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Challenging Times

PA nonprofits weathering recession - for now

 

The effects of the 2009 state budget stalemate continue to linger for a substantial number of nonprofit organizations in Pennsylvania. Coupled with the impact of the national recession, nonprofits are experiencing a double whammy that has made nearly a third less able to fulfill their core missions at a time of skyrocketing demand for services.

Those are the key findings of the 2010 Pennsylvania Charitable Organizations Survey conducted in August by the Lincoln Institute of Public Opinion Research, Inc. in conjunction with the Pennsylvania Association of Nonprofit Organizations (PANO). Despite the challenging economic climate, nonprofits have employed a number of tactics to keep their doors open and even to provide additional services where needed. The survey also revealed an undercurrent of optimism over the future.

This optimism comes as no surprise to Joe Geiger, Executive Director of PANO: "Charitable nonprofit organizations have a resilience about them that has allowed for them to continue provide critical services in Pennsylvania. It is amazing that we are seeing in the numbers that a portion of the universe is doing better during this very challenging time. I suspect that the ones that are doing well started to make adjustments during the 9/11 and Katrina periods that better prepared them for this."

Geiger added that despite the fact most nonprofits have weathered the recession the economy must change for the sector to thrive going forward. "We are seeing that many of the organizations are doing more with less and that will not be sustainable over the long haul. This period is different than others where we could reasonably wait out the cycle and things would bounce back again," Geiger explained. "I believe we are in a new normal. I believe we will see numerous nonprofits fail to survive and that will mean misfortune for those served."

Eighty-nine percent of the nonprofits responding to the survey said the current economic recession has had a negative impact on their operations, with 29% labeling the negative impact as "significant." Despite, or perhaps because of the difficult economic times, 28% said they have increased the services they provide. Conversely, 21% have had to decrease their services while about half have maintained services at a consistent level.

The 2009 state budget stalemate has had a continued impact on those nonprofit that rely on state dollars to help fund their operations. Thirty-nine percent report lingering difficulties while 38% said the budget stalemate has had no lasting impact on their operations. Another 22% of the respondents said they do not receive any state funding.

The budget crisis resulted in significant delays in the flow of dollars to nonprofits across the commonwealth. Twenty-eight percent said they were forced to dip into a line of credit to maintain operations during the budget delay. Another aftereffect of the 2009 budget stand-off is that 43% of the respondents said they now receive less state funding than they did prior to the 2009-2010 fiscal year; 22% said their funding has remained about the same; and state funding increased at 3% of the nonprofits. Another 33% said they do not receive state funding.

In an effort to deal with the economic recession 32% of the nonprofits participating in the Lincoln Institute poll said they have had to lay-off staff with another 33% reporting they have reduced employee hours. Eighteen percent have cut salaries; 31% have reduced benefits; 34% discontinued providing some services; 26% have had to borrow operating money; and 45% have cancelled or postponed expansion plans.

This is reflective of the fact 45% of the nonprofit organizations reported that since the beginning of the year income to their organization has declined, 12% said their income has declined significantly. Twenty-one percent said their income has increased since the beginning of the year, and 34% say their income has remained about the same.

Looking ahead, 46% say they expect their income for 2010 to be about the same as it was in 2009; 31% expect their 2010 revenue to be less than they received in 2009, while 21% forecast an overall increase in funding.`

General Trends

In general, 48% of the respondents said business conditions in Pennsylvania have remained "about the same" over the past year. Thirty-nine percent said the state's business climate has gotten worse, and 13% view the Pennsylvania economy as having improved over the last 12 months. There is a bit of optimism about the future as 38% said they expect the economy to improve over the coming year, while 17% said they look for the recession to deepen. Forty-five percent said they expect business conditions to remain about the same.

A majority, 53% of Pennsylvania's nonprofit organizations say employment levels have remained about the same over the past year. But, 27% report having reduced employment levels compared to the 20% that have added employees. That trend may reverse itself over the coming year. Twenty-three percent said they expect to add more employees, while 12% expect to trim their payroll.

In terms of how the public views the job being done by the nonprofit sector, 71% said the public confidence level in the sector is "medium," compared to the 13% who view it as "high," and 9% who think public trust in charities is low. Forty-five percent said the level of public trust in the sector has remained "about the same" over the past few years. But 28% think public perception has gotten worse, while 22% say it has improved.

Public Policy Issues

With many nonprofit organizations dependent upon government at one or more levels for funding, lobbying and the laws governing lobbying remains a significant issue within the sector. There is disagreement among nonprofits as to whether or not they should even be required to register as lobbyists if they interact with government. Twenty-five percent said that, yes, nonprofits should be required to register as lobbyists. But, 44% said that nonprofits should not be subjected to lobbyist registration requirements. Another 31% said they didn't know or offered no opinion.

In fact, few nonprofits do register to lobby. Just 6% of those responding to the Lincoln Institute/PANO survey said they have registered under Pennsylvania's Lobbying Disclosure Act, while 82% said nobody from their organization has ever registered. That may be somewhat attributed to a lack of understanding about what the law requires. Forty-one percent said they understand provision of the act, while 42% said they did not.

When they do lobby, Pennsylvania nonprofits are more likely to lobby the state, county or municipal government than the federal government. Twenty-eight percent reported having lobbied the state government over the past year, 21% lobbied a county or local government, while 16% lobbied the federal government. Looking ahead, 29% plan to lobby government at some level over the coming year. As a side note, 34% of the respondents said county governments operate the most efficiently when it comes to providing social services; 15% credited municipal governments with being the most efficient; 12% gave a nod to the federal government; while only 9% said the state government was the most efficient provider of social services.

Health care also remains a key issue for nonprofit organizations throughout Penn's Woods. Eighty-three percent of the entities participating in the poll said they currently provide health insurance; 11% said they do not provide health insurance to their employees and have no plans to do so; 2% do not provide health insurance but expect to in the future; and 2% previously provided health insurance coverage to their employees but have discontinued the practice.

Of those who provide employee health insurance as a benefit, 26% of the employers cover the full cost; 54% split the cost between the employer and the employee with the business covering the major share of the cost; 5% split the cost evenly between employer and employee; and in less than one percent of the cases the employee pays the full cost of an employer-sponsored health insurance plan.

Organizational Issues

Despite confronting a wide array of challenging circumstances, 58% of the respondents to the 2010 Pennsylvania Charitable Organizations Survey said they have about the same ability to fulfill their core mission as they have had in past years. But, 29% say they have less ability to fulfill their mission; 12% say they are in a better position to carry out their mission.

Even in challenging times, few nonprofits are contemplating any material change in their status, such as merging or closing. Sixty-five percent said they expect no change in their status over the coming year; while 16% actually predicted they would expand operations. Only 3% indicated they planned a merger and just 1% expected to close their doors.

Despite the high levels of unemployment, many nonprofits are experiencing difficulty in attracting and retaining qualified staff. Forty-six percent said this is because salaries in the nonprofit sector are generally lower than they are in the for-profit or government sectors. Another 20% cited the generally better benefit packages offered by the other sectors. There also is a need for more people to serve on nonprofit boards of directors. A lack of time (39%) is the reason most people decline nonprofit board service while 31% of those approached are already committed to serving other organizations.

Methodology

The 2010 Charitable Organizations Survey was conducted as a collaborative project of the Lincoln Institute of Public Opinion Research, Inc. and the Pennsylvania Association of Nonprofit Organizations (PANO). The survey was conducted between August 3, 2010 and August 27, 2010. A total of 395 nonprofit executives participated in the survey. Complete numeric results can be viewed at www.lincolninstitute.org.

 

 


Taking the Pulse of Pennsylvania