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Lincoln Institute
of Public Opinion Research, Inc.

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Harrisburg, PA 17112

Phone: (717) 671-0776
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Tough Times

Nonprofits struggle to deliver as recession lingers


by Lincoln Institute
 

The lingering national recession continues to have a profound negative effect on Pennsylvania nonprofit organizations, causing some to doubt their ability to fulfill their mission amid a growing sense of pessimism about the future. That is the overall picture to emerge from the Lincoln Institute's 2011 Pennsylvania Charitable Organizations Survey.

Conducted in collaboration with the Pennsylvania Association of Nonprofit Organizations (PANO) the annual poll of nonprofit leaders from across the commonwealth found 89% have been negatively impacted by the recession.

This has caused a third of the respondents to report they are less able to fulfill their mission than in past years. But, nonprofits are accustomed to doing more with less; as a result over half say their ability to fulfill their mission remains about the same, while 11% reported a greater ability to fulfill their core mission. "For now nonprofits are able to continue providing essential services," said Joe Geiger, Executive Director of PANO. "But, they are doing this without the capacity to sustain their operations. Many challenges lie ahead.

As with their for-profit counterparts, 2011 has been difficult economically for nonprofits. Forty percent said that business conditions in Pennsylvania have gotten worse over the past year; only 12% said the state's economy has improved while 53% said conditions had remained about the same. Remaining the same, however, is not good in that last year by a four-to-one margin, charities reported business conditions had gotten worse.

Looking ahead, charities are less optimistic that business conditions will improve than they were at this time last year. Twenty-six percent said they expect business conditions to get worse in the coming 12 months, up from the 17% that predicted deteriorating conditions a year ago. Twenty-seven percent said they expect the economy to improve, down from the 38% who last year said they foresaw improving conditions.

One casualty of the ongoing recession is employment. Taken as a sector, nonprofits are a major employer in Pennsylvania. But, 30% said they have cut employment levels over the past year, while 17% have added to their payrolls. Employment remained stable at 53% of the agencies. Nonprofits are less optimistic of changing that course than they were last year. Nineteen percent said they expect employment levels at their business to increase over the coming year, down from 24% who forecast adding employees last year. Those predicting a drop in employment rise from 12% last year to 16% in the current survey.

Despite, or perhaps because, of the down economy 28% report they have increased services over the past year. Funding may be down, but at many organizations demand is up as families and individuals cope with chronic unemployment. Twenty-three percent say they have been forced to cut services, and 49% said their service levels have remained about the same.

To survive during the recession, 36% report they have been forced to discontinue providing some services (some while opting to increase others), while a third say they have cancelled or postponed expansion plans. Twenty-nine percent of the nonprofits have had to lay-off staff, 31% have reduced employee hours, 26% have cut or eliminated benefits and 12% have cut salaries. Twenty-two percent say they have been forced to borrow money to cover operational costs.

Health insurance remains a major cost driver for nonprofit businesses. Seventy-seven percent say they continue to provide health insurance to their employees, 3% have discontinued the benefit. Fifteen percent said they do not offer health care benefits to their employees and have no plans to do so in the future. Another 4% do not currently provide health insurance, but expect to begin doing so. Among those who do provide health insurance, 49% say the cost of coverage is split between employer and employee. At 22% of the organizations the employer covers the full cost of health insurance coverage.

In addition to economic difficulties, the nonprofit sector has struggled in recent years with a number of high profile scandals that have eroded public trust in charities. Respondents to the Lincoln Institute/PANO 2011 Pennsylvania Nonprofit Organizations Survey say the credibility climate has not improved. Forty-five percent said the level of public trust in charities has remained about the same over the past year, but 28% said it has gotten worse while only 21% said trust levels have improved. Asked to rate the current level of public trust in the work of charities, 61% rated it as medium, 16% as high and 16% as low. "Given the many contributions nonprofits make to our communities it is a shame the actions of a few have caused public perceptions to remain so low," said Geiger.

Government Impact

The recession has negatively impacted individual and corporate contributions, adding to the woes of nonprofits has been declining funding from government. Forty-four percent of those participating in the Lincoln Institute/PANO poll said their level of funding from state government has decreased over the past year. State funding stayed about the same at 17% of the organizations and increased at 1%. Another 37% said they do not receive state funding.

When it comes to providing social services, counties get credit for being the most efficient. Thirty-eight percent said county government was the most efficient level of government in providing social services, 15% cited their local or municipal government; 15% gave state government credit for efficiency, only 5% said the federal government was the most efficient at providing social services.

A major issue impacting community benefit organizations throughout the state is lobbying. A new state law enacted several years ago requires nonprofits to register if they lobby for funding or improved public policy. Thirty-nine percent of those participating in the 2011 Pennsylvania Charitable Organizations Survey said they do not think nonprofits should be required to register under the Lobbyist Disclosure Act. Twenty-nine percent thought registering was a reasonable requirement. Thirty-two percent said they didn't know or offered no opinion.

A substantial majority, 83%, said they are not registered to lobby, only 7% have registered as lobbyists with the commonwealth. Moreover, almost half said they do not understand what is required under the lobbyist disclosure laws. Despite this, 32% report having lobbied state government on a public policy issue during the past year, 17% have lobbied a local official (county, school district or municipality) and 14% have lobbied the federal government. Thirty-one percent said they plan to lobby over the coming year. "These numbers reflect a very low percentage of nonprofits engaging with government," PANO's Geiger explained. "Our sector must do a better job in working with elected officials."

Financial Matters

A third of the nonprofit organizations surveyed by the Lincoln Institute/PANO said they have seen income to their entity decrease moderately since the beginning of the year, an additional 10% report having experienced a significant loss in income. Another third said income this year has remained about the same. At 20% of the nonprofits income is up moderately, 2% have seen a significant increase in income.

Among those reporting a decrease in funding, the biggest drop came in state funding as 28% report a moderate drop in dollars received from the commonwealth with an additional 21% reporting a significant drop in state funding. The next biggest decrease in income was from grant making foundation funding with 34% reporting a drop in grant dollars. Likewise, a third of the nonprofits say giving was down from individual donors. Those nonprofits reporting an increase in giving cited their biggest increase came from individuals (19%) followed by moderate increases from program fees (13%) and from foundations (8%).

A nugget of good news emerged in that 14% of the nonprofits report they plan to expand their operations in 2012, while just 2% forecast closing their doors.

Operational Issues

More nonprofit organizations are turning to social media as part of their communications plan. Ninety-four percent report they have established a Facebook page, 42% utilize Twitter; 35% communicated via Linked In; 32% are on YouTube, and 18% blog. Social media are not yet a major source of income for nonprofits. Sixty-nine percent say they have not tried to raise money via social media. Of those who have, 3% report having raised over $10,000, another 7% say they have raised over $1,000 and 13% have raised between $100 and $1,000.00.

Nonprofits are coming to terms with new IRS form 990 requirements that have been phased in over recent years. Sixty-four percent report not having any difficulty in dealing with the new forms, but 16% are still struggling to comply.

Despite high unemployment rates, staffing remains a problem at 39% of the nonprofits. Fifty-seven percent report not having difficulty in recruiting and hiring qualified staff. Of those having difficulty attracting qualified employees, 40% cite the lower salaries offered by nonprofits; 10% blame their inability to provide benefits; and 7% said prospective employees are not adequately qualified or prepared for the positions they have to offer.

Finding qualified board members continues to be a problem for many community benefit organizations. Thirty-three percent cited the fact potential board candidates are already committed to other organizations as the main reason for their unavailability; another 31% said potential board members lacked the time to participate on their board. An additional 25% said potential board members are not willing to fundraise.

Methodology

The Lincoln Institute/PANO 2011 Pennsylvania Charitable Organizations Survey was conducted on-line from November 4, 2011 to December 5, 2011. A total of 213 Pennsylvania Charitable Organizations participated in the survey. Complete numeric results are available at LincolnInstitute.org.