The stubbornly sluggish economic recovery has created a perfect storm of bad economic news for the state’s charitable nonprofit sector. During times of economic distress funds dip as individuals and foundations see their fortunes decline. At the same time, the demand for services escalates as unemployment and related social ills soar. State and county governments, also caught in a vice between escalating demand and the inability to increase taxes on financially stressed taxpayers, cut funding to social service and charitable organizations.
And the problem could be about to get worse, much worse. One of the items on the table in the so-called “fiscal cliff” negotiations in Washington, D.C. is the scaling back or elimination of the Federal tax deduction for charitable contributions. While it is true many Americans give out of an innate sense of charity, with the income tax deduction being a secondary consideration, the deductibility of contributions does have an impact on whether or not a charitable contribution is made and how many dollars are given.
The Lincoln Institute of Public Opinion Research in conjunction with the Pennsylvania Association of Nonprofit Organizations (PANO) recently conducted the annual Pennsylvania Charitable Organizations Survey. Seventy-five percent of the respondents said the loss of the Federal tax deduction for charitable contributions would have a negative effect on their organization – 40% said the effect would be “significant.” Conversely, just 10% felt the loss of the deduction would have no effect, and 2% predicted a positive effect.
Despite the challenging environment in which they are operating, there was an increase in the number of charitable organizations that report their ability to fulfill their core mission has improved over the past year. Seventeen percent say they have a greater ability to carry out their core mission compared to the 11% who felt that way in 2011. In the current poll, 55% reported their ability to fulfill their core mission has remained about the same as last year, while 26% felt they have less ability to fulfill their core mission. That is down from the 31% who last year reported less ability.
Generally speaking, the nonprofit organizations participating in the Lincoln Institute/PANO poll felt business conditions in Pennsylvania have remained about the same over the past year. That, however, is not good news as the business climate for charities has been challenging in recent years. Despite that, 21% of the respondents said business conditions in the commonwealth have improved over the past year; that is up from just 8% who reported improving business conditions a year ago. Also, 24% said they felt the state’s business climate has gotten worse over the past twelve months; that is down from the 40% reporting a worsening business climate last year.
A further ray of optimism was reflected in responses to the question: Looking ahead one year, do you expect business conditions to be better, about the same or worse than they are today? Thirty-four percent said they expect business conditions in the state to improve over the coming year – that is up from the 27% who forecast an improving economic climate last year. Nineteen percent expect the state’s business climate to get worse, down from the 26% who last year predicted declining business conditions. Forty-seven percent said they expect the state’s business climate to remain about the same over the coming year. Again, “about the same” means continuation of a business climate that is not favorable.
The Lincoln/PANO poll also found employment levels at Pennsylvania Nonprofits have declined over the past year. Fifty-six percent of the nonprofits participating in the survey said employment levels at their entity were about the same as a year ago. But, 26% said they employ fewer people than a year ago, while 18% reported more people on payroll. Looking ahead, 21% forecast rising employment levels, while 13% expect employment at their nonprofit to drop.
Impact of a Sluggish Economy
The lingering economic downturn has had a negative impact on 82% of the nonprofits participating in the 2012 Pennsylvania Charitable Organizations Survey. Of that number, 25% said the negative impact on them has been “significant.” Twelve percent said the economic downturn has had no impact on them, while 6% said the bad economy has positively affected them.
Economic conditions have caused 26% of the nonprofits surveyed to cut services, while 24% say they have increased services as a result of the poor economy. Exactly half said their level of service has remained about the same over the past year. Thirty-eight percent of the nonprofits say they have cancelled or postponed expansion plans to deal with economic conditions. Thirty-two percent have had to lay-off staff; 29% have reduced employee hours; 27% have had to borrow operating money; 27% have cut or eliminated benefits; and 10% have cut salaries.
Looking ahead over the coming year, 48% participating in the Lincoln Institute/PANO poll said funding for their organization remained about the same in 2012 as it was in 2011. Twenty-six percent of the entities experienced a funding decline this year, while 21% saw an increase in revenue. Forty-two percent of the respondents report state funding has decreased over the past year, 18% said funding they receive from the state has remained about the same, while state funding has increased at just 3% of the nonprofits. Thirty-seven percent said they don’t receive or utilize state funding.
Sixty-three percent of the poll’s respondents rated public trust in the nonprofit sector as “medium.” Twenty-one percent rated public trust as “high,” while 11% said public trust levels were low. Looking back over the past couple of years, 45% said public trust was about the same, 28% said trust in such institutions is lower; 22% said trust levels are higher.
Given that many nonprofits receive some part of their funding from government, a number of entities engage in lobbying activities. Just 6% of the respondents are registered under provisions of the Pennsylvania Lobbying Disclosure Act. But, 28% say they lobbied state government over the past year. Nineteen percent report having lobbied at the federal or county level, and 15% lobbied at the local level during the past twelve months. Looking ahead 29% say they expect to lobby government at some level on a public policy issue over the coming year, 51% do not expect to lobby.
Eighty percent of those participating in the Lincoln/PANO poll said they currently provide health insurance for their employees. Of that number, 48% report that the major portion of premiums is paid by the employer with some employee co-pay. Thirty-two percent reported the entire health care premium is covered by the employer.
The property tax exemption for nonprofits continues to face challenges by county and municipal governments. However, just 8% of those participating in the 2012 Pennsylvania Charitable Organizations Survey say they have had their property tax status challenged over the past two years. But, 20% are concerned that county or municipal government may challenge their status in coming years.
The 2012 Pennsylvania Charitable Organizations Survey was conducted by the Lincoln Institute of Public Opinion Research, Inc. in conjunction with the Pennsylvania Association of Nonprofit Organizations (PANO). The poll was conducted electronically between December 3, 2012 and December 17, 2012. A total of 289 nonprofit organizations participated in the survey. Complete numeric results are available on-line here.