LA Philanthropy Watch

“The Great Recession has battered California’s economy and left millions of workers and their families without jobs and with reduced incomes. While home prices in most parts of the state have fallen substantially, the cost of health care, child care, and other basic necessities has continued to rise. As a result, millions of Californians continue to struggle to make ends meet.”

From the introduction of California Budget Project’s recent report, “Making Ends Meet: How Much Does It Cost To Raise a Family in California?” [pdf]  The report develops budgets (for single adults; single working parents with two children; two parent families with two children and one working parent; and two working parent families with two children) – by county – that account for the cost of housing, food, utilities, transportation, health coverage, payroll and income taxes, and miscellaneous living expenses.  The budgets, while not ‘bare bones,’ are modest; there is not much leeway for discretionary items, such as college savings, vacations, or emergencies.

In a two parent family (with two children and one working parent) in Los Angeles County, the basic family budget is $54,016 a year, which requires an hourly wage of $25.97 (for a 40-hour, 52-week year).

The California Budget Project (CBP) is a nonprofit organization engaged in: “independent fiscal and policy analysis and public education with the goal of improving public policies affecting the economic and social well-being of low- and middle-income Californians.
The CBP believes that information can help give voice to those who often go unheard in budget and policy debates.  ‘Knowledge,’ as the saying goes, ‘is power.’  Since 1995, the CBP has worked to make the budget more understandable and to shed light on how budget and related policy decisions can affect the lives of low- and middle-income Californians.”

HT: Rebecca Rona-Tuttle Liberty Hill’s News from the Frontlines blog.

“We are a fiscal poster child for what not to do,” said Ralph Martire of the Center for Tax and Budget Accountability, a liberal-leaning policy group in Illinois. “We make California look as if it’s run by penurious accountants who sit in rooms trying to put together an honest budget all day.”

The quotation is on the fiscal morass the State of Illinois – where I was born and bred – finds itself in today.  From yesterday’s New York Times, “Illinois Stops Paying Its Bills, But Can’t Stop Digging Hole,” by Michael Powell, July 2, 2010.

Several other quotes also got my attention, including this one on the dire economy nationwide, as states lay off literally tens of thousands of workers: “You’re not seeing these states bounce back, and that could be a big drag on the national economy,” said Susan K. Urahn of the Pew Center on the States. “It could be a very tough decade.”

Image of Rod Blogojevich (from Wikimedia) prompted by this passage in the article: “Few budget analysts are surprised to see Illinois, with a limping economy and broken political culture, edge close to the abyss. Two of the last six governors have served jail terms, and a third is on trial.”

1.  Last week, I reported that the Alliance for Justice had come out in opposition to the DISCLOSE Act – crafted to cast sunlight on unregulated corporate dollars in ‘independent expenditure’ campaigns – because of a special exemption created for the National Rifle Association.

The bill passed the House today 219-206 – with the exemption intact.  Senators Harry Reid wrote a letter this week to assure House Democrats that the Senate was prepared to take up the legislation.

“Currently, the Senate companion has 50 sponsors,” The Hill reported. “We commit to working tirelessly for Senate consideration of the House-passed bill so it can be signed by the president in time to take effect for the 2010 elections. We look forward to working with you to make sure that the Disclose Act gets signed into law.”

I can’t imagine why this bill would be expected to pass the Senate, because in the era of routine filibusters by the minority, it will need 60 votes.

2. Today the U.S. Senate failed to pass the bill funding emergency unemployment benefits for people who have been out of work for 6 months or more and assisting financially-strapped states, chiefly with Medicare funds – on a vote of 57 to 41.  That’s 57 in favor; 41 opposed.  In the Senate that spells defeat, since the rules require 60 votes to end a filibuster.  Nebraska’s Ben Nelson joined 40 Republicans to kill the bill.

Pat Garofalo at the Wonk Room points out the dire consequences for the states in the midst of the economic recession; the following excerpt begins with a quote from a Center on Budget and Policy Priorities report:

… stating that “without the extended Medicaid funding, Pennsylvania plans to cut funding for domestic violence prevention in half, eliminate all state funds for addressing substance abuse and homelessness, cut funding for child welfare by one-quarter, and cut payments to private hospitals, nursing homes, and doctors across the state — among other steps.” But Pennsylvania is not the only state that will have to take dramatic steps if Congress doesn’t act.

Arizona would have to cut funding for its state court system, Colorado’s likely cuts “include eliminating state aid for full-day kindergarten for 35,000 children, eliminating preschool aid for 21,000 children, and increasing overcrowding in juvenile detention facilities,” while New Mexico “could eliminate a wide range of Medicaid services, including emergency hospital services, inpatient psychiatric care, personal care assistance for the disabled, prescribed medications, and hospice care.”

Mark Zandi, chief economist of Moody’s Economy.com, estimated that 200,000 jobs could be at stake in this debate over Medicaid funding. “If state governments don’t get additional help from the federal government in the coming fiscal year, then the job losses will be at least that large — in all likelihood, measurably larger than that,” Zandi said.

3. Finally, Americans for Financial reform urged supporters to phone their Senators to urge them to support the Senate version of the bill that would force big banks out of the business of trading derivatives.

Carmen Balber at Consumer Watchdog was liveblogging about the negotiations this morning – but the conference committee never resolved the issue or the impasse regarding the Volcker Rule, to limit the banks from investing their own money in funds they manage.

Update – June 25, 2010: Negotiators reached a deal on financial reform after 5:30 a.m. ET.  From the Wall Street Journal (”U.S. Lawmakers Reach Accord on New Financial Rule,” by Damian Paletta):

“After more than 20 hours of continuous wrangling, Congressional Democrats and White House officials reached agreement on the final shape of legislation that would transform financial regulation, avoiding last-minute defections among New York lawmakers that had threatened to upend the bill.

After months of uncertainty about how the U.S. would craft new rules, the agreement offers the clearest picture since the financial crisis of how markets and the government will interact for decades to come. The common thread: large financial companies are facing a tougher leash.”

(Image of new $100 note from the U.S. Treasury.)

Consumers Union (the folks who publish Consumer Reports) has put together a check list to help people “move their money from the big banks who took billions in bailouts, to smaller local community banks and credit unions.”  This video – featuring George Bailey and Mr. Potter – describes the Move Your Money campaign, apparently inspired by Arianna Huffington and Rob Johnson (”Move Your Money: A New Year’s Resolution“) at the Huffington Post.

NPR’s Melissa Block interviews Susan Welch-Saunders, co-owner of the Ivy Bake Shoppe & Cafe in Fort Madison, Iowa about the state of the economy:

BLOCK: And now you’re saying you’re seeing an uptick. Is that just more people walking in the door? Are they spending more money? What do you see?

Ms. WELCH-SAUNDERS: Oh, yes. Definitely, more people coming in the door. I think instead of being a little conservative and maybe not getting the dessert with lunch, they’re spending a little bit more. So I’m very encouraged.

BLOCK: Maybe that’s the leading economic indicator right there? Do people go for the coconut cream pie?

Ms. WELCH-SAUNDERS: Exactly.

(All Things Considered, April 29, 2010.)

(Image from wikimedia.)

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.)