Nonprofits face toxic combo: rising demand, falling revenue
Photo | Grant Welker
The YWCA Central Massachusetts in downtown Worcester is undergoing a $24-million renovation.
Massachusetts nonprofits reported losing more than $8.6 billion in revenues because of the COVID-19 pandemic, and more than half said in a recent survey that they've made reductions to their workforce.
Surveys conducted through March, April and May by the Massachusetts Nonprofit Network (MNN) and Philanthropy Massachusetts gauged the impact of the pandemic and its ripple effects on the nonprofit sector -- which, according to MNN, is one of the state's largest employment bases, accounting for 18 percent of all jobs.
Nonprofits working in the health, human services, housing and food assistance fields have been helping people affected by the public health and economic crises, while also keeping an eye on their own fiscal conditions.
Forty-four percent of the survey's more than 1,500 respondents said COVID-19 resulted in an increased demand for their services, 88 percent said their services were disrupted, and 78 percent reported revenue decreases.
An MNN report on the survey said COVID-19 "derailed two types of nonprofit revenue streams immediately: fee revenue as services had to be suspended, and contribution revenue as fundraising events had to be canceled, postponed, or changed."
The timing of the pandemic "amplified" fundraising impacts, according to the report, since many events are scheduled for the second quarter of each year.
At 86 percent each, respondents from the environment and arts and culture sub-sectors reported the highest incidence of revenue loss, the MMN said. Arts and culture also had the highest percentage (93 percent) of respondents identifying financial relief as a top need.
"Many arts and culture and environment non-profits have seen a dramatic revenue drop in the wake of COVID-19, as museums, theaters, historic parks, conservation land, and other public gathering spaces have closed completely," the report said. "A breakout of survey results by geographic region shows nonprofits in the Berkshires and the Pioneer Valley with the highest percentages of respondents reporting revenue loss."
Arts and culture was also the sub-sector with the highest percentage of respondents reporting layoffs, furloughs or cutbacks in employee hours, at 43 percent. Overall, 52 percent of nonprofits reported workforce reductions.
The report offers three policy suggestions its authors said would help nonprofits recover.
At the federal level, it calls for lifting the cap that makes the Paycheck Protection Program only available to nonprofits with 500 or fewer employees and otherwise expanding nonprofits' access to capital.
The report said the next federal relief package "should improve the temporary (expiring at the end of 2020), limited ($300/person cap) above-the-line charitable deduction provided in the CARES Act by making it permanent and increasing the cap."
The nonprofit network is also seeking unemployment insurance relief, calling workforce decisions "particularly complex for the many nonprofit organizations that self-insure their unemployment insurance (UI) costs." Such workplaces reimburse the state unemployment trust fund when they have layoffs, instead of making quarterly contributions.
Self-insured nonprofits are now "experiencing unimaginable expenses associated with those reimbursements," the report said. It said the federal CARES Act provided funding for state UI trusts to forgive 50 percent of the claims owed by self-insured nonprofits, but the remaining costs remain "an insurmountable financial burden for many."
The report recommends that more financial support for state-level UI costs be included in the next round of federal stimulus legislation.
"Nonprofits support the most vulnerable, strengthen every community, and generate essential economic activity, which makes the massive impacts of COVID-19 on the sector very troubling," Massachusetts Nonprofit Network CEO Jim Klocke said in a statement. "Because of this, it's in our collective interest to ensure that the nonprofit sector remains strong during, and after, the COVID-19 pandemic."
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