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Hard times squeeze nonprofits: Sinking assets hurt donations
By Leslie Wright
Free Press Staff Writer
Employees at the Visiting Nurse Association of Chittenden and Grand Isle Counties have not had a raise in two years.
The United Way of Chittenden County raised less money this year than the year before, something that hadn't happened since the early 1990s.
The Vermont Foodbank has seen the number of people in need of free food grow by 16 percent in two years, a trend that shows no sign of reversing.
Nonprofits are feeling the effects of the downturn in the stock market and the economy -- and their financial health matters.
Nonprofits employ about 42,000, accounting for 12 percent of the jobs in the state. Total revenues from foundation grants, contributions, fee for service and government contracts and grants come to $2.8 billion, according to the Vermont Alliance of Nonprofit Organizations.
There are 2,682 nonprofit organizations operating statewide, giving Vermont the highest rate of such groups per capita, according to the alliance.
The groups are vulnerable to donors and agencies that react to a slowing economy by curtailing their grants and gifts.
Among the nation's largest 131 foundations, assets fell by a median of 9 percent in 2002, meaning that half of the funds fell more than 9 percent and half fell less, according to a study done by The Chronicle of Philanthropy, an industry publication.
As a result, many foundations have cut off or frozen grants to charities. The United Way of Chittenden County froze giving at last year's levels.
Donations have also been hit. In 2001, donations grew 5.2 percent, compared to an average gain of 11.4 percent in the years 1997 through 2000, according to the Chronicle.
The heady days of the late '90s are long gone. Nonprofits everywhere enjoyed the booming '90s, when healthy stock market returns boosted endowments and profitable corporations made generous donations. State and federal government coffers also swelled with increased tax revenues.
Coping with realities
The VNA is one of thousands of nonprofits in the state coping with the realities of doing business in a down economy. While the trials and tribulations of for-profit businesses tend to be publicized as jobs are cut or companies close doors, nonprofits are also challenged when the economy sours.
"The nonprofit community is much more like the for-profit community than people understand, especially for an entity as large as we are," chief executive officer Church Hindes said. "We live in the same marketplace. We buy insurance for our staff from the same sources. We compete for computer technicians and administrative assistants and financial staff and accountants and facilities managers and human resource experts in the same marketplace."
The 97-year-old home health care agency has been squeezed by cuts in Medicare, stock market losses and the rising costs of health insurance. Freezing salaries was a drastic but necessary step to keep the VNA going without cutting staff or services, Hindes said, adding that a pay raise is on the books for July.
The VNA employs 750. If ranked among for-profit companies, the VNA would be No. 25 in the state for employees and 84 for the size of its budget, said Hindes, who oversees an annual budget of $22 million.
The VNA gets 85 percent of its total revenues from the federal Medicare and the state Medicaid program. Medicare accounts for 35 percent of total revenues and Medicaid accounts for 50 percent of total revenues.
In October Medicare reimbursement rates dropped 11 percent.
"When a third of your revenue stream drops by 11 percent in any business, whether we were selling cars, carpets or legal services, that would be difficult to sustain," Hindes said.
Because VNA bills patients on an ability-to-pay basis, there isn't an opportunity to pass increased costs onto others, a practice known as cost shifting, Hindes said. Other types of businesses can pass cost hikes on to consumers.
The VNA trimmed costs by putting off pay raises and finding ways to work more efficiently, Hindes said. For example, the agency bought laptop computers for workers to complete paperwork in the field, eliminating the need for another person to transcribe field notes into the computer system.
Lowered expectations
The United Way of Chittenden County trimmed fundraising expectations by $100,000 in 2002, something the organization hasn't had to do since the early '90s, spokesman Stephen Mease said. The 2002 campaign raised $3.69 million, slightly ahead of the goal of $3.65 million.
United Way's 32 member agencies, including the VNA, received the same amount of money as the year before for about 60 programs, Mease said.
"The need actually usually is greater in times of recession. So you see your fundraising go down and the need is going up," he said.
United Way was heartened to see 1,500 new donors contribute in the most recent campaign, a sign that people are aware of the need, Mease said. When people see friends and neighbors lose jobs and need services, the importance of local charities hits home, he said.
The Vermont Foodbank, based in Barre, has seen a strong response to a most basic need. The non-profit raised $984,000 in 2002, 10 percent more than the year before.
While Chief Executive Officer Deborah Flateman is pleased with the response, she sees demand growing as fast as the agency can keep up. In the past two years the number of Vermonters served has grown 16 percent to about 130,000, she said.
The foodbank distributed 6 million pounds of food last year and expects to distribute 8 million pounds this year. By 2005 the foodbank envisions distributing 12 million pounds of food, Flateman said.
"Thank God there are plenty of people out there who recognize that this is a need that needs to be addressed," she said.
Contact Leslie Wright at 660-1841 or lwright@bfp.burlingtonfree-
press.com
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