Survey paints worrisome picture for Minnesota nonprofits

According to a survey of 660 Minnesota nonprofits, more than half have had declining revenues this year and one quarter had already cut staff. Nearly half report increasing service demands.

That data is in the Minnesota Council of Nonprofit’s (MCN) 2008 Nonprofit Current Conditions Survey. MCN is releasing the survey and its 2008 Minnesota Nonprofit Economy Report at a morning briefing. Afterward, it is holding a training and strategy session for nonprofit leaders trying to cope with a bleak fiscal forecast. Hundreds are expected to attend.

The survey numbers shouldn’t be surprising, given the state of the economy. Stories of stressed nonprofits have been rolling in. Food-bank donations are up, but still can’t keep pace with demand. The local chapter of the American Red Cross recently cut staff because of declining revenues. Today, the Star Tribune reports that Minneapolis-based Intermedia Arts faces a $100,000 shortfall on a $1 million budget and is “cutting programming, closing its two art galleries and making five of its six full-time employees part-time.”

True, when times get tough some people, foundations and corporations step up and give more. But government budgets are tight and cuts are coming. Endowment investments are dropping. Individual giving will be affected by job loss and the fear of job loss.

Conservation Corps: Dependent on grants, contracts
MCN surveyed its 1,950 members from Dec. 1-10 for the Current Conditions report; one-third responded. MCN provided MinnPost with contacts from organizations that had responded, including Len Price, executive director of the Minnesota Conservation Corps. Price said the Corps has or is making cuts in marketing, outreach, equipment replacement and travel. Some staff members already voluntarily reduced their hours; more will start cutting back in 2009.

The Corps gets about one third of its $3 million-plus budget from state government, the other two-thirds from conservation contracts (for trail maintenance, fire fuel reduction, wild-rice planting, etc.) Fee-for-service work might seem more secure than state funding, given the coming deficit. It’s not. Many Corps contracts are with cash-strapped government entities, such as counties and the State Department of Natural Resources.

Cuts could mean reducing the number of youth and young adults the Corps employs, now about 180-200 a year. On the optimistic side, Price said an Obama administration stimulus package could include money for Corps work.

“The worst-case scenario is to shut the door and say we will close it out, or we will really, really reduce our efforts for some period of time,” he said.

Courage Center: Creating many scenarios
Jan Malcolm, chief executive officer of the Courage Center, sees a double whammy coming. Courage Center serves about 12,000 people annually, providing medical therapies and other services for those with brain injury, stroke and other disabilities. It gets two-thirds of its money from reimbursements (Medicare, Medical Assistance, private insurance, etc.) Those don’t cover costs, so philanthropy has covered the gap.

So far, Courage Center hasn’t cut staff, but here’s the double whammy. If reimbursement rates get cut and the down market hurts philanthropy, “the gap could conceivably continue to grow beyond our capacity to manage it,” she said.

Courage Center had a $40.7 million budget in 2007. It projected 10 percent revenue growth for the fiscal year starting in October. (Most came from increased services, not higher rates.) That now appears optimistic. Malcolm said she hasn’t put a worst-case scenario on paper yet.

“What we are trying to get our arms around right now is how many scenarios to plan for, and order of magnitude,” Malcolm said. “We don’t want to overreact. … On the other had, we can’t afford to underreact and not appreciate the significance or the potential duration of the financial challenges.”

Families Moving Forward: No reserves
Leslie Frost, executive director of Families Moving Forward, said her small faith-based nonprofit in north Minneapolis is just getting by while service demand soars. It provides shelter and support for eight to 10 homeless families at any given time. Calls for help have increased from 50 a month in 2006 to 300 a month.

“We scraped the bottom of the checkbook in September. We spent down all of our cash reserves,” said Frost, who put the annual budget at $600,000. “We are operating on a month-to-month, quarter-to-quarter basis right now.”

Families Moving Forward is trying to boost in-kind donations so it doesn’t have to spend cash on paper supplies, toiletries and other basics. Fourth-quarter donations are up beyond projections, but Frost knows that social-service nonprofits are donation-lean in the first and second quarters. “I am confident that we will survive another three to six months,” she said.

Economy report: fewer nonprofits
MCN’s 2008 Minnesota Nonprofit Economy Report is based on numbers gleaned from 2007 data, so it doesn’t capture the impact of this year’s economic slump.

Last year, nonprofit jobs grew 4 percent, the sector’s strongest growth since the late 1990s. The report also pointed to belt tightening. The number of nonprofit employers dropped by nearly 3 percent, from 3,635 in 2006 to 3,533 in 2007. That’s the second year the number shrank.

Lumping all nonprofits together doesn’t tell the whole story. The nonprofit sector includes a wide range of institutions, from large hospitals with multimillion dollar budgets to small social-service organizations with a handful of staff.

Last year, nonprofit organizations continued to employ one out of every 10 workers in the state, a big chunk of the state’s economy. The bulk of those nonprofit employees — two out of three — work in the health-care field. Those health-care workers accounted for 75 percent of all nonprofit worker wages.

(The nonprofits taking the most staff cuts are those working in employment, legal/civil rights/advocacy/crime and human services/youth development, according to the 2008 Nonprofit Current Conditions Survey.)