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Nonprofits still feeling the crunch in Minnesota — bigger needs and smaller revenues

High unemployment means more Minnesotans need help from the state’s wide array of nonprofit organizations.

High unemployment means more Minnesotans need help from the state’s wide array of nonprofit organizations. But the lousy economy means many of those agencies are hampered in their ability to meet that need because of declining revenue.

That’s a finding in the Minnesota Council of Nonprofits survey released today and discussed at a town hall meeting this morning hosted by the council to help nonprofit boards and managers look ahead to conditions in the coming year.

Comprehensive survey
The survey was conducted early this month from responses by 639 organizations.

Sixty percent reported an increase in need for services, particularly those dealing with mental health and crisis intervention, food and/or housing and employment and jobs. Nonprofits in the south central and southwest parts of the state reported the highest increased demand.

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Yet 61 percent reported declining revenue so far this year. (Last year, that number was 55 percent.) And 60 percent reported a decline in revenue from foundations and corporate giving programs this year, while 47 percent reported a decline in individual gifts.

The use of volunteers is one way that nonprofits try to meet the increased need with fewer resources, the survey said. But even there, 10 percent of organizations reported a decline in volunteers in 2009. That was even worse in northern Minnesota, where about 19 percent had fewer volunteers this year. In the metro, only 8 percent reported fewer volunteers.

Smaller organizations, with annual budgets below $400,000, tended to fare worst. Said the report:

Sixty-three percent of small organizations experienced a decline in total revenue and 25 percent anticipate a cash shortfall next year. Although 59 percent have increased their fundraising efforts, 38 percent do not have reserves available and 86 percent do not have access to a line of credit.

So what to do?
Staff cuts and wage freezes were common stop-gap solutions. The report shows:

32 percent of nonprofits have reduced their number of employees, 52 percent have implemented hiring freezes and/or salary freezes, and 25 percent have reduced employee benefits. The larger the organization, the more likely it was to have cut employee benefits. Thirty-four percent of very large organizations (budget size over $10 million) reduced benefits, as did 32 percent of large organizations (budget size between $3 and $10 million). The types of organizations that most often faced staff reductions were health and/or disease related (42 percent), employment and jobs (41 percent) and mental health and crisis intervention (41 percent).

Other solutions: reducing overall budgets (52 percent), reductions in programming (21 percent) and putting expansion plans on hold (22 percent).

The federal stimulus helped
The reports says that 30 percent of organizations responding applied for stimulus funds and 53 percent of those were successful.

Most likely to get some: employment/job related organizations and food and/or housing organizations. And big nonprofits — $3 million or more annual budget — were most likely to ask for and receive the federal funds.

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And the recession didn’t stop all growth: 20 percent of non-profits said they hired more staff this year. Most likely to do so were human services and/or youth development organizations (32 percent), food and/or housing (12 percent) and health and/or disease (11 percent). Day
The Nov. 17 “Give to Max Day,” sponsored by the Bush, Minneapolis and St. Paul Foundations, gave a boost to state nonprofits. With the promise of matching funds, donors set a national record that day, raising $14 million. Sixty- five percent of organizations responding to the survey participated, with most reporting getting new donors because of the promotion.

Tough times to continue
As bad as it’s been, many nonprofits expect worse in 2010.

With unemployment expected to continue high, 62 percent predict an increase in demand for services and a decline in total revenues next year. Sixty-six percent believe that their organization will suffer from a decline in revenue from foundations and corporate giving programs and 52 percent think they will see individual contributions also decline. Of the 69 percent of nonprofits that had an operating reserve in 2009, 34 percent anticipate using it in 2010 and 67 percent anticipate cash shortfalls during the year.

Reported one mental health organization:

“2009 has not been as difficult a year as the next two will be. The 2007 Legislature was good for mental health and we still benefited from that in 2009. We are starting to see cuts for 2010 and anticipate more via unallotment and potential reduction in fees.”

And a residential treatment center said it is coping by:

“…using careful strategic planning, combined with transparency that supports an informed and positive work culture. We have a ‘we are all in this together’ approach focusing on continuous improvement to and focus on mission.”