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"Death By A Thousand Cuts" Predicted for Nonprofits Across the Nation


November 19, 2003
Wednesday - 12:50 am

Warning that programs of interest to the nonprofit sector will face "death by a thousand cuts for years to come," two new reports released Tuesday by the Aspen Institute Nonprofit Sector Research Fund suggest that people dependent on crucial, community-based services across the nation will suffer for years even after the predicted economic rebound.

Specifically, experts commissioned by the Institute's Nonprofit Sector Research Fund argue that youth programs, after-school programs, job services for low-income people, and programs to help low-income fathers and parents are particularly vulnerable. Also at risk are programs that provide child care services to low-income families not on welfare.

"These findings are troublesome, both for the millions of Americans who will continue to pay the price for a stagnant economy and the policy makers who are charged with fixing the problem," said Alan J. Abramson, director of the Nonprofit Sector Research Fund. "The message here is that we must find ways now to help people who need food, housing, and basic family support services -- amazingly, scarce commodities for too many people in this rich nation."

One report -- "A Divided Community: The Effects of State Fiscal Crises on Nonprofits Under Devolution" -- was prepared by Thomas Gais, Courtney Burke and Rebecca Corso of the Nelson A. Rockefeller Institute of Government at the State University of New York.

Woods Bowman, an associate professor at DePaul University in Chicago, authored the second report, "Fiscal Crisis in the States: Its Impact on Nonprofit Organizations and the People They Serve."

The two reports include original analyses that incorporate a wide range of data from the U.S. Census Bureau and other federal agencies, state governments and nonprofit associations. The Bowman study also includes findings of a survey of state associations of nonprofit organizations.

Both studies highlight the major budget problems confronting state governments across the country. Half of the states expect their 2004 general revenues to be lower than actual 2002 spending, when adjusted for inflation, and nonprofit groups will share in the budgetary pain.

Professor Bowman points out that as in previous recessions, the nonprofit sector was slow to feel the impact of the most recent economic downturn and is, in some cases, trailing other sectors now that the economy is improving. The nonprofit sector lags behind the economy, continuing to grow after the economy goes into recession, and staying down longer (when the economy shows signs of recovery), according to Jon Pratt, Executive Director, Minnesota Council of Nonprofits, whose state's experience is cited in Bowman's report.

Bowman's study points out that as recently as 2002, the nonprofit sector in some states posted job growth that outpaced that of the for-profit sector. However, by the second quarter of 2003, there were signs that cutbacks in government spending were affecting some nonprofit organizations. During that quarter in Minnesota, for example, the number of unemployment insurance claims by workers from nonprofit organizations increased by 20 percent from a year earlier.

One factor that could continue to affect government support for some nonprofit organizations is the steady growth in the joint federal-state Medicaid program, the reports find. Increased expenditures for Medicaid appear to be forcing cuts in other social service programs, the reports show. That trend is particularly acute in states with the lowest levels of per capita personal income.

In those less wealthy states, such as West Virginia, Louisiana, Mississippi, Idaho, North Dakota, New Mexico, Arkansas and Montana, the share of overall state social spending devoted to Medicaid grew from roughly half to 75 percent between 1980 and 2000. During that time, the share of total social spending those states devoted to "other public welfare" programs -- including many programs that fund services provided by nonprofits outside of the health area -- dropped from 30 percent to 19 percent.

"The intense competition for social program resources in the current state fiscal crises provides advantages for nonprofits in the health area and in high fiscal capacity states - and severe disadvantages for other nonprofits elsewhere," Gais says.

Gais's report details, for example, how a recent ballot initiative that expanded Medicaid service in Arizona, a relatively low-income state, put a strain on social-service spending, including programs on parenting skills, character education and post-welfare employment training.

"If the fiscal crisis continues for at least a couple of years, we would expect to see major losses among non-health-related nonprofits in poor states," Gais says.

The reports offer several other important findings, among them:

  • Social welfare programs that do not serve core constituencies are the most likely to see their state-funding cut. With states focusing resources on health care and other vital needs, programs that provide what might be considered "optional" services - after-school activities or fathering classes, to cite two - are most vulnerable.
  • Many nonprofits are coping with the downward economic conditions by forming strategic alliances with other nonprofit groups, as well as with government and business. Even so, nonprofit groups "will have to compete with one another vigorously" for social service spending.

The Nonprofit Sector Research Fund (NSRF) is a grant-making program that awards support to university-based and other researchers studying critical nonprofit issues. In addition to NSRF, other initiatives of the Aspen Institute's Nonprofit Sector and Philanthropy Program include: the Nonprofit Sector Strategy Group, a leadership forum that met from 1997-2001 to address the most pressing issues facing the nonprofit sector in America; the Kellogg-Kauffman Seminar Series for Mid-Continent Foundation CEOs, which brings together a small group of mid-continent foundation executives to discuss issues of mutual interest; the State of America's Nonprofit Sector Project, which is producing an important series of reference books assessing the condition of the nonprofit sector in the United States; and the Philanthropy Information Retrieval Project, an electronic newsletter that reports on new ideas and other developments that may affect philanthropy in years to come.



Source of News Release:

Aspen Institute's Nonprofit Sector and Philanthropy Program
Web Site


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