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Wednesday, January 7, 2009
Mosaic

Current Economic Impacts on Communities and Nonprofits in 2009


By now, we are all quite familiar with the current economic crisis and the uncertainty it creates for our organizations and leadership, and the individuals and families we serve. On November 11, 2008, over 450 people gathered at the Senator John Heinz History Center to participate in a panel discussion on the current state of affairs and strategies needed to address these impacts for the nonprofit sector. The discussion, moderated by Grant Oliphant, was sponsored by Dewey and Kaye, Leadership Pittsburgh, The Pittsburgh Foundation and Pittsburgh Business Times.

"In essence, we stand before two possible futures. The first future suggests the opportunity for an optimistic tomorrow. The second future possesses a spirit of pessimism that will create a divide between winners and losers. What will we allow our guiding spirit to be?"

 —Grant Oliphant, President and CEO, The Pittsburgh Foundation

Summary Messages

After thoughtful discussion, two primary messages emerged:

  • We must organize as a community, and we must do it now. A short–term window exists in the next several months for us to present a collaborative statement of needs to our state and federal government. This means capitalizing on our individual relationships and taking risks for those we serve.
  • An opportunity exists for some, but not for all. Organizations will succeed who are:
    • Informed. This is a primary role of the board. Yet many boards are lacking a full understanding of the complex and serious nature of current times. Organizational leaders who are progressive, thoughtful and informed of their organization's sustainability issues will be most successful.
    • Realistic. Organizations will be doing more and more with less and less, and therefore we must understand internal controls to decipher risks and protect ourselves. Do we have the ability to say 'no' before we bankrupt ourselves? What is our financial situation? What are our resources? How does this all relate to our mission? What can we realistically raise in the next year? Scrap your capital campaign ideas for now, unless your donors are lined up.
    • Able to Communicate Value. Leaders must be able to measure and understand the costs of their services. What is the value? What are the returns? What do we do well? We are roughly one–third of the way through this cycle. Revenue is down and cutbacks are increasing. The focus of giving will narrow in order to tackle pressing economic issues. Where do you stand in the pecking order?
    • Able to Control for Costs. Collaboration is timely and difficult but, when strategic, can be highly beneficial. Where can we consolidate costs? How can repackage what we do and partner with other organizations who are doing it better? Be bold and consider all of your options!

—Kate Dewey, Principal, Dewey & Kaye, A McCrory and McDowell Company

Panelist's Thoughts & Recommendations

Throughout the afternoon, community leaders joined our panelists, Jim Roddey, Jim Smith, Chuck Knolling, Chris Briem, Diana Bucco and Kate Dewey as they shared these somber thoughts and recommendations:

  • Interim Conditions. In the interim, the Presidential results make no real difference for our sector. The 2009 federal budget is not final, and community funds and resources take time to reach us. Instead, the Allegheny County Department of Human Services’ budget will be a good indicator of the types of cuts the sector will be facing. We do know a few things for sure:
    • The need for services for our most vulnerable populations will increase. Our focus should therefore be on saving lives, creating jobs and job training opportunities.
    • Objective leaders are needed who possess the skills to be analytical and focus on mission, especially over the next 18 to 24 months.
    • This is not the time for new programs. What opportunities for collaborations and mergers exist?
    • Funders will need to focus on (financial) sustainability and governance. What are the potential opportunities to reward collaborations and shared services? How can we create a task force to gather best practice ideas? How do we organize a statewide statement of needs and solutions? How do we align ourselves with other northeastern cities?

—Jim Roddey, Senior Consultant, McCrory & McDowell LLC

  • Short–term and long–term issues. Barack Obama's election indicates a positive sign for us as community organizers. However, there are many constraints on the domestic agenda due to the potential of a $1 trillion deficit. Obama has proposed several plans to stimulate the economy:
    • $100 to $500 billion economic stimulus plan. This stimulus is just a question of when. Best guesses say Obama will seek to provide these funds to communities like ours within the first month of his term.
    • Community Development Block Grant Program (CDBG). The Council of Mayors is lobbying to expand CDBG by $10 billion. 
    • "Urban Czar". An Urban Czar will be a White House delegate appointed to advance the urban agenda.

In the meantime, we cannot simply sit back and wait. We must be proactive to capitalize on opportunities. As a community and region, priority should be placed on commissioning a report of services and recommendations to help us weather the storm for the next 12 to 18 months.

—Jim Smith, Managing Partner, Smith, Dawson and Andrews, Washington, DC

  • Pennsylvania political and budget situation. As a region, it is imperative that we are involved with our legislators, and assert our concerns. We will face a challenging year fraught with freezing appropriations, a possible tax increase and a lame duck Governor.
    • Allegheny County lost three incumbent legislators and new leaders will be appointed in all caucuses of the House and Senate. 
    • The potential exists for Jane Orie, Jay Costa, Sean Logan, Bill DeWeese, and Mike Turzai to hold powerful positions in the PA House and Senate.
    • A $1.5 to $2 billion shortfall is projected at the state level and Governor Ed Rendell chose to freeze $300 million of appropriations in the current budget year. The next budget will be announced the first Tuesday in February, and due to the large projected shortfall, we can anticipate a tax increase. 
    • County and city budgets are balanced. However, distribution of the Regional Asset District (RAD) money is currently frozen and because RAD revenues are solely tied to consumer spending, decreases in RAD funding will continue to present problems to our organizations dependent upon these funds.

—Chuck Kolling, Government Relations, Buchanan Ingersoll & Rooney PC

  • Current governmental capacity. To date, the Pittsburgh region is fairing well comparatively to other similar cities like Cleveland and Detroit. In the big picture, a major shift occurred in the provision of services from government to the nonprofit sector. Government is better equipped to weather economic downturns. The onset of this recession was quick and hard. To put recessions in context:
    • The recession we saw roughly seven years ago was mild in history, and we stand in a similar position now. The recession of the 1990's was worse, and even more dire was that of the 1980's, not too mention the Great Depression.
    • The good news is that we are better equipped to deal with a struggling economy now. 
    • Due to the rapid onset of this recession, long–term and significant impacts will nonetheless be felt (less giving, discretionary spending, workforce issues, tax issues, etc).

 —Chris Briem, Regional Economist, Center for Social and Urban Research, University of Pittsburgh

  • Statistics. There is no doubt that nonprofit frontline providers are extremely overwhelmed. We are seeing an increase in the number of the working poor, while the average income has remained consistent for the last eight years and the cost of living has increased exponentially (fuel costs up 143%, utilities costs up 69%, and rising food costs up 32%). Additionally providers are witnessing:
    • 73% increase in first time households seeking assistance.
    • 33% of these folks don't qualify for public assistance.
    • Sub–prime mortgage crisis is primarily affecting those making $25k–$42k.
    • 12% increase in shelter support requests.
    • 35% increase in requests for transportation support (i.e. bus tickets).

The message of the day was, 'Get help soon and don’t wait!' As leaders in the nonprofit community, we are charged with mobilizing financial resources and creating vehicles for non–monetary giving (i.e. food, clothing, furniture, blankets). Human service agencies stretch themselves in times of crisis to ensure they reach the most people in need. We have the ability to innovate and be creative in addressing these issues. After all, on a national level, Pittsburgh is viewed as a leading nonprofit community.

–Diana Bucco, President, Forbes Funds

About the Authors: This article was co–authored by: Alicia Andrews, Associate Director of Human Services Center Corporation; Emily Galbreth, Staff Associate of Dewey & Kaye, a McCrory & McDowell Company; and Kathi Stefani, Director of Development of Providence Connections, Inc. For an audio copy of this panel discussion, visit: http://www.mccmcd.com/mccrory/news_pubs.php. If you would like additional information, please contact Emily Galbreth at egalbreth@deweykaye.com.