NPQ’s 9 Significant Nonprofit Stories of 2010 (+ Yours makes 10)

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As a new year begins – resolutions made, Champagne uncorked – sometimes it is tempting to keep your focus on the future and not look back but then we’d lose all that hard learning we’ve done.

NPQ invites you to review 2010 with us – but with an eye on how what happened last year might affect the near future. Our editorial team has itemized nine of the most portentous stories of 2010. Why nine and not ten? We’re hoping that you, the reader, will fill out our list and make it a proper Top 10.

We also invite you to contribute your own nominations for most important story along with a sentence or two about why you chose it. Use the comment function below and please include a link to the original story.

And of course, your commentary on any of our picks is enthusiastically encouraged. Now, we bring you the top nine (+ one) nonprofit stories of 2010.

1. 2010 Activism Sought Distributed Forms – WikiLeaks and the Tea Party

NPQ believes that the way organizations are constructed is driven by the era from which they emerge. And if we were to choose one story that epitomized an organizational form for this era it would be the WikiLeaks saga. This story featured a very small NGO that set itself against the secrecy of major governmental and institutional powers – declaring its site a repository for receiving and disseminating documents that would reveal the true workings of those powers.

The WikiLeaks story was important in many ways. It revealed a way for even very small nonprofits to powerfully organize themselves that was different than the unified top down structure so familiar to us all. Small but with a large network of common purpose, WikiLeaks reminded NPQ of the way the very successful International Campaign to Ban Land Mines functioned. It is, of course not a new way of making social change – it looks a bit like a guerilla effort taken to cyberspace but where supporters opt in and out at will. WikiLeaks grew very powerful last year – not dissimilar to the Tea Party movement.

Many can debate what the Tea Party stands for and how it will evolve from this point forward, but an undeniable fact is that the Tea Party’s growth and empowerment in 2010 is as much a nonprofit story as a political one.  Like a social movement, there is no one “Tea Party” but rather hundreds, perhaps thousands of small gatherings of like-minded (largely) libertarians who were deeply opposed to the Administration of President Barack Obama and the Democrats in Congress, but also frustrated with what they felt were the lackluster or complicit behaviors of establishment Republicans.

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With an infrastructure of 501(c)(4) organizations such as the Tea Party Express and FreedomWorks, local Tea Party activists ran for Congress and sometimes the U.S. Senate in 2010, unseating more than a few incumbents, and moving the beliefs of the national political structure sharply to the right.  In January, what was once an insurgent political movement will be represented by dozens of new members of Congress.  The advent of the Tea Party movement will reverberate throughout the nonprofit sector in 2011.

As a social movement, the Tea Party’s history has been brief.  Will it burn out or develop deeper inroads? Does the Tea Party’s brief but impressive ascent serve as a case to underscore the importance and dynamism of grassroots citizen activism? 

Nonprofits have a great deal to learn from these high profile examples of small “o” organizations but there remains a ton of experimentation to be done. NPQ is looking forward not just to watching but engaging in this new way of being.

2. Apps, Online Appeals and Other 2010 Technological Stories

Nonprofit technology moves quickly, and NPQ matched its fast and furious pace this year with coverage of these trends. High on the list of stories that focused people on new uses of technology was the Haiti text donation campaign, and online fundraising in general. The debate still lingers whether online fundraising will expand or undercut giving in the long run, but what is sure is that 2010 was all about social media and the rise of the apps.

There were many indicators of technology’s successful use among nonprofits, like the study that claimed we nonprofits outpace Inc. 500 companies in social media know-how, and the exemplary Facebook app that generated $9 million in donations for various nonprofits.

Oddly enough, though, our most popular stories this year were about what nonprofits were not doing: they were not thinking critically, but instead jumping on the social media bandwagon, or passively accepting the ban Apple put on in-app donations.

Techies everywhere consider 2010 to be the year that mobile arrived, and 2011 will see substantial developments in that arena – it will be the year that mobile matured.  NPQ will be branching out in these directions with you, and we’ll share our experiences – along with the analysis and coverage of trends you’ve come to expect – in the coming year.

3. The State Budget Slide

We began 2010 with an all-but-assured prediction of the Ghost of Christmas Future:  “State budgets were a mess in FY2009, a debacle in FY2010, and look like impending catastrophes in FY2011.” Oh that we could have been proven wrong, but despite the economists’ view that the national economic recession has somehow ended, state revenues have failed to show the significant upticks that the movement toward a stronger economy would, in theory, lead to. 

Sales taxes have been looking up, but the length and depth of the downturn still leaves these slight increases well short of undoing the recession’s damage. Cutbacks in state government spending are real, if unpredictable, and carve large holes in the social safety net. For example, we see this in Connecticut’s program meant to help low-income people pay their heating bills, Hawaii’s education cuts leading to “Furlough Fridays,” and pass-through impacts leading local governments to sharply reduce or go cold turkey on nonprofit funding. 

No surprise, but the state budget toll shows up in the proclivity of state and municipal agencies to delay contract payments, delay contracts themselves, and unilaterally alter contract terms with nonprofits, as demonstrated in complementary reports from the National Council of Nonprofits and the Urban Institute. We would like to be able to say with confidence that the picture is looking brighter, that conditions will improve in 2011, but that’s a hard case to make, even if the nation avoids the prospect of a second economic downturn as part of a double-dip recession. 

Just ask California’s new governor, Jerry Brown, who is facing a $25 billion deficit that appears to grow every time he and his advisors inspect the numbers, though his peers in Illinois, Nevada, Connecticut, and elsewhere are probably facing similar conditions.  In the nation’s obsession of how Obama, Reid, Pelosi, and Boehner are faring inside the Washington Beltway, the unpredictable nature of the state budget issue may really be a factor of changes in state legislatures and state gubernatorial offices.

As bad as the state government budget pain has been in 2010, it was mitigated somewhat by a flow of federal stimulus moneys that plugged holes and maintained some critical programs.  What Paul Light called “the buffering miracle of the stimulus” has come and gone.  President Obama’s compromise tax cut package may be a boost to the economy somehow, but federal tax cuts won’t mean more money flowing from Washington into state budget coffers. 

4. Nonprofits as Mules for Political Campaigns

Last year may come to be known as the year the Supreme Court gave license to nonprofits to finance political candidates.

Way back in January 2010, the Supreme Court ruled in Citizens United v. Federal Election Commission that corporations could spend as much money as they want for or against political candidates. The ruling helped unleash a frenzy of spending by groups outside the party system last year, most of it by donors who do not have to be publicly identified.

It quickly became clear that nonprofit groups were being used as improper conduits for anonymous political donors – a violation of I.R.S. regulations.

Under the ruling, 501(c)(3) public charities are still absolutely prohibited from political campaign activities [PDF], but 501(c)(4) “social welfare organizations” (as well as 501(c)(5) labor organizations and 501(c)(6) business leagues) can engage in campaign activities “so long as it does not constitute the organization’s primary activity,” according to the IRS.

During the lead up to November’s midterms there were attempts by some advocacy groups, and some Democrats who began to see the political writing on the wall, to curb this sort of political spending.

In a letter to the I.R.S., Max Baucus, chairman of the Senate Finance Committee wrote, “With hundreds of millions of dollars being spent in election contests by tax-exempt entities, it is time to take a fresh look at current practices and how they comport with the internal revenue code’s rules for nonprofits.”

Then the Senate’s No. 2 Democrat, Dick Durbin, asked the Internal Revenue Service to investigate spending by groups like Crossroads GPS, a third-party group backed by Republican operative Karl Rove, that pumped millions into advertisements targeting Democrats.

How much did third-party spending affect the outcome of 2010’s midterms? It was just one of many factors contributing to the Republican’s surge. But if we had to bet, clean election advocates and big-spending groups like Rove’s will take the next two years, ahem, working out the details of 2010’s sticky Supreme Court decision.

5. Philanthropists Gone Wild: Verging on a Global Cabal of the Very Rich?

NPQ has done a lot of stories on the incredible generosity of people of modest financial means this year and we see these as being a cumulatively big story (see here and here) but generally, although a number of researchers suggest that giving is up a bit towards the end of 2010, it has been a hard year for fundraising.

There are, of course, exceptions to every trend and so 2010 also saw the launch of The Giving Pledge, the effort by Warren Buffett and Bill Gates to invite the wealthiest individuals and families in America to commit to giving the majority of their wealth to the philanthropic causes and charitable organizations.

By August last year, 40 billionaires had signed on to the pledge, including Eli and Edythe Broad, Ann and John Doerr, Pam and Pierre Omidyar, and Jeff Skoll, though much of that money seems to have come from already established foundations that are well on their way to giving away billions, regardless of the pledge. Find the full pledge list here.

Though the Giving Pledge may be the “ultimate rich list that’s enriching the lives of millions,” according to CBS News’ Katie Couric, others say the pledge, especially when it pays into or influences public systems, has dangerous implications for democratic decision-making in that, in some cases, the very rich are giving into national and global systems at a rate that rivals even national superpowers.

One German billionaire went as far as to say the pledge threatens to displace the state.

On our website earlier this year Buzz Schmidt, the founder and president of GuideStar International, called the Giving Pledge stunning. “Yet we are left holding our breaths hoping to see him [Buffett] travel at least one more leg—one that is remembered for its comprehensive, truly game-changing, narrative,” he wrote. Read here Schmidt’s seven predictions or hopes for the future of the Giving Pledge.

6. Erosions of Nonprofit Tax Exemption

The assault on the nonprofit tax exemption—at municipal and county levels—didn’t start in 2010, but it certainly ramped up last year.  Municipalities have been eking “voluntary” payments out of nonprofit property owners for a long time.  But now, “payments in lieu of taxes” (PILOTs) are hardly limited to the big college and hospital cities like Boston.  Wherever there is a nonprofit property owner, local governments imagine trails of dollar signs leading to fill cavities in their budgets. 

The Lincoln Institute of Land Policy counted 117 municipalities tapping nonprofit property owners for PILOTs.  Universities and hospitals are dealing with the PILOT issue, each side becoming increasingly adept at negotiating for its self-interests.  But PILOTS only go so far, and require negotiations that might not get the full support of municipal legislative bodies. 

So the latest burgeoning tactic is to unbundle some of the components of municipal and county taxes, convert some to user fees, and charge the users—there is no tax exemption if the charge isn’t a tax.  The Lincoln Institute study authors actually suggest converting voluntary PILOTs in some cases into not-so-voluntary user fees, a message that was adumbrated in the form of streetlight fees in St. Cloud, Minn., athletic field fees in Hernando County, Fla., sewage fees in Nassau County, N.Y., a police and fire services fee in Mount Clemens, Mich., and “curb fees” in Schenectady, N.Y. 

There is a financial consequence here to be sure, but something more important going on.  With localities willy-nilly unbundling property taxes and converting elements into service and user fees, the result is a redefinition of “nonprofit” and “tax exemption” occurring at multiple levels of government with sometimes no rhyme or reason.  This is something to watch in 2011, otherwise we may find that the IRS definition of 501(c)(3) becomes supplanted by constantly changing definitions divined and interpreted by local city councils and county commissioners. 

7. 2010 – The Start of a Decimation of U.S. Nonprofits?

Around late summer, NPQ began noticing a number of stories from across the country about nonprofits closing or suspending operations or going to unpaid staffing. While we had no way to determine scientifically if such closings were on the rise, many stories seemed to suggest a recession related cause so we began tracking these to see who they were and if there were any discernable commonalities. What we found among those closing or mothballing was a conglomeration of the very large, old and outwardly stable to the small and frail. Some symphonies, for instance, had a very bad few years.Hawaii Symphony, for example, faced Chapter 7 in 2010. So did the well-known Germantown Settlement, a community development and services organization in Philadelphia. Both of these and many of the other nonprofits we saw struggling and eventually closing had “pre-existing conditions” worsened by the recession – too much debt, too many fixed assets, too little connection with their constituencies and other stakeholders. It reminded us acutely of the issues cited in Clara Miller’s article, “The Four Horsemen of the Apocalypse.”

But in some cases, even very robust organizations have been very seriously impacted such as this Indiana based mental health center that slashed staff when public funding was shifted.

In other cases, the decision to close or suspend operations seemed to be as much about waning relevance as finances. Clear suggestion of this can be found in the following two stories from 2010: Vermont Education Program Suspends Itself and Group Hangs Up Tips Line. But in many cases we saw a lack of reserves combined with declining revenue at play, exemplified by the story about thesenior center that closed in Illinois last year.

Meanwhile, state associations and others all over the country were trying to judge how at-risk nonprofits were in their own localities.

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The word “decimation” may be eerily close to an exact term here. At the national level, Guidestar released findings from a survey that suggest that 8 percent of nonprofits in the country feel that they are in “imminent danger” of closing. And while there are pundits claiming that the recession is over some of the key indicators for our practical experience of the recession – jobs, housing prices etc. – are expected to stay troublesome for some time to come. NPQ’s sense of this situation is that we will not see a slowing of such closings and that, as Paul Light recently suggested, the arbitrary nature of this winnowing may lead to “service deserts.” In some locations we are beginning to see efforts pop up to save critical services even in light of the closings but 2011 is likely to be a year for a good deal of reorganization on a community level.

8. Parents Told to Dump Disabled Children and Society Dumps Adults

This story about Indiana state workers suggesting that in the wake of service cutbacks parents should dump disabled children in shelters horrified our readers. We feel like we have been running similar stories all year, many of them about the constriction of mental health services – a move that automatically moves the chronically mentally ill into prisons and onto the streets. Read the study, “More Mentally Ill Persons are in Jails and Prisons Than Hospitals: A Survey of the States” [PDF]. A few of the stories NPQ has done particularly mentioned the lack of mental health services for returning servicemen. See here, here, and here. This is one story that is simmering under the surface, often unrecognized for its enormous implications. The story about Indiana involved children and so it seemed to rivet attention for a moment but we would wish for a more consistent public will on the whole mental health system in 2011.

9. Social Enterprise and Social Innovation – A New Sobriety Afoot?

With the times providing many very serious challenges to nonprofits, circular or overheated conversations about faddish concepts are anathema to the devoted practitioner. There are a few such topics that have been circulating for the last several years. This time many of the popular concepts are preceded by the word “social”. Social enterprise, social investment, social innovation. And in NPQ’s opinion there is little new designated by these phrases.

There are, however, subtopics in these conversations that will likely be more rigorously taken up in the next year. Why do we believe this? Partly because we see some of the questioning of concepts already beginning as in the study that produced the headline, Social Enterprises Linked to Poor Performance in Nonprofits. The NPQ Newswire on the topic elicited a great deal of comment on both sides of the question.

Additionally, some of the grantees of CNCS’s high profile Social innovation Fund are, themselves, grounded practitioners and relatively rhetoric averse. And with new transparency measures at the SIF, NPQ is hopeful that the sector will begin to glean some useful insights and practices from the cloud of blind enthusiasm that has characterized much of this field.

10. [Insert Your Story Here]

NPQ wants to invite you to contribute your nomination for the most significant nonprofit story of 2010. What happened in the past year that you believe has implications for 2011 and the near future?

  • Christa R. Klein

    Why do the 9 stories include no references to churches and religious non-profits? According to Giving USA, 1/3 ($100 billion) of all donations given to non profits go to religious groups. The over all modest declines in religious giving–despite the recession–suggests a vibrant center of voluntarism, one that runs deeper than than NPQ’s political and economic analyses manage to engage. Christa R. Klein
    President, In Trust
    Association of Boards in Theological Education