Colorado Nonprofit Tax Exempt Number

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					State of the U.S. Nonprofit Sector


            Prof. Alan Abramson
          George Mason University
         Dept. of Public and International Affairs
   MPA Program - Nonprofit Management Concentration




                 March 24, 2010
        (Contact: aabramso@gmu.edu; 703-993-8189)


                      Abramson, GMU                   1
Underlying Reality About Nonprofit Data
   Data on nonprofits is improving: National
    Center on Charitable Statistics at the Urban
    Institute and others
   But, for the most part, we still lack
    comprehensive, timely, high-quality data on
    nonprofits
   There is no Dow-Jones index for the nonprofit
    sector


                  Abramson, GMU               2
Outline of Remarks

   Snapshot of c6 associations
   State of c3 charitable nonprofits




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Three Major Sectors
   Business
   Government
   Nonprofit: 1.9 million tax-exempt organizations and non-exempt
    charitable trusts in 2009
       501-c-3: 1.2 million “charitable” nonprofits, including public
        charities and private foundations
       501-c-6: 90,000 business associations
       Other nonprofits: 600,000 501-c-4 social welfare advocacy
        organizations, 501-c-5 labor unions, 501-c-7 social and recreational
        clubs, etc.,


     Source: IRS, IRS Data Book 2009, Table 25.




                                         Abramson, GMU                  4
     C6’S:
A QUICK LOOK AT
 ASSOCIATIONS
Impacts of Recession
   Reduced meeting attendance
   Cut travel budgets
   Renegotiate meeting contracts
   Reduced consultant/vendor costs
   Used reserves to cover revenue shortfall
   Modified investment reserve policies
   Reduction in staff
    75% of Associations Cutting Budgets
Source: Monica Dignam, “The Economy – An Update on How Associations are Doing,” ASAE and The Center,  6
    2010 Great ideas Conference, Colorado Springs, CO, March 9, 2010; ASAE and the Center, “Associations
    and CEOs: A Report on Two Studies During a Down Economy,” Winter 2010.
Impacts of Recession
   Associations performed below expectations
    with regard to:
         Online education
         Other virtual programs



           Harder to Facilitate Transition
Source: Monica Dignam, “The Economy – An Update on How Associations are Doing,” ASAE and The Center,
    2010 Great ideas Conference, Colorado Springs, CO, March 9, 2010; ASAE and the Center, “Associations
    and CEOs: A Report on Two Studies During a Down Economy,” Winter 2010. ASAE & The Center
    economic surveys conducted in 2008-09.


                                                                                                     7
HR Changes in 2009
Impacts of Recession
   In general, the actual performance and
    results of associations in 2009 were better
    than expected!
   In fact, while 59% of associations anticipated
    a reduction in meeting attendance in 2009,
    only 44% did


Source: Monica Dignam, “The Economy – An Update on How Associations are Doing,” ASAE and The Center,
    2010 Great ideas Conference, Colorado Springs, CO, March 9, 2010; ASAE and the Center, “Associations
    and CEOs: A Report on Two Studies During a Down Economy,” Winter 2010.

                                                                                                     9
Growing Optimism
Executives more optimistic in Winter 2010 than they were in Spring
   2009, particularly about overall and non-dues revenue:
  Tradeshows, conferences, and conventions
  Long duration education
  Investments                   Strong Focus on:
  Sponsorships                  •Branding/awareness (36%)
                                                    •Driving new members (41%)
                                                    •Improving member retention (50%)

Still most concerned about:
   Membership (51.6% expect a decline)
Source: Monica Dignam, “The Economy – An Update on How Associations are Doing,” ASAE and The Center,
    2010 Great ideas Conference, Colorado Springs, CO, March 9, 2010; ASAE and the Center, “Associations
    and CEOs: A Report on Two Studies During a Down Economy,” Winter 2010. 2009 Economic Impact on
    Associations, McKinley Marketing.                                                                    10
Anticipated Change in Revenue




       Outlook Has Improved
  Associations of All Sizes are More
  Optimistic




… But Larger Associations Are Much More So!
WHAT ABOUT YOU?
        C3’S:
   A QUICK LOOK AT
CHARITABLE NONPROFITS
Charitable Nonprofits, circa 2008

    420,000 501-c-3 reporting public charities
    5 to 10% of the total U.S. economy
    Total revenues: $1.3 trillion
    Breakdown of overall expenses:
       Health: 59%

       Education: 16%

       Human Services: 13%

       Arts and Culture: 2%

       Other: 10%


Source: National Center for Charitable Statistics, Urban Institute, 2010. Excludes private foundations and most
    religious congregations.


                                       Abramson, GMU                                                     15
Sources of Nonprofit Revenues


   Earned revenue (fees, charges): 50%
   Government: 29%
   Philanthropy: 12%
   Other: 9%

Source: Nonprofit Almanac 2008 (Washington, DC, Urban Institute Press, 2008). Estimates for
    2005 covering 501(c)(3) reporting public charities. Excludes private foundations and most
    religious organizations.




                                Abramson, GMU                                           16
Sources of Philanthropy


Total Private Giving in 2008:
$308 Billion
 Individuals: 75%

 Foundations: 13%

 Bequests: 7%
 Corporations: 5%


Source: Giving USA 2009, a publication of the Giving USA Foundation, researched and written at the Center on
    Philanthropy at Indiana University.



                                     Abramson, GMU                                                    17
State Budget Shortfalls


   FY 2009: -$110 billion
   FY 2010: -$196 billion (29% of general
    fund budget)
   FY 2011 estimate: -$180 billion
   FY 2012 estimate: -$120 billion

Source: Elizabeth McNichol and Nicholas Johnson, “Recession Continues to Batter State Budgets; State
    Responses Could Slow Recovery,” Center on Budget and Policy Priorities, February 25, 2010, pp. 4-5.



                                     Abramson, GMU                                                    18
Mid-Year FY 2010 Budget Gaps,
Selected States



   Virginia: $1.8 billion (11%)
   Maryland: $940 million (7%)
   DC: $170 million (3%)
   U.S. Total: $37.7 billion (7%)

Source: Elizabeth McNichol and Nicholas Johnson, “Recession Continues to Batter State Budgets; State
    Responses Could Slow Recovery,” Center on Budget and Policy Priorities, February 25, 2010, p. 2.

                                     Abramson, GMU                                                     19
State Budget Crises:
Impact on Nonprofits

    Decreasing government support for
     nonprofits
    Withholding payments for services
     already delivered by nonprofits
    Instituting new fees and taxes on
     nonprofits


Source: National Council of Nonprofits, “State Budget Crises: Ripping the Safety Net Held by Nonprofits,”
    March 16, 2010, p. 1.
                                      Abramson, GMU                                                     20
Charitable Giving
(after adjusting for inflation)

Change from 2007 to 2008
 Individual giving: -6.3%

 Foundation giving: -0.8%

 Corporate giving: -8.0%



Source: Giving USA 2009: The Annual Report on Philanthropy for the Year 2008,
   Researched and Written at The Center on Philanthropy at Indiana University,
   Giving USA Foundation, Glenview, IL, 2009, p. 211.



                            Abramson, GMU                                  21
Climate for Fundraising


How today’s              economy compares to third quarter of
  2008:
 2008 Q3:                100.0
 2008 Q4:                38.3
 2009 Q1:                30.7
 2009 Q2:                28.9
 2009 Q3:                29.5
 2009 Q4:                31.1
Source: Index regarding the climate for fundraising developed by the Chronicle of Philanthropy taking into
    account the Gross Domestic Product, Personal Income, Standard and Poor’s 500 stock index, national
    unemployment rate.
                                      Abramson, GMU                                                     22
Number of 501 c-3 Organizations


   2005:             1.0 million (+3.5% over previous
    year)
   2006:             1.1       million           (+1.7%)
   2007:             1.1       million           (+6.0%)
   2008:             1.2       million           (+5.2%)              Still Growing!


   2009:             1.2       million           (+4.3%)

Source: Internal Revenue Service Data Book, 2007 and 2009, Table 25.

                                    Abramson, GMU                                   23
DC-Area Nonprofits in Fragile Shape Even
Before Recession

   In 2006, DC-area nonprofits had median operating
    reserves of 2.1 months of expenses
   28% had no reserves at all
   Larger organizations had lower reserves
   Arts, culture, and humanities organizations were
    most vulnerable
   Nearly 1/6 of nonprofits that filed tax return in 2000
    were out of business or fell below $25,000 revenues
    by 2006

Source: “New Report Finds DC Area’s Nonprofits Lack Funds to Weather Economic Crisis,” Eugene and Agnes E.
    Meyer Foundation, press release, June 24, 2009; Amy S. Blackwood and Thomas H. Pollak, “Washington-
    Area Nonprofit Operating Reserves,” The Urban Institute, Charting Civil Society, No. 20, July 2009.
                                    Abramson, GMU                                                  24
“’Perfect Storm’ of Fiscal Stress Hits
Nonprofits” (4/09 survey)

   80% of nonprofits experiencing fiscal stress – nearly
    40% “severe” or “very severe”
         Especially theaters and orchestras; also, child and elderly
          services
   Hit by declining revenue, increased costs, and
    decreased cash flow
   But, 2/3 of nonprofits successful in coping
         New or expanded fundraising
         Belt-tightening
         Step up marketing and advocacy
   Worries about future revenue declines
Source: Lester M. Salamon, Stephanie L. Geller, and Kasey L. Spence, “Impact of the 2007-09 Economic
    Recession on Nonprofit Organizations,” Communique No. 14, Johns Hopkins University, Center for Civil
    Society Studies, Listening Post Project, June 2009.

                                     Abramson, GMU                                                   25
Nonprofits Outpace For-Profits
in 2008 Recession (Maryland data)

   Nonprofits are counter-cyclical force:
         Nonprofits add workers during economic downturn
   2007 Q4 to 2008 Q4:
         Nonprofit +2.7% employment
         For-profits -3.3% employment
   Holds for all nonprofits, except arts,
    entertainment, recreation

Source: Lester M. Salamon and Stephanie Lessans Geller, “Nonprofits and Recessions: New Data from
    Maryland,” Johns Hopkins University, Center for Civil Society Studies, Johns Hopkins Nonprofit Economic
    Data Project, Nonprofit Employment Bulletin Number 33, and the Maryland Association of Nonprofit
    Organizations, January 2010.

                                      Abramson, GMU                                                    26
        Most DC Charities Plan to Hire, Maintain
        Salaries in 2010 (Fall 2009 survey)

   In 2010, 49% of DC nonprofits expect a better 2010
    than 2009
   In 2010, 27% of DC nonprofits expect salaries to remain
    same in 2010 and 65% expect salary increases
   In 2010, 62% of DC nonprofits expect to hire program
    staff
   32% of DC nonprofits think the worst is over
Source: “Professionals for Nonprofits 2009: NY Salary Survey,” Professionals for Nonprofits, 2010;
    “Professionals for Nonprofits 2009: DC Salary Survey,” Professionals for Nonprofits, 2010.




                                         Abramson, GMU                                           27
Nonprofits Brace for Tough 2010
(2/10 survey)

   Nearly 90% of nonprofit leaders expect 2010 to be as difficult or
    more difficult than 2009
   80% of nonprofits expect an increase in demand for services in
    2010; 49% expect to fully meet this demand
   61% of nonprofits have less than three months of cash
    available; 12% have none
   To cope with the financial pressures, in the past year 60% of
    nonprofits engaged more closely with their boards; 52%
    collaborated with another organization; 43% added or
    expanded programs; 39% relied more on volunteers
   Finances are getting tighter for nonprofits: 40% reported
    ending 2008 with a surplus; 35% reported ending 2009 with a
    surplus; only 18% predict they will end 2010 with a surplus.

Source: “Nonprofit Finance Fund Survey: America’s Nonprofits Brace for Tough 2010,” Nonprofit Finance Fund,
    March 2010.
                                     Abramson, GMU                                                  28
Bottom Line:
C3 Charities Are Strained but Coping;
Another Tight Year to Come
   In 2008 and 2009, charities experienced significant
    downward pressure on their revenues, while facing
    increased demands for their services
   In the face of this pressure, charities made spending
    cuts where they could and generally held the line on
    expenses – arts and culture organizations were worse
    off than others
   Dreary outlook for 2010 – expect continuing high
    demands on charities for services while federal and
    state funding are tight; individual giving may be
    turning the corner

                    Abramson, GMU                    29
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