June 21, 2020; Inside Tucson Business and Marin Independent Journal
“Staying Alive” is more than the title of a Bee Gees’ hit song from the ’70s; organizationally, it is an imperative. If a nonprofit organization is going to fulfill its mission, it needs a sustainable business model. This was always a challenge, but COVID-19 has upped the ante, leaving the survival of many organizations in question. Conditions may never return to their earlier state, and governments and philanthropists need to step up support.
Nearly every aspect of operations has been shaken. Organizations have had to find new ways to provide their services while staying as close as they can to their stakeholders. Revenues shrank, but expenses did not go away. As communities are reopening and trying—perhaps too quickly—to return to “normal,” we are also learning that no matter how important an organization’s mission might be, things are harder and more expensive in a world with COVID-19 still undefeated.
J. Clinton Mabie, the president and CEO of the Tucson-based Community Foundation for Southern Arizona (CFSA), writing last week in Inside Tucson Business, put the current reality bluntly.
The impact of COVID-19 on the nonprofit community is unprecedented. It has affected the capacity and sustainability of every nonprofit—from education to the environment, affordable housing to mental health services, animal welfare to the arts—no organization will emerge unscathed.
Mabie shared grim data from a recent survey of Arizona’s nonprofits conducted by the Alliance of Arizona Nonprofits. The data collected provided a sobering snapshot of what the impact of social distancing, business closures, and stay-at-home orders has been.
Fundraising and program cancellations as a result of COVID-19 have cost Arizona nonprofits an estimated $53 million in lost revenue (as of June 11). In that same survey, 25 percent of nonprofits indicated that they’ve had to lay off or furlough employees, and 69 percent report a loss of critical program volunteers.
Similar economic losses have been felt across the nonprofit sector and across the country. In May, the Minnesota Council of Nonprofits reported, “Nonprofits experienced sudden, catastrophic earned revenue loss…due to public event, class, and conference cancellations and discontinuation of income generating direct services. Among those hardest hit were performing arts organizations and museums who rely on ticket sales for live performances and exhibits.”
We now know that the virus will remain a threat for months, if not years. Organizations already coping with lost revenue must now take on the added burden of protecting those they serve—and those who serve—from the disease. And adaptation won’t come cheaply. In a recent article, the Marin Independent Journal looked at this impact for childcare organizations, a critical service for working parents and one provided by many nonprofits. According to Aideen Gaidmore, executive director of the Marin Child Care Council, “What we’re hearing from the programs is that they won’t be able to run at the same capacity as they were. It could be devastating to the childcare industry. For our economy to come back and to reopen, we need childcare.”
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Minimizing the risk of infection means taking steps that translate into less money coming in and more going out. Monique Liebhard of Community Action Marin told the Journal that her organization’s new reality means a reduction in capacity by 50 percent. leaving the parents of 500 children to find, if they can, a new provider.
This is devastating for our program and for working parents who rely on us. We can’t serve them the same way. Even though we’re serving half the class size, we still need to retain the same staffing for each classroom because each classroom has to be its own cohort; you can’t have a floater teacher who comes in to give another teacher a break. This is going to be very expensive to operate.
For some parts of the nonprofit community, the challenge is meeting these new demands. For others, it’s facing an even longer period of closure. Like many arts organizations, the Joffrey Ballet was shuttered by the virus. They recently announced it would have to stay that way, cancelling scheduled performances for the remainder of 2020, because they could find no way to dance before an audience safely. According to the Chicago Sun-Times, other offerings will also remain on life support, offering “virtual programming indefinitely.” If Joffrey is to live past 2021, it will mean carrying a loss of more than $6 million and finding new ways to perform and teach.
As creative and innovative as nonprofit leaders might be, adapting to these new economic realities means they will need help. Because state and local governments have seen their tax bases shrink, their ability to keep stable funding levels for nonprofits as they balance their budgets is at risk. In California, childcare advocates were pleased to get a state budget passed that kept “the same amount of funding they were receiving prior to COVID-19, despite reductions in the number of children they serve due to the new safety guidelines.” The federal government could transfer funds to state governments, but legislation to do that, which passed by the US House of Representatives last month, has stalled in the Senate.
Mabie issued a call for donors to step forward and buffer the impact of lost capacity, limited opportunities for earned revenue, and higher costs. “As we move towards recovery and the costly and challenging process of rebuilding,” he says, “we encourage you to support your favorite nonprofits with your time, talent and treasure…to help provide the necessary financial and technical assistance at scale.”
Community foundations like the CFSA have also raised funds to respond to the crisis. But most funding to date has targeted more immediate priorities, such as finding a vaccine and new drugs to treat the disease, supporting essential workers, and meeting the immediate economic distress the virus has caused to millions of families. The ongoing support many vital organizations require still awaits a large-scale response.
There is a need for us to continue to spotlight how a new set of conditions requires a new approach from both government and philanthropists. If that does not happen, many nonprofits providing crucial services will fail. And if that happens, replacing them will not be easy.—Martin Levine
NPQ thanks the Alliance of Arizona Nonprofits and is pleased to credit them for conducting their survey.