to help struggling charities weather the crisis. … The nonprofit health clinics that the [California Community Foundation] supports are already seeing declines from governments and corporations – and private foundations may be next in line to cut funds.” The Chronicle of Philanthropy (Oct. 3)

♦ “33 states faced or are facing shortfalls in their 2009 budgets” and “the state revenue situation is rapidly worsening”

�� “Thus far in fiscal 2009, personal income tax revenue is running 1% to 7% below last year’s level, reflecting rising joblessness and slow wage growth. Recent stock market declines and continued job losses will depress revenues further.”

�� “Sales tax revenue is running 3% to 12% below last year’s level in major states, reflecting a fall in both personal consumption and business purchases.”

�� “State spending levels were relatively low even before this crisis. Aggregate state spending … when states adopted their 2008 budgets … remained below the 2001 level as a share of the economy.”

�� “State budget reserves to address funding gaps are largely spent.”

�� “Several states already have enacted tax increases, closed loopholes, restricted tax credits, increased tobacco taxes, raised tuition, or implemented other revenue-raising measures. … Also, at least 20 states have proposed or implemented cuts to their state workforce.” Policy Points (Oct. 20 ed.), The Center for Budget and Policy Priorities.

♦ “Financial Crisis Takes a Toll on Already-Squeezed Cities” – “With tax receipts from retail sales and property values plummeting as unemployment rises, city officials … across the country say they are feeling increasingly squeezed and helpless as the national economic crisis eats away at the core sources of revenue. … All over the country, parks are being sold, fees for routine services are going up, and city workers are being laid off. [One city official said] ‘Unfortunately, this time around there’s going to be direct service cuts …police and fire, and parks and senior services, libraries.” NY Times (Oct. 7).

♦ “With all that’s happening in the economy, John Q. Public is starting to have a hard time taking care of himself and might not have much left over to give,” according to a nonprofit executive. “Social-Service Charities Say Demand for Aid Far Outstrips Supply,” The Chronicle of Philanthropy (Oct. 2).

♦ “As corporations across the country try to control their costs, employee benefits have taken a hit. In a recent survey … 21% said they have asked employees to pay a larger share of their health-care premiums and 11% have frozen or closed pension plans.”

♦ University of California, Berkeley:  announced $3 billion campaign on Sept. 19, 2008

♦ University of Texas at Austin:  announced $3 billion campaign on Oct. 17, 2008

♦ University of Virginia: $3 billion capital campaign (2006-2011)

NOTE: This is just a tiny sampling of the various public institutions with announced capital campaigns; other always maintain huge development staffs when most nonprofits don’t even have one person fully dedicated to fundraising.

Community-based nonprofits touch all spheres of an individual’s life – mind, body, soul:

♦ fuel the mind (e.g., arts, literacy groups, and museums)

♦ protect the body (e.g., domestic violence & homeless shelters, environmental groups, public health)

♦ feed the body (e.g., food banks, meals on wheels, and soup kitchens)

♦ heal the body (e.g., blood banks, hospitals and clinics, and substance abuse centers)

♦ exercise the body (e.g., sports clubs, summer camps, and youth sports)

♦ nurture the soul (e.g., religious congregations, service organizations, and volunteer centers)

Community-based nonprofits also add value to the broader community, by serving as:

Champions of the Common Good

�� Nonprofits monitor government operations to ensure accountability to the people.

�� Nonprofits provide a means for people to collectively promote justice, such as protecting vulnerable children, the elderly, the sick, the homeless, the abused, and the poor.

�� Nonprofits can do things that government sometimes cannot and should not do (such as religion), allowing diversity of ideas and activities to blossom.

Protectors of Taxpayers

Consider how much it would cost taxpayers if nonprofits disappeared and government had to supply all of the services nonprofits provide, including “relief of the poor, the distressed, or the underprivileged,” “prevention of cruelty to children and animals,” “advancement of education or science,” “combating community deterioration and juvenile delinquency,” and other services “beneficial to the public interest,” such as child care, homes for the aged, volunteer fire companies, and health care and hospices. 

Laboratories of Leadership

Nonprofits serve as a natural laboratory for people to develop their leadership skills, including public speaking, facilitating a meeting, conflict resolution, developing consensus, and much more.

Incubators of Innovation

Economic Engines

�� America’s nonprofits employ more than 9% of the nation’s workforce – which is more than all of the employees working for the finance, insurance, and real estate industries combined. SOURCE: Final Report of the Panel on the Nonprofit Sector (2005). When adding the value of volunteer labor, the economic impact of America’s nonprofit sector skyrockets.

�� The economic impact of the nonprofit sector expands further than payroll and number of workers. Consider, for example, the broader positive ripple effect that nonprofits provide to America’s economy by, among other ways, generating additional jobs and dollars for other businesses through sales to keep the nonprofit workforce (paid and volunteer) equipped – by buying buildings, cars, computers, desks, equipment, other items, and vast amounts of paper, pens, and other supplies.

Weavers of Community

Nonprofits provide a space for individuals to weave invisible networks of connections that build and strengthen the social capital of their communities. In so doing, nonprofits provide ways for individuals to build their own sense of community as they increase volunteers’ awareness of important societal issues and transform volunteers into more informed citizens