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Nonprofits Show Optimism Despite Serious Concerns, United Way Survey Finds

By Kathryn M. Roy

October 10, 2011

Even as the economy continues its slow recovery, many Hartford-area non-profit organizations have a renewed sense of optimism, according to the United Way’s eighth annual Non-Profit Pulse Survey.

While many organizations have developed creative ways to do more with less, concerns liger over public sector funding, increased demand for services and general uncertainty over the future.

Susan Dunn, president and CEO of the United Way of Central and Northeastern Connecticut, said she was surprised by the increase in optimism from those surveyed.

“(Optimism increased) from 53 percent to 66 percent,” Dunn said. “While things haven’t gotten dramatically worse, they have not gotten better. (Some respondents were) optimistic around individual and corporate and foundation revenue, but those aren’t major funding sources for them.”

Eighty-two area non-profit organizations — of 366 non-profits sent the survey in late August — participated. Half of the respondents are funded United Way partners.

This year’s survey reflects a three-year uptrend in optimism, following the dramatic drop to 35 percent reported in 2008.

Donna Taglianetti, executive director of Co-Opportunity, a Hartford non-profit focusing on housing and community economic development initiatives, said she thinks the reality of the economic downturn has set in for many organizations.

“I think people are a little less shell-shocked,” Taglianetti said. “We have fared pretty well financially, but we’re starting to feel the hit on federal grants. We have looked at this 40 different ways. We’ve done all sorts of scenario planning and we’re confident we’ll make it through; we’re pretty optimistic as a group.”

Dunn said in general, she believes people that work in the nonprofit sector are more optimistic by nature.

“You believe you can make change,” she said. “I’m making a broad generalization, but you believe you can change others and you can change conditions for the better.”

Optimism notwithstanding, many respondents reported being worried about funding.

“Every year that funding goes flat, your program costs go up five percent or so each year…you have utilities, and if health care costs only go up 14 percent a year, we think we’re lucky,” said Ray Gorman, executive director of Community Mental Health Affiliates, a New Britain-based private non-profit provider of mental health and substance abuse treatment services with 18 locations in the state. “There’s no place to shift that expense to, so we’ve consolidated and closed a number of our locations.”

Half of all respondents to the 2011 survey indicated that changes in this year’s public sector budgets — including federal, state and local funding — would affect their organization, compared to 47 percent who expressed that view in 2010. Fifty-two percent of those surveyed indicate that they receive more than half of their funding from public grants or contracts.

James O’S. Morton, president and CEO of the YMCA of Greater Hartford, said he is concerned that economic constraints could have an effect on the state’s policy of funding educational and after-school programming for children.

“If the state decided it could no longer afford to provide the kind of educational supports to young people, especially children coming from under-resourced communities, that would be a problem for us,” Morton said. “We’d have to find a way to carry on those opportunities without those state funds. We’re always watching very carefully how the state is going about its funding priorities, and we’re hoping they continue to keep youth and teens a priority.”

Iris Hope Rich, executive director of the Women’s League, Inc. Child Development Center in Hartford, a provider of early education services, said she’s had to become her own advocate for increased early education funding.

“My role in advocacy has become much more profound,” Rich said. “We maintain relationships and gladly do so with the United Way. We continue to be very assertive and active in advocating in Care 4 Kids and other sources of funding such as the Department of Social Services and School Readiness dollars, and hopefully those will remain.”

Ron Cretaro, executive director of the Connecticut Association of Non-Profits, said the organizations have reason for concern.

“There’s more anxiety over loss of federal dollars,” he said. “Over the years, people thought that was more secure and that’s now unsettling. We haven’t been decimated in the state budget, but the lack of increases coupled with the increase of operating costs for health insurance, utilities and gasoline results in a net loss.”

Taglianetti, of Co-Opportunity, said her organization gets about 40 percent of its funding from government sources and about 30 percent of that comes from the federal government.

“There’s still money to do foreclosure counseling, but other services will get hit,” she said. “Counseling and education for first-time homebuyers would be affected.”

Co-Opportunity also runs a workforce development program for young adults who have not finished high school, and funding for that program has been slashed. But Taglianetti has not lost hope.

“There is more of a focus (on the federal level) on jobs right now, even than there was six or seven month ago, so that could bode well for that program,” she said.

While concerns linger over public sector funding, many nonprofits are seeing foundation, corporate and individual giving hold steady and in some cases increase. According to a recent report from the Nonprofit Research Collaborative, fewer than half of 813 surveyed nonprofits reported fundraising increases during the first half of 2011.

The United Way survey showed giving from individuals continues to rise, with 36 percent of respondents reporting an increase in 2011, up from 34 percent in 2010. Twenty-nine percent reported lower individual contributions, compared to 41 percent in the prior year. Nearly half of the responded reported that foundation/corporate giving has remained the same.

Gorman, of Community Mental Health Affiliates, said he is seeing a little improvement in giving from private donors over last year.

“(Some of the) private donors relied on stock market returns to make their gifts,” he said. “Even though it’s volatile, it’s off its lows of 2008 and 2009, so you’re seeing some private donors coming back with contributions.”

Gorman said CMHA has a great relationship with United Way, but funding from the United Way is down some as well.

“In some other United Ways we’ve dealt with, they’ve missed their (fundraising) targets by 10 or 15 percent, so they pass that on to provider agencies,” Gorman said. “(With) industrial or workplace giving, it’s very tough on them to meet their objectives right now.”

Morton, of the YMCA, said the lack of consumer confidence typically means people change their philanthropic priorities, and he wouldn’t be surprised to see the effects of that in the coming months.

“Fortunately, we’ve been very well supported by our philanthropic community here at the Y,” he said. “We’ve been able to continue to raise dollars to support some of our programs in particular for families and children in need.”

Nancy Roberts, president of the Connecticut Council for Philanthropy, said foundation assets are down 22 percent from the end of 2007.

“We still have a foundation community that has not bounced back, just as nonprofits haven’t bounced back,” Roberts said. “Donors are cautious; the corporate sector has not been engaged as much as they have been. It’s not a great time, but it’s not as bleak as it was in 2008 and 2009.”

Over the past three years, Roberts said, many community and private foundations have become more focused. “(They’re saying) ‘We want to maintain support of the good organizations we like supporting… We can’t take on a whole lot of new organizations; we’re trying to have a bigger impact.’ That certainly presents a tougher picture for those organizations that are newer or those that are trying to go out and diversity their funding base,” she said.

Cretaro said he is encouraged to see that while financial support for some nonprofits may have waned over the past couple of years, those who serve some of the neediest populations are getting by.

“It seems people have continued to give, and in some cases upped their giving, where shelter and food were at stake,” he said. “The public has continued to support those causes.”

Despite the slightly improved outlook, nonprofits working with the underserved, low- and moderate income communities are seeing no drop in demand for services. Eighty-eight percent of respondents reported in 2011 that demand for services remained flat or increased compared to 2010.

Gorman said CMHA is seeing increased demand for health care services. “For adults and families looking for outpatient care, (demand for services) has never been higher,” Gorman said. “They are unable to pay their own COBRA premiums, or they have put their kids onto a HUSKY plan.”

Gorman said CMHA was forced to lay off employees because of the recession.

“Having flat funding for four or five years necessitated that we had to lay people off, and they’re still laid off,” he said. “These are people who are licensed professionals, people with bachelor’s degrees.”

Taglianetti said Co-Opportunity is seeing many new clients who have never needed the organization’s services before.

“We’re beginning to see people unemployed for a long period of time and are beginning to rethink their career,” she said. “(Or) they come through our foreclosure program or coaching program, people who had pretty good salaries and assets at one point and they’ve just depleted them.”

As nonprofits across the state look ahead, they continue to be creative in their operations and work to do more with less. Some have considered merging with other organizations, while others have pared down their services, to focus on what they do best.

“There’s no need to compete for shrinking resources,” said Gorman. “We absorbed four nonprofits a couple of years ago and the past two years, we have refined what those personnel and what those programs do to reduce costs.”

The YMCA has a renewed focus on cutting expenses while still providing the best and highest quality of service it can.

“We’re just beginning to deploy a 2012 strategy to develop or create a centralized purchasing strategy within our own organization — 10 branches, 48 (before and after school) sites and two camps,” Morton said. “We have lots of contractors and suppliers that provide goods and services, and we’re now beginning to see if there’s some economy of scale by centralizing in some way the way we purchase those services and engage those contractors.”

Dunn said while the nonprofits indicated they’re restructuring or refocusing their energies to stay viable, some are neglecting their infrastructure.

“Whether it means maintaining the building or their IT or training for staff, ultimately, you’re going to have to pay for that,” she said. “But most people who work for a nonprofit do it for more than just a paycheck.”

For now, nonprofit leaders like Taglianetti continue plugging away, hoping they can survive the economic turmoil.

“I can’t think of a time when the services we provide could be more critical,” she said. “The people we work with, whether funders, peers or clients, know we’re providing a quality, high level service. Those are things that keep you coming to work every day.”