July 24, 2020; New York Times
Earlier this month, notes Nicholas Kulish in the New York Times, more than 3,800 nonprofits sent a letter to Congress seeking a universal charitable deduction, reimbursement of nonprofit payments to state unemployment funds, expansion of the Paycheck Protection Program, and greater loan support for larger nonprofits. One item that did not make the list however, but which might be vital to the finances of many nonprofits, is adequate funding to state and local governments.
“This question of whether there’s going to be a stimulus bill to state and local governments is very important to nonprofits,” Lester Salamon, director of the Johns Hopkins Center for Civil Society Studies, tells Kulish. “Otherwise, they’re going to get really walloped.”
Salamon, NPQ readers may recall, coauthored a recent study that estimated that 1.6 million nonprofit employees lost their jobs due to the pandemic, out of total sector employment of 12.5 million.
As we noted in NPQ earlier this month, in a typical year nonprofits receive $187 billion from state and local governments, which is more than four times the $44 billion they receive from private foundations. In the Times, Tim Delaney, president of the National Council on Nonprofits, reminds Kulish that nonprofits roughly get half of their revenues from earned income, a third from government (federal, state, and local), and nine percent from donations.
Of course, hidden in these averages is a huge amount of variation. Indeed, talking about a singular nonprofit business model makes about as much sense as talking about a singular for-profit business model. No business journalist would expect TGI Friday’s and Amazon to have similar business models. And neither should one expect public radio, for example, to have a similar business model as the YMCA.
As NPQ’s Ruth McCambridge points out, the nonprofits that often are most vulnerable to COVID-19 are those that “depend upon people coming to congregate sites for their income.” This includes museums, theaters, childcare centers, and recreation centers. The YMCA system, in which many chapters offer both recreation (gym) services and childcare, has seen a number of shutdowns as a result.
Understandably, Kulish focuses on YMCA chapters, but he also looks more broadly. Kulish observes that, “From a bike shop in San Francisco providing internships for disadvantaged youths to a dental clinic for low-income families in Ames, Iowa, and from a community center with a gym in Ohio to a thrift shop in Nebraska staffed in part by individuals with intellectual disabilities, nonprofits have shut their doors and laid off staff members.”
Kulish also profiles American Indian Services in Lincoln Park, Michigan, just south of Detroit, at which, for nearly a half-century, Native Americans “celebrated weddings and held funerals, where children learned to dance and make traditional regalia, and where psychologists served mental-health needs.” Fay Givens, who had directed the center for 27 years, shut the nonprofit’s doors this month.
“We don’t have the money to pay the rent”—$1,750 a month—Givens tells Kulish, adding she hopes part of the community center might be retained for use as artist studios.
Notably, Givens told the Detroit Metro Times last month that state budget cuts helped cause the closing. The story is complicated, as the state cuts preceded COVID-19. Still, the dependency on state contracts is obvious: Past budget cuts, coupled with the pandemic, sunk a nonprofit that had been serving the community for 49 years.
Meanwhile, a number of states’ budget decisions are affecting nonprofits. For instance, NYN Media reports the state government in New York has “stopped approving any new nonprofit contracts and delayed payment for existing contractors in the face of a multibillion-dollar budget gap.” According to Doug Sauer, CEO of New York Council of Nonprofits, nonprofits that have multi-year contracts with state agencies are being told they may not get the full amount. In Massachusetts, state lawmakers have held off on passing a state budget, hoping that federal support will be forthcoming. In Colorado, not willing to wait on federal action, the state legislature passed a budget with an overall two-year, 16-percent cut.
Back in May, the US House of Representatives passed the HEROES bill, which would have directed $500 billion to states, $20 billion to Puerto Rico, $20 billion to tribal governments, and $375 billion to local governments to make up for the shortfall in state tax revenues. The federal government, of course, can print money and is allowed to borrow unlimited sums, while nearly all states have balanced budget requirements. According to CNBC, however, the most recent counteroffer from Republicans in the US Senate is zero.—Steve Dubb