How You Can Start and Operate a Soup Kitchen

Mission Possible: How You Can Start and Operate a Soup Kitchen

Times are 'a-changing' for nonprofits in financial storm

New Jersey Newsroom
By Irwin Stoolmacher

Although it was announced in September that the Great Recession officially ended in June 2009, our nation’s nonprofits continue to facing the “perfect storm.” They are grappling with an astronomical increase in demand for their services and dramatic change in the fundraising landscape, in which they have operated for decades.

The financial meltdown and the resultant financial instability caused cataclysmic terrain changes in all the nonprofit fundraising landscape. When it comes to the plight of America’s nonprofits Bob Dylan got it right when he wrote “The Times They Are A-Changing.”

Individual Giving

As a result of the severe economic downturn, The Chronicle of Philanthropy reported recently that “nearly half of Americans say they are giving less in 2010. Only 8 percent of donors said they would increase their giving in 2010, a new poll finds, and many donors say that the bad economy will continue to hold them back on contributions in 2011.”

The PEW Economic Policy Group recently reported that 23 percent of the unemployed had been jobless for a year or more – the highest rate since World War II. According to The New York Times, “the percentage of unemployed who have been without work for more than 27 weeks or longer edged up to last month to 44.3 percent, virtually unchanged from a year ago.” Millions upon millions of middle-class American are facing very difficult economic times for the first time in their lives. A significant portion of our aging baby boomers have almost no chance of obtaining employment in a job that pays anywhere near their old salary in the foreseeable future.

Many of the newly needy were previously contributors to food banks and food pantries. Today they are clients. The combination of the newly needy and the historic needy -- the elderly, the physically challenge, the mentally ill, those suffering from substance abuse – has already exceed the capacity of nation’s nonprofits in a variety of areas. Pantries run out of food in mid-month and emergency shelters in man parts of our nation can not meet provide sufficient bed nights of service.

When people lose their jobs or see their income drop dramatically they have no choice but to limit their discretionary spending. Charitable giving is one of the areas that are pruned. When faced with a choice between food, housing and health insurance, charitable giving is jettisoned. Many nonprofits have seen a dramatic fall-off in end-of-the year giving and increased number of lapsed donors.

Government Funds

Local governments across-the nation are facing multi-million dollar deficits. They have either reduced their staff or are contemplating laying-off non-essential employees in droves. To close structural deficits heretofore sacred cows like police and fire services will also have to be dramatically cut. Future new hires will be required to pay a significant portion of their health benefits thus reducing dramatically their take home pay and discretionary income. Likewise retirees will see their vested health and pension benefits cut and their life styles dramatically altered to where they have to do more with less.

Likewise state governments are facing multi-billion dollars deficits. All told states and cities have more than 3 trillion in outstanding bonds and more than 3.5 trillion in pension obligations.

States in order to meet long-term structural deficits have begun to significantly reduce staff and cut benefits to current employees, new employees and those on pension. The same will take place at the federal level where the current national debt is roughly $13.7 trillion. Cutting staff alone with not substantially reduce the federal deficit. To really address the deficit it will be necessary to make dramatic cuts in all area including the department of defense, grant programs and so-called entitlement programs. Further there will have to be tax increases which will further affect the discretionary spending of all Americans.

The trimming of government spending will have a cataclysmic effect on the nonprofit sector which currently receives a significant portion of its funding from government. For example, a recent study by Jang and Feiock found that “government funding currently accounts for 66 percent of the revenue of health related nonprofits.”

Not only will nonprofits see less government grants and contracts to provide health, human care, educational, social, and recreational services, but they will also far fewer dollars donated by public employee through workplace charitable giving as governments, at all levels, continues to reduce their staff. When it comes to governmental staff reductions we have just seen the tip of the iceberg. Thousands upon thousands of additional Americans will lose their jobs over the next decade as government, at all levels continues to reduce staff. These laid-off workers will further tax an already tattered social and human care safety net.

Foundation Grants

As a result of the economic downturn many foundations saw the value of their endowment portfolios plummet. The result has been fewer funds available for discretionary grants from small and mid-sized foundations to our nation’s nonprofits.

Corporate Giving

America’s corporations responded to the severe economic downturn by tightening their belts and tightening their giving. The consequences for nonprofits were reduced corporate contributions, grants and employee charitable giving.

In my crystal ball, more and more of the burden for taking care of the least among us will fall on the nonprofit sector as government continues to extricate itself from the delivery of health and human care services. Those who adhere to the less government is better philosophy, envision the nonprofit sector as the primary provider of the safety net. What they don’t address is where will the additional funds needed by the nonprofit sector to meet the increased demand for services come from.