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Nonprofits Brace For Fallout

Survey shows officials expect falling donations, rising need for services

By Sean O’Leary

October 13, 2008

As the financial crisis spreads worldwide and uncertainty and gloom take hold in the region, Greater Hartford’s nonprofits are bracing for the worst.

The United Way of Central and Northeastern Connecticut’s 2008 Nonprofit Pulse Survey found that area nonprofits are sharply more pessimistic about the next 12 months than they have been in previous surveys. As a group, they believe funding will tend to dry up while the need for services will skyrocket.

“We are just holding our breath right now,” said Jennifer Smith Turner, chief executive director for the Girl Scouts of Connecticut. “So many donations come in at the end of the year that we don’t know what it all means yet. But we have to expect fewer donations.”

Among the region’s major givers, Hartford-based United Technologies Corp. doesn’t plan to cut back on its $20 million budget for donations worldwide, 20-25 percent of which ends up with local nonprofits.

“We have made a line in the sand for $20 million, and we intended to honor that,” said Andrea Doane, UTC’s director of corporate citizenship and community investment.

But UTC may be the exception to the rule if nonprofit officials are reading the market correctly.

The pulse survey is in its fifth year. For the first four, the number of optimistic respondents ranged from a low of 62.3 percent to a high of 78.8 percent just last year.

This year, however, that optimism level fell precipitously to 35.4 percent, while 64.6 percent of local nonprofits were pessimistic.

“We’re going into the season, the next three months, where nonprofits raise a lot of their money,” said Nancy Roberts, president of the Connecticut Council for Philanthropy. “From everyone I’m talking to, it’s pretty clear that donations are going to be down. No one is optimistic about raising money right now.”

The survey found that 42.9 percent of nonprofits believe total revenue will increase, down from 67 percent that expected an increase a year ago. The main concern is that the major corporations that drive giving will fall prey to the troubles afflicting the entire financial system.

“In Hartford, nonprofits are struggling with how to get that corporate funding,” Roberts said. “We’re finding it difficult already because everyone, not just nonprofits, is concerned about the economy and where it’s heading.”

State Cutbacks

Ron Cretaro, executive director for the Connecticut Association of Nonprofits, predicted that the corporate funding will dry up as the effects of the financial crisis spread into the area from New York City and Fairfield County.

“The corporate and foundation portfolios are caught up in this mess too,” he said. “It’s going to affect nonprofits all over the state, and something has to give.”

Doane said UTC has already started to see an increase in inquiries from local nonprofits that feel the pinch when the state reduces their funding. Those calls are likely to mount as the state, which is spending $1.3 billion this year on nonprofits, weighs cutbacks to address its mounting deficit.

The state relies on nonprofit workers, who cost about half as much as state workers, to provide services to people with mental retardation, the mentally ill, abused children, drug addicts, prison inmates and others.

The looming funding crisis was no surprise, Cretaro added. In fact, his association held a conference in late September entitled, “Sustaining Nonprofits” to help organizations weather the storm.

“It’s hard to lobby right now to expand your revenue because the likelihood isn’t very good,” Cretaro said. “We’re all in the same boat, so it’s time to look at all kinds of ways to do a better and more efficient job.”

In fact, Cretaro believes the Pulse Survey results may understate the level of pessimism among area nonprofits because it was conducted before the $700 billion federal rescue bill and the latest stock market spasms.

The surveys were sent electronically in August to 420 nonprofit organizations in the United Way of Central and Northeastern Connecticut’s 40-town service area. Some were UWCNC partner agencies that were funded, some were unfunded partners and some were nonprofits outside the United Way.

Survey Predated Crisis

A total of 81 usable surveys were returned by mid-September, for a response rate of 19.3 percent. (For survey results, see page 27.)

Susan Dunn, president and CEO, noted that the full force of the economic crisis did not hit until after all the surveys had been returned. That suggests that the negative attitudes might have been even more pronounced if the survey had taken place a short time later.

The Girl Scouts’ Smith Turner said the crisis on Wall Street has made it clear that business plans for nonprofits will have to change.

“The important thing moving forward is to be more efficient with your staff and your services,” she said.

The survey found that 84.6 percent of nonprofits believe the demand for services will increase next year, up from 56.4 percent last year and more than 20 percentage points higher than any previous survey. Again, it comes as no surprise.

“The demand for services is always going to be higher when the economy goes down,” Cretaro said. “You’re going to see more clients for homeless shelters, energy assistance, food programs, just across the board. We can’t have these programs close their doors because Connecticut is going to need these nonprofits.”

The survey found that staffing levels had been reduced at 41.6 percent of nonprofits, up from 15.8 percent last year. But the percentage of nonprofits that reported increases in staffing this year also increased, from 47.9 percent to 48.5 percent, suggesting that organizations are taking on increased workloads.

Roberts said nonprofits are going to have to pace themselves through the downturn to make sure they have the staying power for the long haul.