During the past month, the Center on Budget and Policy Priorities (CBPP) and Weiss Research have both indicated that the economic crisis is far from over. Many states and municipalities are struggling to reduce debt. During fiscal 2010, on average, states cut 12% of their budgets, according to CBPP. And, they are expected to cut about 13% during fiscal 2011, this year.

Weiss Research has shown that many municipalities have severely lost capacity, from ability to borrow to lowered investment ratings. A good number will go bankrupt.

What is the impact for nonprofits?

We can expect continuing budget cuts to state and local contracts. And, there will be greater competition for funds. Those agencies with proven track records, strong program outcomes, and good relationships will be better positioned.

Nonprofits will need to work together on policy issues. And, the local state nonprofit association is usually the best resource for mobilizing the sector around common issues of concern. And, field specific associations can help further mobilize on more targeted areas.

Mid 2010

For more than a year, we’ve been hearing about and experiencing a very severe recession. Rather than calling it a depression, it has been titled a “Global Fiscal Crisis.” And it has hit nonprofits very, very hard. And by whatever name it’s called, it is still a financial storm that has wreaked havoc on families, organizations, and communities.

Your stakeholderes may or may not know that the nonprofit sector is one of the hardest hit during this Fiscal Crisis. One can check out the research by the Aspen Institute, WK Kellogg Foundation, National Council of Nonprofits, Join Together, Michigan Nonprofit Association, Boston Foundation, the Finance Project and others.

All of these very reputable organizations have analyzed the impact of the Fiscal Crisis on nonprofits and community services. The picture is bleak, showing that, in most areas, a significant majority of nonprofits have been affected, and the nonprofit sector is expected to rebound more slowly that the country in general.

Stakeholders, especially board and staff, need to understand that the nonprofit sector is already very hard-hit, and hard pressed to maintain programs and services.  Most states are talking about more cuts. Foundations, themselves hard hit, are continuing to cut back on giving after cutting about 28% in 2009.

The landscape of the nonprofit sector is being fundamentally altered. The large cuts, especially from government, cannot be made up by even the most creative and effective fund raising combinations. There is no one solution. But, as a consultant who has seen nonprofits face major cuts at least three times, I believe that we need a combination of powerful state and local strategies to respond.

These would include policies that restore the importance of funding nonprofit community serviuces. We need special economic development programs for community-based nonprofits and niche nonprofits. We need to limit the amount that states cut from children, elderly and health bureaus. There need to be more donors giving more, at a time when many have hard hit and afraid. There needs to be a bold initiative to support nonprofit progress.

Please tell us about your experiences with the Fiscal Crisis. How has your nonprofit been affected? What strategies have you tried. What has worked? What hasn’t worked?

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