This article comes from the spring 2020 edition of the Nonprofit Quarterly. It’s part of a series of articles addressing the last recession and informing nonprofits and philanthropies on options for our work and advocacy agendas in the impending recession. Watch for the next in this special series online. This article was updated on April 7, 2020.
The U.S. economy in 2008 through 2009—at the peak of the Great Recession—as well as during the recession’s immediate aftermath, was a personal financial disaster for millions of Americans. Ten million foreclosures were filed against homeowners in 2008 and 2009 (default notices, scheduled foreclosure auctions, bank repossessions);1 23 percent of private homes slid into negative equity by the third quarter of 2009;2 and the U.S. unemployment rate jumped from 4.7 percent to over 10 percent.3 (These figures are now beginning to pale in the current pandemic context, with some predicting twice that rate of unemployment.) Bank failures, a shrinking economy, and shaken consumer confidence convinced enough members of Congress and a newly elected President Obama to pass a nearly $840 billion stimulus package to jump-start the economy: the American Recovery and Reinvestment Act.4
Conventional wisdom has it that the recession must have been a difficult and painful period for the nonprofit sector, with reduced assets, funding, and employment—especially as, simultaneously, nonprofits saw exploding demand for such nonprofit services as food banks, emergency housing, fuel assistance, and employment counseling. But how difficult and painful was it?
By far the biggest news story of 2009, the Great Recession inspired no small amount of advice for nonprofits on how to cope with a shrinking economy, such as diversifying funding streams, using compassion when cutting staff, and launching social enterprises. As it turns out, most organizations survived this period. Now, with the benefit of a rearview mirror and big data, we can get an overview of what really happened across the breadth of the sector. Thanks to regularly collected government forms, employment data, and IRS-required financial filings, we are able to review the recent history of the U.S. nonprofit sector in the areas of employment, revenues, and assets, and break it down further by field of activity and geography.
Nonprofit Employment: Where’s the Dip?
News coverage of the state of the U.S. economy tends to focus on two numbers: the stock market and the unemployment rate. Below, a single chart (Figure 1) tells the barely known story of nonprofit economic resilience: The most striking difference between nonprofits and businesses in 2009 was that nonprofit employers kept their employees.5
Throughout the recession, the sector recorded steady growth in its number and share of the U.S. workforce, and nonprofit employers experienced fewer unemployment claims than their business counterparts.6 Steady employment growth held true across all nonprofit activity areas during the recession, with 7 percent growth over five years.7
Business employment dropped by 6 percent in 2009—a loss of 6.4 million jobs—a year in which nonprofit employment grew by 1.5 percent.10
Nonprofit Finances: Where’s the Dip?
The top-line story here is that most parts of the nonprofit sector saw no reduction in overall financial resources, and actually grew throughout this period. Analysis of IRS Form 990 filings from 2003 to 2015 shows changes in total revenue over time in the ten major activity areas—and, separately, colleges and universities (“eds”) and hospitals (“meds”), which are analyzed apart because they have such a distinct financial footprint. While some activity areas experienced fluctuations in the recession years (such as human services, which saw a 2 percent increase in total revenue from 2008 to 200911), in most cases nonprofits saw a modest single-year reduction and a following-year recovery.12 (See Figures 3 and 4.)
To understand the impacts of the recession on the U.S. nonprofit economy, it’s also necessary to look beyond overall revenue and more closely at specific types of support. Charitable contributions are an important source of revenue for nonprofit organizations, at 18 percent of total nonprofit revenue.15
As Figure 5 illustrates, the area of nonprofit activity that showed the greatest decline in charitable contributions was the National Taxonomy of Exempt Entities (NTEE) category of “Public Benefit,” which includes grantmaking organizations, United Ways, and community and industry associations.16 Some of the biggest entities in this category are large charitable affiliates of the financial services industry (Fidelity Charitable, Schwab Charitable, etc.). Contributions to these intermediary organizations declined by 16 percent from 2008 to 2009 (and total revenue declined by 21 percent).17
While contributed revenue to nonprofit organizations in other activity areas (such as human services and the arts) is frequently used within the year it’s received to fund operating expenses, contributed revenue to organizations in the public benefit activity area (particularly the charitable a