Recession Hurting PA Charities: Many will be unable to fulfill their core mission
Pennsylvania’s nonprofit organizations are feeling the pinch of the national economic recession with 90% saying they have been hurt financially by the downturn. As a result of declining revenues, 42% of the state’s charities say they are less able to fulfill their organization’s core mission this year than they have in years past.
Those results highlight the 2009 Pennsylvania Charitable Organizations Survey conducted by the Lincoln Institute of Public Opinion Research, Inc., in conjunction with the Pennsylvania Association of Nonprofit Organizations (PANO). The degree to which the recession has impacted charities is illustrated by the fact that 66% say their total funding from all sources has dropped since the beginning of this calendar year.
In terms of impact, of the 90% that said the recession has financially hurt their organizations 36% say the impact has been "significant," while the others report a moderately negative impact. Five percent say the recession has positively impacted their operations, while another 5% report the downturn is having no effect on them at all.
The current recession hit with full force in October of last year, and that is reflected in the funding that was available to nonprofits in 2008. From 2007 to 2008 funding decreased at 35% of the nonprofits participating in the survey, while 28% reported an increase in revenue during 2008. Funding levels remained about the same at 38% of the charities.
Even those mixed results are not likely to be repeated when the books close on calendar year 2009. Of the 66% of nonprofits reporting their funding is down since the beginning of this year, 21% say that drop has been significant, while 45% say they have experienced a moderate funding drop. Funding has increased at 11% of the charities while income levels have remained stable at 21%. As for charities’ expectation for 2009, 54% are braced for an overall decrease in funding, while 11% anticipate enjoying an increase in funding. An additional 32% are expecting funding levels to remain about the same.
"Although 42% of state charities say they are less able to fulfill their missions now than in the past, that means that 58% feel that they are still in good position to deliver services," said Joseph Geiger, Executive Director of the Pennsylvania Association of Nonprofit Organizations (PANO). "My observation is that 911 and Katrina may have caused many charities to better prepare for times like these. Although they are doing more with less, this is not sustainable for a long time."
Despite the financial challenges few of Pennsylvania’s nonprofit organizations anticipate their money problem will result in having to close their doors. Only 1% expects to go out of business, another 5% are considering merging with another entity. Conversely, 13% of the nonprofits say they will be expanding their operations. Since many nonprofits provide human services, demand often increases during a recession accounting in some measure for expansion plans at some agencies.
"The worst hit charities have been the arts groups and orchestras," Geiger explained. "Human service organizations have been hit hard but their resilience is keeping many of them in the game. Unfortunately, the inability to resolve the state budget in Pennsylvania is causing some very critical services to be lost by cutting back on services and in some cases organizations are closing their doors. This comes at a time when services are needed more than ever."
In addition to the recession, another storm cloud on the horizon is the possibility of the federal government placing a limit on the amount of charitable deductions claimed by higher income taxpayers. That category of taxpayers tends to give larger dollar contributions to charities in anticipation of deductions at tax time.
Were the federal government to place limits on the deductibility of charitable contributions, 85% of Pennsylvania charities say they would expect to see a decrease in giving. At 37% of the nonprofits the expectation is that the decrease in giving would be significant, while 49% expect a more moderate decrease. Only two percent think such a change in policy would increase the dollars donated, while 10% forecast no impact of that change.
In terms of Pennsylvania’s nonprofits, 26% say between 76% – 100% of their contributors deduct their contributions on their federal income taxes. Another 11% report 51% -75% deduct their charitable donations. Eight percent say 25% – 50% of those who donate to their entity deduct their charitable contributions.
"The concept of reducing charitable giving incentives is ludicrous," said PANO’s Geiger. "Handouts are going to insurance companies, banks, car makers but there is a notion that reducing the incentive for wealthy people to contribute to charities is a good idea. None of the Pennsylvania elected officials in Washington that we spoke to expressed support for this policy suggestion – acknowledging it to be bad policy."
Funding from the American Recovery and Reinvestment Act, more commonly known as the stimulus program, is expected to find its way into the coffers of 34% of the nonprofit organizations who participated in the 2009 Pennsylvania Charitable Organizations Survey. Another 30% are unsure at this point whether or not they will apply for funding under the program.
Respondents to the poll say public trust in the nonprofit sector remains at moderate levels. Seventy-three percent say public trust levels are in the medium range. Fifteen percent perceive public trust levels to be high, while 9% say trust levels are low. The results are virtually identical to responses to the same question in last year’s survey, where 15% said public trust in charities was high, 74% medium and 9% low.
As for the trend in levels of public trust over the past few years, 36% say trust levels have improved with 32% saying they have somewhat improved and 4% saying they have improved significantly. Thirty-eight percent of the nonprofit leaders say public trust in their efforts has remained about the same over the last couple of years, while 22% say public perceptions have gotten worse. Of those who say perceptions have deteriorated, 3% say perceptions have significantly gotten worse, while 19% say they have gotten moderately worse.
With a health care debate raging nationally 80% of the nonprofit organizations participating in the Lincoln Institute/PANO poll say they provide health insurance to their employees. Of those entities that do not provide health insurance coverage, 2% said they once did, but discontinued the benefit; 4% plan to provide health insurance benefits to employees in the future; and 13% have no plans to provide employer health insurance coverage.
The most common model for premium payment at organizations with employer paid health insurance coverage is for the employer and the employee to each contribute to the premium with the major portion paid by the employer. That is the case at 50% of the entities. At 5% of the nonprofits the premiums are split 50/50 between employer and employee, while at 1% of the nonprofits the employee pays the major share of premiums with the employer making up the difference.
As might be expected, health insurance premiums have increased over the past year. Fifty-seven percent reported an increase of between 1% and 25%, another 8% say premiums increased between 26%-50%, while 2% saw premiums hiked over 50%. Six percent of the charities say there was no change in their premiums over the past year, while 7% actually reported a premium decrease.
To cope with rising health insurance premium costs Pennsylvania’s nonprofits are considering a wide range of options. At 31% of the entities consideration is being given to increasing deductibles while 20% are considering increasing the amount of employee co-pays. Twenty-six percent are mulling over changing insurance companies while 20% are considering changing the type of coverage they offer. At 16% of the organizations with complete employer paid plans, employee co-pays are being considered. Twenty-five percent of the organizations are planning to hire a broker or a consultant to help them achieve better rates.
When it comes to the availability of health care 9% of the nonprofits say they have had an employee complain about being unable to receive medical care due to the physician discontinuing or cutting back on service as a result of the rising cost of malpractice insurance. Seventy-two percent said availability of care was not a problem.
Interacting With Government
Many nonprofits interact with government, either by receiving part of their funding from a governmental entity or providing service in conjunction with a government agency.
When it comes to social services, county governments were given the nod as the most efficient level of government. Thirty-four percent said counties operate most efficiently compared to 15% who say local municipalities are the most efficient and 14% who find efficiency at the state level. Nine percent cited the federal government as the most efficient layer of government in the delivery of such services.
Since many charities interact with government they have fallen under provisions of state law requiring them to register as lobbyists. However, only 8% report having registered as a lobbyist under provisions of the Pennsylvania Lobbying Disclosure Act. There is some confusion about the law, as 40% of the respondents said they did not understand what is required under the new regulation.
There is considerable disagreement in the nonprofit community as to whether charities should be required to register as lobbyists. Forty-six percent said they do not believe nonprofits should have to register while 37% agreed with the lobbyist registration requirement.
In terms of actual lobbying that has occurred, 22% say they have lobbied the federal government in the past year, 37% have lobbied state government, and 23% have lobbied a county or municipal government. Thirty-four percent of the nonprofits say they plan to lobby government at some level this year, while 42% expect to engage in no lobbying activities.
"Most charities do not interact with government officials," Geiger explained. "This is too bad. It is unlikely that will change as the reporting requirements become complicated for the average small charity. The rationale to make charities register does not hold much water for me when one considers that there is also a significant restriction on the amount of lobbying a charity may do and that charities are not permitted to get involved in electioneering."
With unemployment levels running high, hiring qualified staff has become less of a problem for organizations responding to the 2009 Pennsylvania Charitable Organizations Survey. Fifty-eight percent of the nonprofits say they have had no problem hiring qualified staff, up from 52% last year. The number reporting difficulty hiring qualified staff dropped from 46% last year to 25% this year.
For those who are having difficulty hiring qualified staff, 43% say the fact they offer lower salaries than many for-profit businesses is the reason. Another 22% cited the fact they cannot compete with for-profits in terms of the benefit packages they can offer a potential employee.
One organizational problem that persists for many nonprofits is the recruitment of good board members. Forty-nine percent say a lack of time is the most often cited reason they are turned down when asking an individual to join their board of directors. Further, many individuals deemed as desirable board members are already committed to other organizations. That problem was cited by 38% of the respondents.
The 2009 Pennsylvania Charitable Organizations Survey is a collaborative effort between the Lincoln Institute of Public Opinion Research, Inc., a non-profit educational foundation based in Harrisburg, PA; and the Pennsylvania Association of Nonprofit Organizations, the state’s leading nonprofit association. The 2009 poll was conducted electronically between July 15, 2009 and August 20, 2009. A total of 323 responses were received by the survey deadline. Complete numeric results of the poll can be read on-line at www.lincolninstitute.org.