Nonprofits Impact Nashville Economy

TN

November 6, 2013; Daily News Journal

 

In 2012, NPQ ran a story about a study of the economic impact of the nonprofit sector in Oregon. Recently, a similar study was conducted by a team from the Middle Tennessee State University and commissioned by the Center for Nonprofit Management in Nashville. The study is apparently the first of its kind, looking at the impact the nonprofit sector has on the Nashville Metropolitan Statistical Area (MSA), how nonprofits have fared since the Great Recession, and how they compare to peer communities around the country. The Nashville MSA includes 13 counties, and includes 1.6 million people.

In pure, raw statistics, the report suggests that the nonprofit sector in Nashville has total revenue of $9.4 billion, or roughly 6.7 percent of the total revenue for the area’s businesses. The sector employs more than 15 percent of people holding jobs in the area, and make up almost 5.5 percent of the total number of businesses.

An interesting way of looking at broader impact, however, is when the study suggests that area nonprofits attract money to the Nashville area that originates elsewhere, which the report calls an “export base analysis.” For this, the report states: “The economic impact of the direct spending of $2.7 billion (export base) by the nonprofit sector accounts for $6.12 billion in business revenue, representing 4.37 percent of all business revenues in the Nashville MSA.”

During the Great Recession and its aftermath, there was an overall decline in the number of for profit businesses in the Nashville MSA, while the number of nonprofit organizations increased by 5.2 percent. No reasons are given for this increase, although it might be reasonable to assume that since the social service subsector saw the largest increase in the number of nonprofits as income and assets shrank during the Great Recession, the number of nonprofits offering access to basic needs also grew.

In answer to one of the questions posed by the report, during the Great Recession and afterward, the nonprofit sector in the Nashville MSA fared quite well. Every segment of the sector saw growth in number of organizations, growth in request for services, and in revenue. On the other hand, almost 50 percent of individual nonprofits responding to a survey said they had seen a decline in revenue.

In comparing the Nashville MSA nonprofit sector to that in peer community, a roster of communities most commonly referenced by the local chamber of commerce was examined. This included 10 areas, including Columbus, Raleigh,  Indianapolis and others. A number of indicators were used to compare the sectors, including nonprofits as the total number of establishments in the area, nonprofit revenue as percent of total GDP, and the nonprofit expenditure per capita. Nashville averaged a ranking of third in these metrics, behind only Raleigh and Indianapolis.

To put these numbers in a broader context, the National Center for Charitable Statistics reports that as of October 2013, there were 1,406,820 nonprofits registered in the United States. Tennessee had 27,623, or just slightly less than two percent, and Nashville MSA had slightly more than 2,000 organizations. This ranks the state as 19th nationally in the number of registered nonprofits. Nationally, nonprofits generated more than $2 trillion in revenue, as reported to the IRS on Form 990 filed in the period prior to October 2013. Revenue reported during that time from nonprofits in Tennessee was approximately 1.5 percent of that amount. In terms of annual revenue, Tennessee nonprofits ranked 23rd nationally. Interestingly, only about 33 percent of the registered nonprofits in Tennessee filed a Form 990.

What we learn from this report is that the nonprofit sector is a significant element of the Nashville MSA economy. If compared with other segments of the economy, such as manufacturing, government, retail, etc., the nonprofit sector is the number-one employer in the area. This is a revelatory number and raises the question of why the organizations in the nonprofit sector continue to be treated as outsiders when decisions about an area’s economy are being made. The chamber of commerce is always represented in major discussions about the economy, and perhaps a series of studies like this would demonstrate that the nonprofit sector needs to be at the table as an equal partner.—Rob Meiksins

  • Tricia Maddrey Baker

    I’m delighted to see this analysis! When I lived in rural NY state, I the nonprofit for which I worked was one of the major employers in the county, but it was impossible to have the county Statistics changed to reflect this, and I was never given a reason.
    One national statistic that I use is that nonprofits compose 9% of the US economy (a number from about five years ago.) That is huge, and deserves the attention that this study gave to it.