Despite treacherous road conditions and frigid temperatures, the Minnesota Council of Nonprofits (MCN) addressed a packed room in St. Paul to unveil a detailed report on the recession’s impact on nonprofits statewide. MCN’s presentation included a mixture of disheartening statistics, hopeful predictions, and strategies to address the ominous reality.
The event’s message was summed up by Kate Barr, Executive Director of the Nonprofits Assistance Fund when she advised, “Be confidant that you will prevail, but be brutally honest about the problems ahead.” The findings reported by MCN on the state of Minnesota’s nonprofit sector were troublesome but not surprising to the room full of nonprofit representatives. Many of them have seen their own budgets shrink in recent months, and are already preparing to trim their operations in 2009.
MCN release two reports at the event. The first was an annual Nonprofit Economy Report that tracks the economic health of nonprofits through employment, wage and financial statistics. The report includes statistics through the end of 2007, and offers insight into the early stages of the current recession. Findings reveal that the number of nonprofit employers declined in 2007, yet the number of nonprofit jobs increased at a strong rate, most notably in the healthcare sector.
Despite strong job creation data, however, the report identified several vulnerabilities for the coming year. Large organizations account for merely 6% of the nonprofit market, yet they bring in 85% of nonprofit revenue. These large organizations rely primarily on program services, which include government fees and contracts. While Federal funding tends to be relatively stable, Minnesota’s current budget forecast virtually assures cuts in local government funding streams.
Small organizations make up the vast majority of Minnesota’s nonprofits. These groups are more likely to rely on individual charitable donations and government grants to meet their budgets. Both funding sources are more likely to be impacted by an economic downturn as individuals tighten their belts and governments divert resources from grant processes. Thus small organizations are likely to face the greatest challenges in the year ahead.
In a first time effort to gather a real-time reaction to the economy’s impact on the nonprofit community, MCN conducted a survey between December 1st and 10th of this year and tallied the results in its Nonprofit Current Conditions Report. The survey’s timing was particularly important, because most individual charitable contributions are made in the 4th quarter of the year, a time when nonprofits focus their individual giving appeals.
The survey notes that “the impact of the 2008 recession on Minnesota’s nonprofits has been atypically quick and sharp.” During previous economic downturns many nonprofits have been shielded from immediate impact by the extended nature of grant cycles. This year, however, MCN found that organizations are being hit by dual challenges: declines in total revenue are being coupled with increased demand for services.
Nonprofits themselves are attempting to manage their assets. More than 49% of organizations surveyed reported that they have already reduced their staff, despite the fact that respondents identified a 42.4% increase in demand for services. More is being asked of fewer individuals attempting to meet the needs of the community.
Faced with decreases in funding and individual contributions yet increased demand for essential services, MCN urged its members to remain hopeful yet pragmatic. They will no doubt be called upon to meet an increasing need as the economy continues to witness possible layoffs, economic restructuring and decreases in some government spending, particularly at the state level. In response to the call for service, MCN encouraged nonprofits to refine their message, engage in meaningful advocacy at the state level, and be open to new ways of improving management and efficiency.
Nonprofits not only play a significant role in our local economy, employing nearly 1 of ever 10 workers in the state, they also meet critical human needs. As demands on government funding continue to increase, nonprofits will remain a crucial first level of support for all of those impacted by the economic recession. Together government agencies, individual contributors and nonprofit leaders must find ways to manage resources and when possible, remain generous in these times of decline.