LA Philanthropy Watch

Post #5 – Discarding a forecast and searching for better information

As I noted earlier, the assertion that 100,000 nonprofits (more or less) will fail has been widely quoted in the popular press, business media, and many nonprofit sources over the past year.  One hundred thousand (whether “as many as 100,000,” “100,000,” or “100,000 or more,” and regardless of the time frame – one year, six months, the duration of the recession …) is a fat, frightening number.  And the estimate came from a respected scholar.  By the time the authors of “Convergence” reported it, it was quite familiar to the nonprofit community.  It was also out of date.  Things change; we learn more; we have reason to reassess what we thought was a sure thing.  That’s the way scholarship works (and science, and business, and philanthropy, and so on).

I suggest that this forecast, no matter how well justified or how emblematic it was for a number of critical months, has lost its mojo; it should be retired from service.

As discussed in my previous posts, Paul Light, professor at NYU’s Wagner Graduate School of Public Service, has revisited this issue; in doing so, he has revised his prediction, given a brief description of his methodology, and commented more broadly about how nonprofits are faring right now.

Information please

In recent months (and before seeing his own reassessment) I was surprised not to encounter any challenges to Paul Light’s forecast, questions about his methodology, or objections that his assessment lacked corroborating evidence.  Moreover, I came across no discussions that put the 100,000 figure into perspective.  What’s the baseline?  How many nonprofits go out of business in a year when the economy is flat?  Is 100,000 ten times more, or twice as many, or …? (Perhaps such conversations have taken place in the halls of academia, public policy institutes, or foundations – but I saw no critical discussion in the popular press, in brand name nonprofit media, among various trade associations in the sector, or on well-known nonprofit blogs.)

At this point, I find the lack of public discussion more understandable: First of all, there is a consensus that the nonprofit sector has been hit hard by the economy.  Efforts are focused on surviving and thriving in this environment, not on quantifying how badly things may turn out.  When I spoke recently with Maria Stokes of the United Way of the Bay Area, she said that the media were no longer much interested in surveys assessing the challenges to nonprofits; they were concerned with nonprofits’ strategies going forward.

This pragmatic outlook – how do we navigate the fix we’re in – is of overriding importance right now.

Second, there is a dearth of data – especially data that is not literally years old – to help us get a quantitative handle on the threat the nonprofits’ survival. (This is a far cry from the ‘real-time’ information we’re accustomed to in other realms.)

Contrast this to the national economy, about which there is a multitude of data, including numbers on unemployment, foreclosures, productivity, state budget deficits, stimulus dollars spent, TARP funds recovered, and so on.  Accessible information about nonprofit failures is much harder to come by.

This information-vacuum has repercussions in the policy area.  Paul Light has observed, “Largely ignored during last year’s bailout party in Washington, nonprofits have been left to save themselves. The lack of any government response to the sector’s fiscal calamity appears to reflect a quiet agreement that there are just too many nonprofits out there. If the crisis pushes some nonprofits to the brink of failure, so be it.”

I’d like to strike a different note: one factor (among many) that allows this indifference is the lack of facts and figures.  Your Member of Congress (at least if s/he is in the majority party in a district with high unemployment) has a compelling interest in lowering the unemployment rate.  That’s a number that is regularly reported; furthermore, trend lines in unemployment can be plotted on graphs.  But the number of nonprofits going under?  If there are no data available, the problem is for all practical purposes nearly invisible.  Invisible problems, especially at a time with so many high-profile crises, are unlikely to become the focus of public policy priorities.

Question without an answer?

Will we get confirmation two (or three) years from now that 25,000 nonprofits (Paul Light’s most recent prediction) have been driven out of business by the recession and its aftermath?  Is it not at all clear – in the absence of an elaborate research project in our future – that we will ever learn how many nonprofits have crashed.  The National Center for Charitable Statistics may be researchers’ most reliable source of data on nonprofits, but it has no registry for nonprofit failures.  Charting nonprofits that go under would be a dauntingly difficult task.

The sector is huge and diverse – with many obvious consequences.  Outcomes for housing agencies may be starkly different than the outcomes for arts and cultural groups.  Huge nonprofit hospitals and HMOs may fare better than free clinics.  Funding sources vary widely across the sector.  Regional differences abound.  Furthermore, a nonprofit might disappear for many reasons: a catastrophic financial collapse, a merger with another institution, a conversion to for-profit status, and so on.

Amassing meaningful data to reliably measure nonprofit failures – across the sector nationally – may just not be in the cards.  As this realization dawned on me, my initial surprise faded.  Now I know better.

I appreciate the comments – in an email response to a question – of Marcus Lam, of UCLA’s Center for Civil Society, for providing a helpful perspective on the issues discussed in the final section of this post.

Previous posts in this series:

• Fourth post – Appeal to Surveys: Loss of 100,000 or More Nonprofits
• Third post – Emblematic Forecast: Loss of 100,000 or More Nonprofits
• Second post – Appeal to Authority: Loss of 100,000 or More Nonprofits
• First post – Myth or Fact: Economic Crisis Sounds a Death Knell for Nonprofits

Post #4 – Consideration of two surveys as justification for the forecast

In addition to referencing Paul Light’s November 2008 appraisal, the Irvine Foundation report references two surveys to document its embrace of the loss of 100,000 or more nonprofits forecast.  Let us consider each in turn:

Footnote 3 cites the report of a survey conducted by the United Way of the Bay Area.  The report, in the form of a May 28, 2009 press release [PDF], began, “One third of Bay Area nonprofits are concerned they may cease operations in the next year according to United Way of Bay Area’s 2009 Nonprofits Pulse Survey.  Correspondingly, 34% report they have two or fewer months of operating expenses in reserves.”

This survey of nonprofit organizations in 13 San Francisco Bay Area counties was conducted from April 14-27, 2009; I have no doubt that the report accurately reflected the 391 responses received.  But 7 months later, what are the implications of these survey results?

I recently spoke with Maria Stokes, Communications Director of the United Way of the Bay Area, to ask whether the extensive concerns of nonprofit failures had been realized over the past seven months.  She advised me that the United Way has not conducted another survey and is not aware of widespread failures.  This is not to say that things are rosy: nonprofits continue to struggle with declining revenues and increasing demands.

The United Way of the Bay Area has encouraged collaborations among the agencies it funds to help stretch resources and provide help.  SparkPoint, an initiative to assist families and individuals create financial plans to reach their goals – rather than simply to provide a ‘hand-out’ – focuses on integrating a bundle of services to help clients manage credit, increase income, and build assets.

There has been a 70% increase in calls to 2-1-1 for people seeking referrals for help with food, housing, employment, health care, and counseling.  (2-1-1 is a program, offered jointly by United Way and AIRS, in many regions of the country that provides local referrals for basic services.  Across California there are tens of thousands of community agencies providing human services – but how does one connect with them?  Calling 2-1-1 can resolve the issue.  Here is a link to the LA 2-1-1 website.)

But whatever anxieties were expressed – and as Paul Light suggested on September 28, 2009, “There is still plenty of anxiety…” – widespread failures since the April survey have not (as we enter December) been realized.  These survey results offer no justification for the claim that “100,000 or more nonprofits” will be lost.

Finally, note 3 cites an Urban Institute publication (dated July 2009) reporting that “57% of Washington-area nonprofits had less than three months of operating reserves (the industry standard) in the bank in 2006, indicating the vulnerability of many organizations even prior to the recent downturn.”

This survey (note: circa 2006) may suggest reason for concern, though we could ask how many of these nonprofits have survived during the intervening three years; the answer might help us evaluate just how dire this situation – operating with reserves below the “industry standard” – actually is in practice.  These survey results, however, can hardly be cited as justification for the assertion that 100,000 or more nonprofits are going under in the current recession (or over any specified number of months or years).

The Irvine Foundation report embraced a forecast – that gained prominence since its introduction in November 2008 – but that, based on what we know, was clearly out of date by November 2009.

Next post: Retire this Forecast: Loss of 100,000 or More Nonprofits

Previous posts in this series:

• Third post – Emblematic Forecast: Loss of 100,000 or More Nonprofits
• Second post – Appeal to Authority: Loss of 100,000 or More Nonprofits
• First post – Myth or Fact: Economic Crisis Sounds a Death Knell for Nonprofits

Post #3 – A look at a scholar’s prediction and his reconsideration of it

An article (cited in the report commissioned by the Irvine Foundation) in the Chronicle of Philanthropy [subscription required] begins with this sentence, “More than 100,000 nonprofit groups nationwide will fail within the next two years, including a few ‘big brand-name nonprofits,’ a scholar of philanthropy and government told charity leaders assembled here to discuss the fallout from the nation’s financial meltdown.”  This article appeared in the issue dated November 27, 2008.

On the next morning, November 28, 2008, the scholar, Paul Light, published an op-ed in the Washington Post, in which he made a similar (though not identical) prediction, “Of the nearly 1 million nonprofits up and running, as many as 100,000 will fail over the coming six months.”

And as late as March 3, 2009, the Colorado Springs Gazette reported, in an article describing Mr. Light’s keynote speaking engagement at Nonprofit Day 2009, “A national expert on nonprofits who will speak in Colorado Springs on Friday estimates that, because of the bad economy, 100,000 of the nation’s 1.3 million nonprofit organizations will collapse this year from frozen lines of credit, late payments by government entities and lack of efficient management.”

Whether or not this take on things represented Mr. Light’s thinking as late as March 2009 – even that was 9 months ago!  The Chronicle article and the op-ed Mr. Light penned for the Washington Post both appeared nearly 12 months before the Irvine Foundation report cited Mr. Light’s prediction to justify its own.  Much has changed since the initial prediction – with passage of a stimulus bill; the apparent technical end of the recession, even as high unemployment continues; and a lack of evidence that widespread failures have actually come to pass – and, unsurprisingly, Mr. Light’s views have changed as well.

In a series of posts in a blog at the Sandford School of Public Policy at Duke University, Professor Light has taken a fresh look at the state of the nonprofit sector in the “deepest economic recession of the century.”  These brief posts are worth reading in their entirety, and they certainly do not dismiss the severity of “the sector’s fiscal calamity.”  The third post (”Second Future: A Steady Withering”) suggests, for instance, that there has been “a steady withering of the sector’s general capacity to meet its mission.”

But the first paragraph of the first post (”Anecdotes ≠ Data. And Yet …”) concludes, “There is still plenty of anxiety about balance sheets, a double-dip recession, and inflation, but the anecdotes suggest that most nonprofits are still holding on despite the odds.”

The fourth post (Third Future: Winnowing of the Sector”) focuses on the predicted loss of 100,000 nonprofits.  Mr. Light writes, “ … At one point last fall, I predicted that as many as 100,000 mostly smaller nonprofits would disappear during the recession. This number was based on a simple extrapolation of small-business failure rates during the past two recessions. During the relatively mild 2001-2003 economic downturn, for example, roughly 10 percent of small businesses failed. Although the failures were almost entirely offset by the creation of new small businesses that were created by unemployed workers, there is little reason to believe that the nonprofit sector will not follow the pattern given the continued credit crisis.

There is ample reason to believe that some winnowing is underway, especially among smaller, government-dependent nonprofits. But it is difficult to estimate just how much winnowing will actually occur. There is no evidence yet of a wave of mergers and acquisitions, for example, and relatively few reports of nonprofit meltdowns. Whether the winnowing will reach 100,000 is clearly in doubt. But the probability of at least mild winnowing is still very high. The probability of 100,000 may now be close to zero, but the number will almost surely cross the 25,000 mark.”

While I intend to return to this less dire forecast in a subsequent post, at this point I believe we have grounds to suggest that the predicted “loss of 100,000 or more nonprofits” cannot be substantiated by appeal to Paul Light’s most recent words on the subject.  His reconsideration – and withdrawal – of the November 2008 forecast blocks this line of reasoning.

(Photo of NYU’s Wagner at the Puck Building from Wikimedia Commons.)

Next post: Appeal to Surveys: Loss of 100,000 or More Nonprofits

Previous posts in this series:

• Second post – Appeal to Authority: Loss of 100,000 or More Nonprofits
• First post – Myth or Fact: Economic Crisis Sounds a Death Knell for Nonprofits

Post #2 – On what basis does the Irvine Foundation report assert that 100,000 or more nonprofits will be lost to the recession?

The November 2009 report, “Convergence: How Five Trends Will Reshape the Social Sector,” [PDF] commissioned by the James Irvine Foundation, forecasts that the economic crisis will bring about the loss of 100,000 or more nonprofits.  The prediction appears in the second paragraph of the report’s introductory section (immediately following the Forward) titled, “What’s Next?  Moving at the Speed of Change.” To put things into perspective, let’s begin with a look at the first paragraph of this introduction.  It reads in full:

“The nonprofit sector, like the rest of the nation, has been riveted by the first great economic crisis of the new century.  This response is only natural, as the crisis threatens large numbers of organizations with, at the least, hard times, and at the worst, extinction.  But this story is not about that crisis.  The nonprofit sector is at an inflection point that will fundamentally reshape it long after the recession, when surviving nonprofits find themselves in a new reality – not just economically, but demographically, technologically and socially.  We call this shift NonprofitNext.”

The next paragraph – which features the forecast – begins:

“Already, national and global trends are changing the environment for nonprofits.  Thoughtful observers recognize that five years from now the sector will not simply have returned to its previous, pre-crisis state.  They know that a fundamental change in Americans’ attitudes toward credit, debt, risk, work and philanthropy, coupled with the loss of 100,000 or more nonprofits, will permanently change the landscape.”

In this passage the Irvine Foundation report embraces (though cast as the recognition of thoughtful observers) the predicted “loss of 100,000 or more nonprofits.”  The quoted phrase, in this amply documented report, is footnoted; the footnote reads in full:

“3 In 2008, NYU Wagner Professor Paul Light forecasted the closure of as many as 100,000 nonprofits in the coming year. (See: Paula Wasley. “100,000 Nonprofit Groups Could Collapse in Next Two Years, Expert Predicts.” Chronicle of Philanthropy 21 (4); 19.) In May 2009, United Way of the Bay Area reported on survey findings suggesting that one-third of Bay Area nonprofits fear they may cease operations within the next year. (See: “One-third of Bay Area Nonprofits Struggling to Survive, According to United Way Survey.” Press Release: 5/28/09. United Way of the Bay Area. Available at: www.uwba.org) And in July of this year, the Urban Institute reported that 57% of Washington-area nonprofits had less than three months of operating reserves (the industry standard) in the bank in 2006, indicating the vulnerability of many organizations even prior to the recent downturn. (See: Amy Blackwood and Thomas H. Pollack. Washington-Area Nonprofit Operating Reserves. The Urban Institute. July 2009.)”

This footnote cites three bases of support for the “loss of 100,000 or more nonprofits” assertion: a forecast by Professor Paul Light, a survey by the United Way of the Bay Area, and a report by the Urban Institute.  I will examine the latter two bases in a future post; right now, let’s turn to Mr. Light’s prediction (clearly the primary basis for the report’s embrace of the “loss of 100,000 …” assertion).

Paula Wasley begins her Chronicle article [subscription required] with this sentence, “More than 100,000 nonprofit groups nationwide will fail within the next two years, including a few ‘big brand-name nonprofits,’ a scholar of philanthropy and government told charity leaders assembled here to discuss the fallout from the nation’s financial meltdown.”

The scholar, of course, is Paul C. Light, Paulette Goddard Professor of Public Service at NYU’s Wagner School of Public Service.  Several related claims – all featuring the 100,000 figure – have been attributed to him.  The assertion that 100,000 nonprofits will fail has been widely quoted in the popular press, business media, and many nonprofit sources over the past year.  (Virtually everyone in the philanthropic community likely to read the Irvine Foundation’s “Convergence” has probably seen Mr. Light’s forecast – in one guise or another – during the past year.)  It is easy to see why Mr. Light’s forecast, which acquired an emblematic status, has become so well-known: Mr. Light is a well-recognized authority, frequently cited in the media with crisp, clear quotations illustrating policy and providing perspective; the simple clarity and economy of expression of the ‘loss of 100,000 …’ quote (in its various forms) became an illuminating short-hand for the challenges the economy has posed for nonprofits; and 100,000 is a nice – and scary – round number.

When push comes to shove, the report’s authors’ strongest justification for embracing the “loss of 100,000 or more nonprofits” assertion comes down to an appeal to authority: a respected scholar of philanthropy and government (aka a thoughtful observer) said it.

That would be fine (as far as it goes), except the scholar, Professor Light, has had occasion to reconsider the 100,000 figure.  In other words, whatever justification Mr. Light had for offering his prediction in November 2008 may not be available to the Irvine Foundation in November 2009.  In my next post in this series, I will look more closely at Mr. Light’s forecast and at his reassessment of the risks to nonprofits resulting from the ongoing recession.

Editor’s note: The monograph “Convergence” was commissioned by the James Irvine Foundation and written by Heather Gowdy, Alex Hildebrand, David La Piana, and Melissa Mendez Campos of La Piana Consulting; the report invites readers to comment at NonprofitNext.  (The image is from the report.)

Next post: Emblematic Forecast: Loss of 100,000 or More Nonprofits

Initial post in this series:

• First post – Myth or Fact: Economic Crisis Sounds a Death Knell for Nonprofits

Post #1 (in a brief series) – Just how hard a blow has the economy landed on the nonprofit sector?

Is the economy driving record numbers of nonprofits out of business?  Is a huge swath of the nonprofit sector at risk of such a fate?  A recent report commissioned by the Irvine Foundation (in a passage heralding fundamental, permanent changes coming to the nonprofit sector) forecast the elimination of 100,000 or more nonprofit groups.

Clearly the nonprofit sector has been hard hit by the financial crisis and the continuing economic downturn.  But is there evidence at this point that the dismal economy is causing (or about to cause) a multitude of nonprofits to disappear?  I will consider this question in a series of posts.

Let’s step back a moment to take stock: News reports, surveys of nonprofits, and anecdotal evidence suggest that fund raising revenues have declined in the past year and, among nonprofits that provide social services, demand for services has increased.  While this is unsurprising in the midst of the worst recession in decades, the juxtaposition of declining revenues and rising demand for assistance has posed huge challenges for nonprofits.

This difficult environment is a continuing concern.  In a recent essay – which offers spirited, eloquent advocacy for changes in philanthropic giving in a time of crisis – Pablo Eisenberg (”What’s Wrong With Charitable Giving – and How to Fix It” in the Wall St. Journal) describes the crisis in these words, “A severe reduction in available public and private funds has put many important nonprofit groups, especially at the local level, in grave danger. Cutbacks in their budgets and programs are depriving their clients of essential health and social services.”  UCLA’s Center for Civil Society just released a report – the 10^th in an annual series – which focuses on the resourcefulness of nonprofits to “do more with less” in confronting the ordeal of reduced resources and increased demands.  “Resilience & Vulnerability: the State of the Nonprofit Sector in Los Angeles” [PDF] does not foresee widespread failures, but does reference nonprofits’ challenge “to keep their doors open” and “survive in the longer-term.”

Nonprofit organizations have responded to this crisis in a number of ways, including: freezing hiring and salaries, laying off staff, spending down reserves, suspending new initiatives, cutting back programs, and turning away clients in need.  Nonprofits have intensified fund raising activities; many have entered into collaborations with other institutions.  These all represent rational strategies in the midst of challenging times: if this is not exactly business as usual (since the times are unusually challenging), at least it is suggestive neither of panic, nor of extensive failures forcing nonprofits to shut their doors.

The Irvine Foundation report [PDF] describes the challenges posed by the economic crisis in more dire terms – with the prediction of widespread failures:

“Thoughtful observers recognize that five years from now the sector will not simply have returned to its previous, pre-crisis state.   They know that a fundamental change in Americans’ attitudes toward credit, debt, risk, work and philanthropy, coupled with the loss of 100,000 or more nonprofits, will permanently change the landscape.”

This forecast (phrased as the realization of “thoughtful observers”) projects “the loss of 100,000 or more nonprofits” due to the financial crisis.

I will argue that this forecast is unjustified.  The economy has dealt a tough hand to nonprofits – but not many death blows.

Next post: Appeal to Authority: Loss of 100,000 or More Nonprofits

(Mourning angel in the churchyard of San Miniato al Monte in Firenze, Italy from Wikimedia Commons.)

1. CNNMoney has a report on “Stressful jobs that pay badly,” and the list includes fundraisers – 67% of whom say their jobs are stressful.  “Add in a recession and their job gets even more difficult. But fundraisers must persevere in order to keep worthy charities and non-profit organizations running.”  Nonetheless, it’s better to have a job than not.

2. The national unemployment rate has risen into double-digits for the first time in 26 years – 10.2%.  Delving into the numbers, Heather Boushey at the Center for American Progress, reveals a grim picture:

“The share of the unemployed who are ‘long-term unemployed’—that is, out of work and searching for a job for at least six months—remains at an all-time record high of 35.6 percent (going back to 1948). The typical worker is taking 18.7 weeks to find a new job—also a record high going back to 1948.”

And, “9.3 million workers are employed part-time even though they would prefer a full-time jobs; and the share of the population with a job has fallen to 58.5 percent, lower than at any point since 1983; adult men’s employment rates fell to 66.7 percent, hitting another all-time low (going back to 1948); and teens are seeing their worst labor market ever—unemployment among 16- to 19-year-olds is a record 27.6 percent.”

3. How many jobs have stimulus funds saved?

On October 20, the LA Times ran a story (by-line: Joe Markman) with this headline: “Stimulus saved 6,000 education jobs in L.A., report says.”  The source of this information was a White House report.

Since then Recovery.gov – Track the Money – has touted 640,329 jobs created/saved (as of 10/30/2009) as reported by recipients of stimulus funds.  A table suggests 110,185 jobs created/saved in California.  Critics have complained that roughly 650,000 jobs have been created (or saved) at a cost of $160 billion.  “By the critics’ calculations,” AP reports, “that’s over $246,000 a job — and a terrible deal for taxpayers. Why spend nearly $250,000 to employ a highway worker or a teacher making a small fraction of that?” But of course – it’s not just a job for a highway worker that was created; the cost includes construction materials and creation of a highway. There must be a value to that – as well as to the teacher’s efforts on behalf of students in the classroom.

As I mentioned, the Recovery.gov site numbers are tallies of reports by fund recipients.  So it should probably not be surprising that a call to LAUSD’s communications office yielded figures even rosier than the administration’s: Stimulus funds received by the district – $358.8 million.  Jobs saved – 7,601.

That’s only $47,200 a year per job.  Feel better?

4. Warren Buffett says of Berkshire Hathaway’s purchase of the Burlington Northern “It’s an all-in wager on the economic future of the United States.”  Coming from the shrewd investor, the surprising purchase is regarded as an expression of optimism for the direction of the economy.

5. The number of jobs advertised online declined by 83,200 in October the Conference Board reports (via Reuters).  “The September and October numbers are a further indication that, thus far, the recovery is weak,” said Gad Levanon, Senior Economist, at The Conference Board.  “Labor demand is a leading indicator of employment, and the numbers indicate that employment is not likely to rise for the rest of this year.”

6. The LA Times reports that CIT group, which provides loans to about a million businesses, filed for bankruptcy protection.    “CIT is the first firm to fail after a government bailout.”

7. George Soros has pledged $50 million – $5 million a year for 1o years – according to a report last week in the Financial Times (registration required, but no subscription), to back a new economic think-tank, to be named the Institute of New Economic Thinking.  “The ideologists in the free markets are still in command and I think they’ll be very difficult to remove because they have tenure,” Mr. Soros told the Financial Times.  He hopes to “shift demand” among university students, so economics departments will offer courses of study that are less wedded to strict mathematical models that assume strictly rational behavior.  (Via Philanthropy Today.)

From the business page of Sunday’s Los Angeles Times: Costco (which “has catered to bargain-hunting but affluent shoppers”) announced late last week that it will start accepting food stamps across the country, after a test run in its New York stores.  Costco executives said that during the New York testing “it turned out that new members said they were joining precisely because” the company accepted food stamps.  [Italics added.]

The Center on Philanthropy has noted (in a February 27, 2009 press release that I’ve cited a number of times in the past six months), “changes in personal income and wealth, both of which have declined in the past year, have a greater impact on charitable giving than do tax rate changes.”  In fact, in my experience virtually nothing has a greater impact on charitable giving than the state of the economy (though the performance of the stock market, often regarded as a leading indicator of the economy, also influences giving).

Until the economy (and the employment numbers) improve, nonprofits will continue to struggle with fund raising.  And social service organizations will continue to experience a demand for services.

Helmut Anheier, Founding Director of the Center for Civil Society, just left UCLA to become Dean of the Hertie School of Governance.  A professor of sociology, he is a well-known international scholar.  He flew back from Berlin to speak at the annual conference on the State of the Nonprofit Sector in Los Angeles (which I mentioned in a previous post).

Unfortunately, Mr. Anheier was scheduled to speak at the end of the program – by which point we had pretty much run out of time.  Although he rushed through his remarks, he did spend a few minutes considering the challenging environment nonprofits face, answering the question, ‘What do we know?’ and looking ahead to what we can anticipate.

Here is a summary of his remarks (which represent a reconstruction, not a transcript):

Every sector has been hit hard by the economy. Nonprofits have suffered because every potential source of nonprofit revenues is under stress.

Governments, especially state and local governments, are focused on ‘short-termism’- management of the current crisis; they lack capacity to come to the rescue.  The for-profit sector is cutting back on corporate social responsibility initiatives and lobbying government for handouts.  Foundations have seen assets drop precipitously, which has curtailed grantmaking.  Households are experiencing greater uncertainty, contributing fewer dollars, and reconsidering levels of engagement.

While we don’t know how this will play out, Professor Anheier suggested that we do know a number of things:

• As economic conditions unfold, the nonprofit business cycle will be delayed one to two years.  So, even if the economy continues to recover, nonprofits will experience difficulties well into 2010 and even 2011.
• Larger organizations, with greater capacity to weather the storm, will fare better than smaller organizations.
• Small nonprofits will go into ‘survival mode.’
• Board and staff members will try to compensate for the financial shortfalls at their organizations; their efforts will offer limited success at best and the risk of ‘burnout.’
• Nonprofits will have little say, as more powerful interests come to the fore.
• Few lessons – from the economic challenges of 1981 and 2002-03 – have been learned and remembered.

So going forward, what can we expect?  We will see:

• Muddling through, with nonprofits pretty much on their own.
• Mergers and rationalization for a number of years.
• Social costs shifted to families and individuals.
• Many innovations take place.  We should capture them, Mr. Anheier suggested; we can hardly afford to let them go unnoticed.
• Action Research Partnership.  UCLA’s Center for Civil Society and the Los Angeles nonprofit community are natural partners.

Just a final bracing word: Mr. Anheier noted that he is not optimistic over the short term.

(Photo courtesy of UCLA School of Public Affairs)

Nonprofit Finance Fund (NFF) has announced an initiative to assist Los Angeles nonprofits facing financial challenges by providing working capital loans and financial expertise – through workshops, consulting services, and detailed business analyses.

For this collaborative effort, NFF has teamed up with California Community Foundation, the Bank of America Charitable Foundation, First 5 LA, the Weingart Foundation’s Developmental Disabilities Initiative, and the California Wellness Foundation.

California Community Foundation president and CEO Antonia Hernández suggested that nonprofits addressing significant financial challenges needed more than just funding.  “By investing in their financial planning and decision-making capabilities, we’re positioning our grantee organizations to more efficiently and effectively serve the community.”

NFF, a 501(c)(3) is based in New York; it has a West Coast office in San Francisco.

In a page one story titled, “Sharing the Pain,” the Chronicle of Philanthropy’s Noelle Barton and Caroline Preston suggest – based on a survey of the 400 nonprofits that raise the most philanthropic dollars – that giving will drop sharply in 2009 and that 2010 will not be much better.  (Here is a free link to an abbreviated version of the article.)

Total charitable giving declined in 2008; in fact, Giving USA reported only the second decline in charitable giving since the foundation began doing annual surveys in 1955.  (I linked to this story in June.)  But the largest nonprofits, those with the most sophisticated and successful fund raising operations, fared better than smaller organizations last year: total contributions actually increased slightly at the top 400 nonprofits in 2008.

At this stage, however, things are looking less promising even for the elite 400 in 2009.  Institutions have redoubled their fund raising efforts as they scramble to reach more modest goals.  The Chronicle reports that the top nonprofits anticipate a median decline in giving of 9% this year.

Of the top 400 institutions profiled, 51 have headquarters in California; 15 are based in Los Angeles.  The fund raising results for the LA cohort varied widely among these organizations in 2008. Giving was up 25.2% at UCLA (which raised the most philanthropic dollars) and down 12.9% at USC (number 2 in LA). Contributions increased last year at just 5 of 15 Philanthropy 400 organizations in Los Angeles – by a whopping 439.7% at the Entertainment Industry Foundation!  Contributions declined (from 5.4% to 43.6%) at 9 top ranked organizations in LA.

Note: the Chronicle’s ranking is based on fiscal years ending in 2008; for LA-based organizations on the list, the end of the fiscal year ranged from June 30, 2008 to December 31, 2008 (with one exception, noted below).

To make this interesting, I have listed the 15 Los Angeles nonprofits on the Philanthropy 400 based on the percentage increase or decrease in fund raising they experienced in the past year.  In parentheses, I list their overall ranking on the Chronicle’s list (based on total dollars raised, not percentage of change).

Four Los Angeles institutions experienced increases in fund raising in 2008.  (EIF led the way; LACMA experienced the second greatest increase in fund raising; and so on.)

• Entertainment Industry Foundation (#118 on the Chronicle’s list of 400)
• Los Angeles County Museum of Art (#167)
• International Medical Corps (#400)
• University of California at Los Angeles (#32)

Philanthropic revenues were essentially flat at Childrens Hospital Los Angeles (#229) – technically up one-tenth of one percent.

Nine organizations experienced declines in fund raising; the first two organizations listed below declined less than 6%, while the last two declined by more than 40%:

• RAND Corporation (#371)
• Jewish Community Foundation (#241)
• KCET/Community Television of Southern California (#399)
• University of Southern California (#37)
• City of Hope (#198)
• Help the Children (#272)
• Cedars-Sinai Medical Center (#306)
• California Community Foundation (#157)
• California Institute of Technology (#206)

The Jewish Federation Council of Greater Los Angeles (#349 on the Chronicle’s list) is an anomaly; its ranking is based on the fiscal year ending on December 31, 2007.