“SPINNING TOP” BY BERIT BREDAHL/WWW.ARTBERIT.COM

This article comes from the spring 2020 edition of the Nonprofit Quarterly. It’s part of a special series of articles about the impending recession and how nonprofits are likely to be affected. The full issue of the Quarterly contains the data and methodology used to construct this work. Please also see On COVID-19, the Recession, and Nonprofits: A Special Series and Deconstructing the (Not-So-Great) Nonprofit Recession.” This article was modified on April 11, 2020.

We have taken the extraordinary step of changing this article at the last minute before it is released, because the context for it has changed radically; where a month ago we were speculating about the possibility of an imminent recession, we are now descending into a downturn that may be likely have the depth of a depression. The coronavirus and our federal government’s lack of preparedness has resulted in wide shutdowns of business and community infrastructures and massive unemployment, even as we struggle at the last minute to find the supplies we need to test people, protect frontline workers, and treat the sick and dying. Within a matter of weeks, this country is succumbing to a miasma that is moving at high speed and causing untold damage.

These kinds of mass events have the tendency to surface preexisting fault lines in our communities, and one of these fault lines is in this democracy’s inability to care for itself properly. This is, in large part, the responsibility of nonprofits, where people gather to attend to the interests of those with less voice; but do nonprofits play that role?

Our investigation of the last recession reveals, in short, that the nonprofit sector fared relatively well during and following that period. As we write this, we understand that some may be thinking, “Well, don’t tell them that!” But the facts are the facts: The nonprofit sector, as a collection of institutions, fared well, while its most vulnerable constituencies lost ground—and that should raise questions about this sector’s function and focus in society, even given that not all nonprofits work on issues of equity, justice, and democracy.

That said, the data have revealed a number of interesting findings and patterns not only about specific fields but also about the sector in general, and that overall pattern is one of enviable institutional agility and resilience even as the overall economy has become increasingly stratified.

Overview

We looked at the effects of the recession on nonprofits in a number of different ways, examining

  • changes in contributed revenue;
  • changes in program service revenue;
  • changes in assets; and
  • changes in the proportions of income that were derived from contributed versus earned revenue.

We broke these down by category of nonprofit, and compared the gains and losses across fields. (For more details, see the “Data and Methodology” sidebar on pages 16–20 of the full issue of the Quarterly.) These data do not recognize, however, the details of what achieving resilience required of organizations as the recession hit, and in its wake. These are contained in thousands of small dramas that NPQ documented in story form over the years. We have mixed all of these informational streams here to

  • reinforce the understanding that, according to the hard data, nonprofits are excellent and highly adaptive managers when it comes to running complex organizations, even in financial downturns—and this advantage will only improve as we examine and reflect on our still-underused capacities;
  • detail the realities of the last downturn, to help nonprofits prepare for the current situation; and
  • emphasize that, while this will undoubtedly be a very challenging time for nonprofits, the sector has in the past seemed to devote more attention to its own sustainability than to its stakeholders, so nonprofits need to keep a close eye on meta-policies affecting the long-term resilience of the communities we serve.

Top-Line Findings

When we look at the effects of the recession on the various National Taxonomy of Exempt Entities (NTEE) categories of nonprofits,1 we can sense that for each category, preexisting trends and dynamics were often interacting with the downturn to create the outcomes for various particular types of organizations. For instance, many arts organizations make large capital outlays on spec, because that is how their enterprises work; but as a precommitted large capital outlay met a newly financially cautious audience and donors—along with the sudden underperformance of endowments (where they existed)—one saw many symphonies, operas, repertory theaters, and museums in panic mode. These preexisting field-specific dynamics, coupled with the character and sources of the recession, were playing out in a plethora of ways that resulted in the landscapes evident in the data. (Note: All the data and analysis that follow are the authors’ own unless otherwise noted; see the “Data and Methodology” section on pages 16–20 of the full issue of the Quarterly for details.)

  • Some nonprofit organizational types never fully recovered, while others ended up in better shape after the recovery (and even immediately postrecession). For most categories of nonprofits, dips in overall revenue were felt most acutely in 2009; but the depths of the dips and the trajectories of recovery, which we define here as occurring between 2010 and 2015, varied widely.
  • What we can assume right now is that, overall, larger nonprofits ended up gaining ground while smaller nonprofits lost ground during and after the recession. This assumption is based on the finding that “eds and meds”—institutions of higher education and hospitals and healthcare organizations—gained 27.6 percent in assets over the recession and recovery period (fiscal years 2007 through 2015, controlling for inflation), while other nonprofits—taken as a whole—gained only 12.3 percent. Eds and meds—which, speaking in terms of assets, made up 55.9 percent of the sector in 2015—saw only a 1.2 percent loss of assets during the recession; meanwhile, other types of organizations saw a 3.7 percent loss of assets during the recession.
  • Most non-eds-and-meds saw their revenues decline during the recession, but health organizations (not in the category of meds) and human services organizations were the exception. Excluding the eds and meds, total revenues declined by 1.6 percent in inflation-adjusted dollars between 2007 and 2010, the period covering the recession. The two categories where overall revenues increased were health organizations (excluding hospitals, i.e., meds), where revenues incr