RESILIENCE AND VULNERABILITY The State of the Nonprofit Sector in Los Angeles 2009
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1 RESILIENCE AND VULNERABILITY The State of the Nonprofit Sector in Los Angeles 2009 UCLA Center for Civil Society University of California, Los Angeles School of Public Affairs
2 Previous Focus Areas Human services 2003 budget crises Foundations Employment and wages Civic engagement Arts and culture Regional Differences Economic Crisis
3 Context Economic Crisis Recession State and local budget shortfalls Foreclosures Resource/Demand Dilemma - Increased service demands - Decreased resources available for nonprofits
4 Los Angeles Nonprofit Survey Representative sample of nonprofits Human Services, Education, Health, Arts and Culture, and Environmental Excluded very large ($10 million +) and very small (under $50,000) Telephone survey (June August 2009) 46% response rate (252 of 548)
5 Other Data Sources National Center for Charitable Statistics IRS 990 Forms Foundation Center CA Employment Development Department
6 Demand Change Over the Last Year In 2010, survey respondents report a 59% increase in demand for services. All Organizations 22% 35% 31% 9% 3% Arts, culture, and humanities 12% 41% 27% 12% 7% Education 12% 37% 38% 12% 2% Sub-fields Environment 24% 33% 33% 10% 0% Health 15% 40% 34% 6% 4% Human services 36% 29% 26% 8% 1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Increased substantially Increased moderately Stayed the same Decreased moderately Decreased substantially Source: 2009 Los Angeles Nonprofit Survey
7 Revenue Change, All Organizations 41% 38% 22% Arts, culture, and humanities 45% 31% 23% Education 44% 34% 22% Sub-fields Environment 51% 24% 25% Health 38% 38% 23% Human services 38% 42% 20% 0% 20% 40% 60% 80% 100% Source: NCCS IRS CORE Files Increased Stayed the Same Decreased
8 In 2010, 52% of nonprofit organizations experienced decreased revenue. Revenue Change Over the Last Year All Organizations 14% 50% 36% Arts, culture, and humanities 14% 43% 43% Education 12% 64% 24% Sub-fields Environment 14% 29% 57% Health 9% 62% 29% Human services 17% 45% 38% Source: 2009 Los Angeles Nonprofit Survey 0% 20% 40% 60% 80% 100% Increased Stayed the Same Decreased
9 Expenditure Change, All Organizations 42% 41% 17% Arts, culture, and humanities 45% 34% 21% Education 47% 35% 18% Sub-fields Environment 50% 30% 20% Health 38% 44% 18% Human services 39% 45% 16% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: NCCS IRS CORE Files Increased Stayed the Same Decreased
10 Expenditure Change Over the Last Year All Organizations 37% 33% 30% Arts, culture, and humanities 26% 31% 43% Education 45% 35% 20% Sub-fields Environment 29% 43% 29% Health 38% 28% 34% Human services 39% 34% 27% Source: 2009 Los Angeles Nonprofit Survey 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Increased Stayed the Same Decreased
11 Revenue and Expenditure Change, % 40% 41% 42% 38% 41% 30% 20% 22% 17% 10% 0% Increased Stayed the Same Decreased Change in Revenue Change in Expenditure Source: NCCS IRS CORE Files
12 Revenue and Expenditure Change Over the Last Year 60% 50% 50% 40% 30% 37% 33% 36% 30% 20% 14% 10% 0% Increased Stayed the Same Decreased Change in Revenue Change in Expenditure Source: 2009 Los Angeles Nonprofit Survey
13 Revenue and Expenditures Organizations that rely heavily on government funding most frequently indicated decreased revenues (46%) Nearly 2/3 of human service organizations received government funding and 40% relied on govt. more than other sources Those that rely on fees, sales, dues or other earned income less frequently reported decreased revenues (26%) Higher percentage of environmental nonprofits (57%), arts, culture and humanities (43%), and human services (38%) experienced revenue decreases
14 Revenue and Expenditures Donative income fluctuated the most over the past year Government income was the most stagnant Over a third of nonprofit organizations increased or maintained their expenditures with less funding ( doing more with less )
15 Note on Foundation Funding Nearly 2/3 of respondents reported receiving some foundation support, although not typically highly relied upon 31% of respondents stated that foundation revenue decreased in the past year, while only 11% reported an increase Only government income (8.3%) was less frequently reported to have increased in the past year
16 Total Foundation Assets, LA County, $40 In Billions (Adjusted to 2007 Dollars) $35 $30 $25 $20 $15 $18.8 $20.3 $25.6 $29.5 $28.6 $ % drop between $26.6 $30.7 $32.1 $34.9 $35.2 Only 5% drop between nationwide? $10 $5 $0 87% increase in assets between Source: IRS CORE-PF, Foundation Center
17 NPOs with Decreased Revenue that Discontinued Programs/Services Over the Last Year All Organizations 38% 62% Arts, culture, and humanities 33% 67% Education 17% 83% Sub-fields Environment 42% 58% Health 46% 54% Human services 44% 56% 0% 20% 40% 60% 80% 100% Yes No Source: 2009 Los Angeles NonprofitSurvey
18 Change in Employees/Volunteers Over the Last Year Full-Time Employees 9% 65% 25% Part-Time Employees 11% 72% 17% Volunteer 26% 68% 6% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Increased Stayed the Same Decreased Source: 2009 Los Angeles Nonprofit Survey
19 Nonprofit Organization Activities during the Economic Downturn Developed a strategic plan? 52% Reorganized your administrative or management structure? 44% Implemented a new fiscal or cost control system? 37% Added new programs? 37% Implemented a program evaluation system? 35% Contracted out internal operations? Started a joint revenue generating activity with other organizations? Expanded or started a profit-making venture? 18% 16% 19% Merged with another organization? 2% 0% 10% 20% 30% 40% 50% 60% Source: 2009 Los Angeles Nonprofit Survey
20 LOOKING AHEAD
21 Expected Revenue Change Over the Next Year, by Subfield All Organizations 20% 53% 27% Arts, culture, and humanities 33% 41% 26% Education 20% 62% 18% Sub-fields Environment 20% 40% 40% Health 9% 71% 20% Human services 19% 48% 33% 0% 20% 40% 60% 80% 100% Source: 2009 Los Angeles Nonprofit Survey Increase Stay the Same Decrease
22 Expected Expenditure Change Over the Next Year, by Subfield All Organizations 28% 50% 22% Arts, culture, and humanities 29% 46% 24% Education 29% 53% 18% Sub-fields Environment 20% 35% 45% Health 17% 68% 15% Human services 36% 44% 21% 0% 20% 40% 60% 80% 100% Source: 2009 Los Angeles Nonprofit Survey Increased Stayed the same Decreased
23 Looking Ahead Organizations tend to expect less of a decrease in revenue (36% decrease last year; 27% expect decrease next year) cautious optimism Expectation that expenditures will still outpace income Sustainability issue
24 Looking Ahead Strategies going forward Most common response: fundraising Other common responses: cutting costs (e.g., laying off staff, discontinuing programs, etc.) general cost control strategies (e.g., tighter fiscal monitoring) expanding services increasing visibility no change needed Least common: collaboration, program evaluation and advocacy
25 Employment in the LA Nonprofit Sector
26 Nonprofit Employment 238,000 (or about 6% of the county s workforce) and accounts for about 6% of the county s total wages. Nonprofits experienced a 1.3% decline in total employment between October 2007 and September 2008 (fairing slightly better than forprofit firms 1.8% decline), while public sector employment experienced a 4.6% decline.
27 Average Annual Wage of Nonprofit/For-Profit/Public Sectors, Selected Industries, 2008 Scientific Research and Development Svc Hospitals Educational Services Ambulatory Health Care Services Arts, Entertainment, and Recreation Social Advocacy Organizations Emergency and Other Relief Services Individual and Family Services Nursing and Residential Care Facilities Vocational Rehabilitation Services Child Day Care Services Civic and Social Organizations $18,241 $31,375 $27,765 $25,890 $36,625 $33,567 $32,634 $44,320 $40,725 $39,848 $63,012 $87,649 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 Nonprofit For-Profit Public Source: California Employment Development Department, 2nd Quarter, 2008 Average nonprofit salaries grew modestly in most subfields between % decline Some 15% decline Exceptions
28 The LA Nonprofit Sector: A Look at the Numbers
29 Growth in the Number of 501(c)(3) Organizations in Los Angeles County Number of Organizations 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, ,674 32,911 33,435 29,865 29,888 29,114 27,761 26,030 24,730 22,892 23,213 21,009 21,661 19,640 20, % 6.5% 6.7% 5.7% 5.3% 4.7% 4.9% 2.2% 3.1% 3.7% 1.4% 2.6% 0.1% 1.6% % 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% % Growth Source: NCCS IRS BMF Files 501(c)(3) Organizations % Annual Growth
30 Nonprofit Expenditure, 5-County Region, $35,000 $32,000 $30,525 $32,182 $32,294 $32,777 $33,841 $34,218 In Millions (Adjusted to 2007 Dollars) $29,000 $26,000 $23,000 $20,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 $21,594 $21,918 $23,809 $24,458 $26,365 $27,291 $28, LA County Orange County San Bernardino Ventura Riverside Source: NCCS IRS Core Files,
31 Number of Organizations 41,486 Registered Nonprofits 34,674 Registered 501(c)(3) Nonprofits 9,641 Filers ($25,000+) 4,031 ($100K and under) 3,796 ($100K - $1m) 1,430 ($1m - $10m) 384 ($10 million+) The 2010 Report will include estimates of the number of organizations with $25K and under
32 Conclusions Formidable challenges: increased demands and decreased resources Sector s willingness to maintain or increase expenditures Encouraging (resiliency), but also troubling (vulnerability)
33 Conclusions Question: Who will pick up the slack? Local and state budget cuts Private donations from individuals or households increase only incrementally even in a good economy Foundation asset losses Corporate donors may very well deemphasize social responsibility and grant making in the face of thinning profit margins and shortfalls.
34 Conclusion Question: How will nonprofits respond? More with less? Less with less? Will nonprofits be forced to generate new forms of earned income in order to keep their doors open? Organizations that rely most heavily on fees and other earned income fared better than organizations that rely more on government or donative revenue. What implications does this trend have on a sector that is already becoming more professional and, in some ways, commercial?
35 Recommendations 1. Renewed focus on program evaluation. Strategic planning and re-focused missions not enough without evaluation. Need to measure progress toward stated outcomes and measure the effectiveness of their programs and activities. Difficult decisions about scarce resource allocation should be made based on sound data and results that can be reported clearly to stakeholders.
36 Recommendations 2. More widespread advocacy efforts among nonprofits. All nonprofits can engage in advocacy without penalty. There is need for a wider shared commitment to higher visibility and understanding of civil society and the nonprofit sector as a whole toward increasing civic engagement. Nonprofit voices need to infiltrate the debates around health care reform, economic recovery and other social issues.
37 Recommendations 3. New modes of strategic collaboration and consolidation. Collaborative efforts should decrease costs and increase efficiencies for involved parties not the other way around. This economic downturn may very well require more widespread consolidation voluntary and otherwise of local nonprofits, and the sector needs information and guidance on how to most effectively pursue such avenues.
38 Thank you. The 2010 State of the Nonprofit Sector in Los Angeles Report will be released later this year. All other reports are available online. UCLA Center for Civil Society University of California, Los Angeles School of Public Affairs
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