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Lincoln Institute
of Public Opinion Research, Inc.

5405 Jonestown Road, Suite #110
Harrisburg, PA 17112

Phone: (717) 671-0776
Fax: (717) 671-1176

PA's Economic Climate Challenges Nonprofits

by Policy Brief
 

'Tis the season when many Americans donate to their favorite charity. While leaders in the nonprofit sector remain firm in their conviction that they are best suited to deal with Pennsylvania's social and economic challenges they are concerned that public trust in charities is not as high as it should be. Those are among the findings of the 2016 Pennsylvania Charitable Organizations Survey conducted during the month of November by the Lincoln Institute of Public Opinion Research, Inc. in cooperation with the Pennsylvania Association of Nonprofit Organizations (PANO).

Among the participating nonprofits just ten percent said that public trust in charities is "high," while 77% rated public trust as "medium." Nine percent felt public trust in charities currently is "low." Twenty-two percent of the nonprofit executives said the level of public trust in charities has gotten better over the past few years, but 31% said it has gotten worse.

Having said that, the nonprofit leaders feel their sector is best positioned to address Pennsylvania's social and economic challenges. Forty-five percent identified their own sector as best suited to address those needs; 22% think state government is most effective; while 6% cite the for-profit sector. Just three percent said the federal or municipal governments can best handle those challenges.

"Public trust," said Anne Gingerich, Executive Director of PANO, "is critical to the sustainability of any business - nonprofit, for-profit or government. When one nonprofit fails to live up to the highest standards it can damage the reputation of all." She continued: "Unfortunately these stories overshadow the hundreds of nonprofits who give selflessly to ensure that lives are changed, not just during the holidays but all year long."

Like their counterparts in the for-profit world, leaders in Pennsylvania's nonprofit sector say business conditions in the state have gotten worse over the past year rather than better. Concerns over potential new federal regulations and the growing likelihood of another extended state budget stalemate feed concerns that the commonwealth's business climate will continue to deteriorate during the year ahead.

The survey found 15% of the nonprofit executives view business conditions in Penn's Woods over the past year as having improved, 22% say business conditions have gotten worse. The majority - 63% - say the state's economy has remained about the same. But "about the same" is not good as business confidence, whether for-profit or nonprofit, has been low for the past two years.

By comparison, a September 2016 survey of owners/chief executive officers of for-profit businesses found only five percent saying the state's economy has improved in recent months while 50% said it had gotten worse.

Looking ahead, a third of the nonprofit leaders expect the state's business climate to get worse while 22% predict it will get better. Forty-four percent say the Pennsylvania business climate will remain about the same during 2017.

Despite their overall pessimism about the direction of the commonwealth's economy, employment was up at a quarter of the nonprofits, and down at 16%. That could be explained in part by some nonprofits stepping up hiring after having cut back staff during the budget stalemate of two years ago. However, looking ahead 22% say they expect to add employees while 14% predict staffing cuts.

Federal Regulation

Hanging over all sectors of the economy including nonprofits are U.S. Department of Labor (DOL) regulations that would increase the minimum salary requirements for "white collar" workers from $23,600 to $47,476 per year. The effect would be a significant increase in overtime costs. This is perhaps more significant for the nonprofit sector in that employees at many smaller nonprofits view their jobs as being community service as much as employment and often put in hours well in excess of those for which there are paid.

The 2016 Pennsylvania Charitable Organizations Survey found that the new regulations would increase payroll costs at 43% of the responding organizations as well as increase the amount of time spent tracking employee hours. The regulations are now on hold due to a federal court ruling, but should they go into effect 30% of the nonprofits surveyed said they would have to cut staff to pay for the increased costs of complying with the regulations; 11% would have to cut services and another 16% would respond by seeking additional volunteer help.

State Issues

Pennsylvania's nonprofit organizations were among those most significantly impacted by the lengthy state budget stalemate of two years ago. In light of that experience, 68% would support putting into place legislation that would incentivize lawmakers to adopt a state budget in a timely manner. Sixty-eight percent (some with board approval) said they would support legislation that would progressively penalize state lawmakers for missing the state budget deadline, with penalties increasing for each day past the June 30th deadline.

PANO's Gingerich said nonprofit support of legislation penalizing lawmakers for budget stalemates is not surprising. "Not only clients suffer as a result of the impasse, but nonprofits themselves had to lay off staff and borrow money to continue operations. As partners with state government in providing mandated services, nonprofits should ask to be at the budget negotiation table."

Unlike executives in the for-profit sector, nonprofit leaders are open to supporting a wide range of tax hikes. Thirty-seven percent said they would support an increase in the state's Personal Income Tax (PIT), while 22% said they would not. Another 41% offer no opinion on the question. Likewise 43% would support imposing a new natural gas drilling tax of up to 6.5% specifically to support human services. Thirteen percent would oppose such a tax, and 43% offered no opinion. Similar support levels were voiced for the imposition of a new public health tax (ie: sugar tax, soda tax) of 1.5 cents per ounce dedicated to human services. The highest level of support - 50% - is for dedicating a portion of taxes generated by Pennsylvania's gaming industry to support human services.

Organizational Issues

Despite their overall negative assessment of the direction of Pennsylvania's business climate, more of the nonprofits participating in the 2016 Pennsylvania Charitable Organizations Survey said funding for this calendar year has increased than have seen decreases. A third of the nonprofits said funding is up, a quarter reporting funding has dropped and 43% said their funding levels have remained about the same. Looking ahead to 2017 about half of the nonprofits predict funding levels at their organization will remain static; 30% say they expect funding to increase; 20% are braced for funding to decrease.

By a two-to-one margin nonprofits have seen state funding levels decrease over the past five years. Twenty-one percent said funding from the state had dropped during that period of time while ten percent saw an increase in state funding. The other half of the organizations said funding from state government has remained about the same. Likewise there has been a slight drop in federal funding. Sixteen percent said their organization's funding from the federal government has dropped over the past five years, 12% said federal funds have increased. Federal funding remained about the same at the remaining 45% of organizations surveyed.

Property tax exemption challenges remain a concern at some nonprofit organizations. Seven percent report having had their property tax exemption challenged over the past two years and 13% are concerned their municipal or county government may challenge their exemption next year.

Nonprofit organizations are not participating in lobbying activities in a major way. Just six percent say they have someone from their organization registered as a lobbyist under the Pennsylvania Lobbying Disclosure Act. Twenty-two percent have lobbied on a public policy issue at some level of government over the past year. Twenty-seven percent expect to lobby government at some level during the coming year. Gingerich urged nonprofits to engage in more lobbying activities. "Nonprofits must understand that not only can they lobby, but they are not doing their jobs if they do not. Together, the collective voice of the nonprofit sector has powerful, yet untapped power."

Methodology

The 2016 Pennsylvania Charitable Organizations Survey was electronically conducted during the month of November 2016. A total of 177 nonprofit organizations responded to the survey invitation. Complete numeric results are available at www.lincolninstitute.org.