Donors Forum's Economic Outlook 2009 Shows the Impact of the Economic Crisis on Illinois' Nonprofit Sector

According to Economic Outlook 2009, a new report from Donors Forum, Illinois' vibrant nonprofit sector is raising concerns about the effect of the economic crisis on charitable giving and demand for services, and in turn, nonprofits and grantmakers are responding in proactive ways to meet current challenges. The report is based on responses from 260 nonprofit organizations and 54 grantmakers in Illinois to a survey conducted in the late fall by Donors Forum.

Impact
Economic Outlook 2009 features responses from organizations directly affected by the economic downturn and mortgage crisis as well as grantmakers that fund them. Key findings include:

• Nonprofits and grantmakers reported that operating revenues (for nonprofits) and assets (for grantmakers) have declined in the last year. Seventy percent of grantmakers reported that lack of asset growth or income was a "very important or moderately important issue within their organization."
• Nonprofits were more likely to mention government funding cuts or delays and declines in corporate giving than to mention declines in foundation and individual giving over the last year.
• Two-thirds of nonprofits surveyed reported an increase in requests for services.

Both grantmakers and nonprofits reported that the sector has not yet felt the full impact of the economic crisis. The report also showed how nonprofits and grantmakers are responding to economic challenges. In many cases, prominent strategies include a heightened emphasis on sustaining and building the capacity of nonprofits.

Nonprofits
The report shows that many nonprofits are cautious about what's ahead, with many projecting more conservative budgets in the next year. The reasons for that are clear, including the lack of operating reserves. Nearly half (45 percent) of those surveyed reported they have no operating reserves -- or that reserves have declined in recent years.

Nonprofits also reported declines in funding, with decreases in state funding the "most common," particularly for arts, housing, health, disability, and child and family services organizations. Meanwhile, more than one third also emphasized that delays in government funding "posed as many or more concerns than cuts." Just two years ago, only 20 percent reported similar problems.

Now, many of these nonprofits are likely to counter this trend by employing strategies previously associated with businesses -- like using credit lines to deal with cash flow problems.
While nonprofits saw foundation, corporate funding, individual giving and special events revenue increase or remain stable in the last year, respondents questioned whether that trend will continue in this economy.

Grantmakers
Nearly two thirds (65 percent) of grantmakers who responded to the survey experienced a decrease in assets in the last year. Respondents most often cited declines in assets as the reason for changes in giving levels. According to the report, "Only 50 percent [of grantmakers surveyed] expected to maintain or increase their giving levels in 2009."

Responding to Challenge
In response to the current economic climate, both nonprofits and grantmakers point to a wide range of strategies that can bolster the nonprofit sector. For nonprofit service providers, that may include stepping up communications and fundraising efforts while building their capacity to plan, to manage, and to develop leaders. For grantmakers, it can mean streamlining the grant proposal process, maintaining funding for current grantees and encouraging collaboration. Another strategy could include "convening with grantees" to see if there are ways to leverage resources.

"Despite the current crisis, there is reason to be heartened," said Valerie S. Lies, President and CEO of Donors Forum. "Grantmakers have told us that they are trying hard to keep their grant funding stable and that they're considering funding strategies, such as providing general operating support, to ensure that nonprofits can continue to meet the needs of people around the state."