When Main St. melts down: Nonprofits are worried

How likely are you to give money away that you don’t have to give away other than to satisfy your philanthropic sensibilities?

Minnesota non-profit organizations are about to find out. The steady stream of bad economic news, coupled with the drop in home prices and retirement funds, may put a crimp in the services delivered by non-profits, including food shelves and charitable organizations. Even last week’s arrest of Tom Petters reverberated through some nonprofit organizations.

“What we’re hearing is approaching panic,” said Kate Barr, the executive director of the Nonprofits Assistance Fund, which lends money to nonprofits. “The timing of this is never good but it’s a unique time now because we’re going into the fourth quarter, which is the best quarter for individual giving, and it’s budget time for a lot of non-profits.” She says it’s difficult for nonprofits to predict when there’s so much uncertainty.

Nonprofits are most worried about individual giving now because, Barr says, “it’s what’s felt most immediately” in an economic downturn. Foundations which have provided millions of dollars in support to Minnesota organizations have “hung in there” over the last few years, but are unlikely to give additional dollars, and it’s unlikely an organization will be able to get new grants. But, she says, most grants are two-year grants so the impact of the financial meltdown isn’t immediate.

But she expects a “rough” state budget in 2009, comparing the overall effect to that of the state budget crisis in 2002 and 2003.

Nonprofits built up financial reserves in the “good years” after 2003, but many of those “got hammered” in the stock market slowdown, according to Barr. Many organizations that have been planning capital campaigns are “revisiting their timing,” she says.

“The ones that are having the hardest time are the ones that are seeing increased demand for services. It’s hard for a food shelf to cut back when there’s twice as many people at the door,” according to Barr.

Bottom line? Expect cutbacks. Government has been “outsourcing” services to nonprofit groups. Those days may be over. “Nonprofits have made do with less. There might not be a lot of ‘give’ there,” Barr says.

In which case, with ballooning budget deficits, governments may decide to simply stop paying for services, according to John Pratt with the Minnesota Council of Nonprofits. “People may want services and not be allowed to get it. The counties may just decide to have longer waiting lists and fewer clients.”

There’s a lot of worry, Pratt acknowledges. “For the Salvation Army, or Catholic Charities, this is a very important time. This is where it could hit very quickly,” he says.

How quickly? He says the Center for Philanthropy at Indiana University has calculated that individual giving follows the S&P 500. As early as last summer it sounded a warning.

And this year the S&P 500 is down more than 30%, more than 7% today alone.

  • I just bloged about this last week, Nonprofits usually don’t get hit for 6-12 months after down turns happen, but they are seeing this current events effecting them, well currently.

    A resource I passed on to my readers was this link to money saving tips for nonprofits http://www.mncn.org/moneysavingtips.htm (the above referenced John Pratt with the Minnesota Council of Nonprofits web site)