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Survival Mode
August 27, 2009  |  by Greg Hanscom

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The study released by the center in June confirmed what many in the sector already knew: Nonprofits nationwide were under significant financial stress. Orchestras and theaters had been particularly hard-hit, along with organizations that provide care for children and the elderly. A third of the 363 organizations surveyed for the study had eliminated staff positions. Many had postponed new hires, reduced or eliminated travel budgets, and frozen salaries.

Still, Salamon says, the nonprofit sector as a whole has weathered the recession fairly well. Two-thirds of the groups surveyed reported that they had handled the stress successfully—only 5 percent reported that they were in imminent danger of going out of business— and three-quarters reported that they were able to maintain or even increase the number of people they served.

How have they done it? Some organizations have insulated themselves from the vagaries of the markets by tapping into a wide variety of funding pools. One such group, profiled recently in a Center for Civil Society Studies publication, is the Presbyterian Villages of Michigan, which spends roughly $50 million annually to provide affordable senior housing in a state that has been hit even harder than most. President and CEO Roger Myers says his business has softened as more seniors have chosen to stay in their homes, waiting for real estate values to rebound before selling and moving into a senior housing “village.” Some have even moved in with their children, both as a way to save money and to contribute Social Security checks to their offspring’s household income. Still, by using a combination of state funds, low-income-housing tax credits, and stimulus money, the organization has been able to move ahead with several new housing projects. “We are doing reasonably well,” Myers says.

Other nonprofits are making more use of volunteers—and not just to stuff envelopes and answer phones. Kelly Hodge-Williams, who took a nonprofit management course at Johns Hopkins, is executive director of Business Volunteers Unlimited Maryland, which pairs service-minded businesses with nonprofits that need help. Early in the year, her organization began getting calls from out-of-work professionals. “People were losing their jobs and not finding work immediately,” Hodge-Williams says. “They said, ‘I love serving soup, but I would love to use my accounting skills, or my marketing skills. I’d like to keep my skills fresh and maybe network a bit.’”

Since then, Business Volunteers Unlimited has put new energy into partnering “high-skill” volunteers with nonprofits that don’t have the money to hire specialists or contract jobs to consultants. An accountant volunteered to help a community development organization with its annual audit. A computer specialist helped a YMCA develop a database to track its volunteers. A third volunteer is working on a marketing plan for the Baltimore City Department of Recreation and Parks. Hodge-Williams says her group referred hundreds of highly skilled volunteers to needy nonprofits in the first half of the year, and that at least 40 were working on projects like these.

Still other organizations have managed to spin straw into gold. Aaron Miripol, A&S ’94 (MA), who earned his master’s degree in public policy, is now president and CEO of the Urban Land Conservancy, a Denver nonprofit that buys up properties in gentrifying neighborhoods with a mission to make life better for the people who live there. Much of the conservancy’s recent work has centered around a massive expansion of Denver’s rail and bus system. “There has been a lot of speculation around some of these transit corridors. Now, investors who bought in can’t refinance,” Miripol says. “Those are our opportunities now.” The group bought a former Budget Motel near a planned light rail station and acquired two parking lots totaling 25,000 square feet one block from another transit stop. Both properties will be redeveloped into affordable housing with help from the new $15 million Denver Transit-Oriented Development Fund, created by the conservancy, the city of Denver, and a national nonprofit called Enterprise Community Partners.

Miripol says the Urban Land Conservancy’s financial portfolio—a pool that started with a donation of $15 million from a civic-minded oil and gas company—declined about 20 percent in 2008, limiting the amount of work he was able to do last year. But 2009 is looking significantly better. The organization draws 90 percent of its revenue from leasing the properties it owns to other nonprofits. “Right now, everyone is jumping at the stimulus dollars. It’s a mad frenzy,” he says. “But we’re not dependent on federal money. If [government agencies] are at the table, that’s great, all the better. But to be able to say, ‘We’re going to do this with or without you,’ that’s powerful.”

Even in a down economy, groups like these offer proof that, as Lester Salamon has long argued, nonprofit organizations have outgrown their reputation as admirable but amateurish volunteer associations. They have become more business and media savvy. They’ve borrowed tools from and offered formidable competition to the for-profit sector. But the worst may be yet to come.

“If you think it’s horrible this year, wait until next year,” says Delaney with the National Council of Nonprofits, a member of the Pocantico group. “Next year, we’re not going to have the stimulus,” he says, and the pressure on state governments to slash spending will be even more acute. He adds that foundations have been able to cushion the blow to some extent this year. The full force of their diminished reserves will not be felt until later this year and early next. He urges nonprofits to take drastic measures, if necessary. “Not one of the nonprofits in this country has written into their mission statement that ‘we’re here to hold on for another day.’ I’m urging board members to reconnect with the organization’s core purpose, to ask, ‘How can we best advance this mission?’”

That mission, Salamon says, is what makes nonprofits particularly vital to society. He points to the home health care industry, which was pioneered by the nonprofit sector at a time when forprofits were hesitant to enter the field. The private sector only rushed in after home health care became eligible for Medicare reimbursement. Today, he says, many for-profits are abandoning the nursing home business as Medicare payments have declined. Nonprofits, meanwhile, are holding strong.

Still, Salamon is not a champion of the status quo, and while he is confident that the nonprofit sector will survive to see a better day, he predicts—hopes, in fact—that it will be changed along the way. He has been pushing for years for foundations to behave more like “philanthropic banks,” leveraging their money by offering loans and loan-guarantee programs rather than simply giving it away as grants (which he calls “18thcentury technology”). He also believes that nonprofits could be better run and collaborate more effectively with business and government. “This was all created in an ad hoc way,” he says of the current system. “It needs to be fixed.”

Salamon envisions a day when the nonprofit sector is embraced as a full partner in society: “In the future, it is not government that is going to solve problems, but networks.” Perhaps this is the silver lining to the current economic cloud: the prospect of emerging on the other side—where and whenever that might be—transformed.

Greg Hanscom is a writer and editor in Baltimore. He has worked for numerous nonprofit organizations, including the award-winning Western news magazine High Country News.



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