Nonprofits hear a gloomy forecast about future funding

If nonprofits think the current economy is troublesome, the message from Frank Forsberg of the Greater Twin Cities United Way is hold on tight, it’s going to get worse.

“Make sure that you realize that the biggest challenges are still to come — they are coming in 2009 and 2010,” Forsberg, senior vice president of community impact, told a room of 200-plus nonprofit leaders Thursday.

Forsberg made his comments as part of an event titled “The State We’re In: Fulfilling Human Service Needs in a Time of Economic Uncertainty.” Sponsors were the Council of Agency Executives, United Way, MAP for Nonprofits and the Minnesota Council of Nonprofits (MCN).

Nonprofits are particularly dependent on government spending and private largess, which swing with the economy.

Nonprofits have ridden this economic roller coaster before, but they are taking this jarring ride in an already weakened state. Forsberg said, generally speaking, United Way-backed agencies have less financial stability today than they did six years ago, when the attacks of Sept. 11 set off a downturn.

He gave a cautionary note about United Way’s ability to help. His staff talks daily about creating a successful annual fund drive, he said. “On the other hand, we are putting contingencies in place for what happens if we fall a bit short.”

Warning flags
Other speakers added their own worry lines.

Nan Madden, Minnesota Budget Project director for MCN, said nonprofit human services are heavily dependent on government funding. They receive 18 percent of revenue from government grants, and 59 percent from service charges including government fees and contracts.

Here’s the warning flag: Most of this year’s state budget fixes were short-term, tap-the-reserve type solutions, Madden said. The session didn’t address long-term problems. As it stands now, the next legislative session will start with something like a $2 billion biennial budget hole. (Some, not all, will hit human services.)

Bill King, executive director of the Minnesota Council on Foundations, took that $2 billion figure to make a point about philanthropy’s limits. Minnesota’s foundation and corporate givers wouldn’t be able to “waltz in” and pick up the gap, he said. (In 2005, Minnesota’s total foundation/corporate giving was $1 billion.)

“That is the story we have to share with the media, with you and with the Legislature,” King said. “We can’t let government off the hook on these issues, even though I don’t know that we can put them back on the hook.”

The 2008 foundation grants are set, he said. “Next year and the year after … is what we have to be concerned about.”

Collaborate! Partner! Merge!

Forsberg challenged nonprofits to do a better job building collaborations and coalitions.

Jay Kiedrowski, senior fellow at the Humphrey Institute’s Public and Nonprofit Leadership Center, advised nonprofits to seek more partnerships with the public and private sectors and to consider mergers.

Kiedrowski also talked about the need to refocus philanthropy where the need is greatest.

“Some of our philanthropy is going to nice things,” he said. “But we have in today’s environment far more significant core needs of our society that are being unaddressed or inadequately addressed.”

Given a chance to respond, audience members reacted most to the collaboration challenge.

One participant noted it was difficult to rethink strategies when faced with growing service demands. Another said collaboration isn’t free and questioned who would provide the incentive money to make it work.

Michael Wirth-Davis, president and chief executive officer of Goodwill/Easter Seals Minnesota, questioned how nonprofits could “ratchet up” talks on alliances and mergers.

People are passionate about their organization and mission, he said. “We have to step out of that sometimes and say, ‘What does Minnesota need?’ ‘What do communities need?’ Not just, ‘What does our own organization need?'”

Dan Cain, president of RS Eden, agreed that the human services nonprofits — housing, employment, economic assistant, chemical dependency and mental health programs — could improve coordination. But he said he has heard the speech about nonprofits “doing more with less” for many years.

“We have done our part,” he said. “We have done more with less. We need more.”

That was the applause line of the event.

Up next: A follow-up session is set for July 23, 8:30-11 a.m., Zuhrah Shrine Center, 2450 Park Ave. S., Minneapolis.

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