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Virginia nonprofits continue to struggle during the recession

The recession continues to rock Virginia’s nonprofits

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Print this page by Nicole Anderson Ellis

On any given night, 30 to 60 men sleep on the lobby floor of the homeless shelter on Virginia Beach Boulevard in Virginia Beach.  “With the economy the way it is, we’ve seen a big jump in people coming to us for help,” says Linda Jones, volunteer coordinator and public relations director of Union Mission Ministries. “We house anywhere from 275 to 300 people every night of the year.”  That’s a 10 percent jump from 2007 and exceeds the number of beds in the shelter.

Two hundred miles away, Roxanne Rice sees a similar trend at Food for Others, a Fairfax County food bank where she is executive director. In 2007 the nonprofit served 50 families a day.  Now its traffic has doubled to more than 100 a day.  “We’re a growth industry,” Rice says.

Although the economy has begun to grow again, the aftershocks of a deep recession continue to rock Virginia’s nonprofit organizations.

Nationwide charitable giving has fallen (down nearly 6 percent in 2008, according to the Giving USA Foundation, the first dip in more than 20 years). While donations have dwindled, human-services organizations such as Union Mission Ministries and Food for Others have found more and more people at their door as Virginia’s unemployment rate has soared.
And things may get worse. The Virginia General Assembly slashed health and human services spending by $360 million to plug a $4.2 billion hole in the state budget. As public programs are curtailed, nonprofits expect to see increased demand for help at a time when their own budgets are stretched thin.

This perfect storm of stresses may be a defining moment for Virginia’s nonprofits, which employed 211,000 workers in 2008, only 10,000 fewer than the state’s construction industry at the time. Even before the recession, competition for donor dollars was fierce among the state’s 40,000 nonprofits. As corporate and individual donors make new priorities about their giving, they could determine which charities survive.

Fixing the safety net
From food banks to the ballet troupes, many Virginia nonprofits depend on grants from foundations to fund programs. Foundations, in turn, rely on gifts and growth from their investments.  When the market is down, foundations have less to share. 

The portfolio of The Community Foundation Serving Richmond and Central Virginia dropped just over 21 percent in 2008, and gifts to the foundation were $23 million below 2006 levels.  The situation forced the foundation to reprioritize charitable giving.

“We reached out to the nonprofit community to see what they were facing,” says Elaine Summerford, the foundation’s program officer.  They contacted organizations providing safety net services — food security, emergency housing and health care.  “We weren’t surprised to hear they were seeing a very large increase in the number of people asking for help,” says Summerford, “many of whom had never asked before.”

So in late 2008 the foundation created a Safety Net Fund.  It sent a single e-mail to supporters and within a year more than 60 individuals and companies had donated a combined $800,000 in matching funds.  For its part, the foundation spent $1 million from its endowment. “We’ll have $40,000 less to give away each year because we’re spending principal,” says Robert Thalhimer, the foundation’s senior vice president, “but it was extraordinary need.”

Thalhimer believes donors likewise reached a critical decision.  Faced with fewer dollars to give because of the recession, many are giving first priority to human-services organizations, he says.

It’s a statewide trend, says Deborah Oswalt, executive director of Richmond-based Virginia Health Care Foundation (VHCF), which supports free clinics and other services for uninsured and underserved Virginians. “People see we’re in a recession,” says Oswalt.  “They’re rethinking their giving and targeting the basic needs:  food banks, emergency shelters, health care.”

Though overall giving has fallen, the VHCF has seen small gifts from individuals go up since the recession.  So has Food for Others.  “People really understand the need for food,” says Rice.

Those small gifts are keeping many Virginia nonprofits afloat.  But not all.

Spread thin
In the past decade the number of nonprofits in the commonwealth ballooned by nearly 40 percent to 40,000, according to the National Center for Charitable Statistics. Fairfax County alone had more than 1,300 nonprofits in 2005, the most recent year for which county-level data is available. “Entrepreneurship in the nonprofit sector is no different from the for-profit sector,” says Deborah Williamson, executive director of the Virginia Network of Nonprofit Organizations.  “People see a need, and they have an idea about how to meet that need.  They have a passion.”

Often that passion is a boon to the community.  “People have an idea that is so new it needs its own home,” says Alan Hutson, a principal at the Monument Group, a Richmond-based fundraising consulting firm.  He points to The Healing Place, a homeless shelter/addiction recovery facility in Richmond with a reported 70 percent success rate (compared with 50 percent at the well-known Betty Ford Center in California).  “They’re doing something unique.”

But occasionally, new nonprofits are just reinventing the wheel.  And there’s a downside to an overpopulation of nonprofits: competition for finite resources.  “With each nonprofit comes infrastructure that needs to be supported, fundraising that needs to be supported,” explains Thalhimer, The Community Foundation official.  “There are limits.  Especially with the downturn we’ve seen.” 

Part of The Community Foundation’s Safety Net Fund provided emergency aid to struggling nonprofits, including The Healing Place and Richmond CASA (Court Appointed Special Advocate), a program helping abused and neglected children.

It’s too soon to know how many Virginia nonprofits will fall victim to the slowly recovering economy, but there’s no doubt the number of independent organizations is shrinking.  Last year the Southside Virginia Nonprofit Resource Center, Focus INC and ConnectSouthside.org merged and now are governed by the Appomattox Regional Library System.  Likewise, CASA became part of Richmond SCAN (Stop Child Abuse Now). The Healing Place and CARITAS are exploring the possibility of a union.

“As a matter of survival, we’re going to see more collaboration and consolidation,” says Williamson of the Virginia Network of Nonprofit Organizations.
Thalhimer believes that consolidation will serve Virginia well in the long run.  “The recession was an opportunity to get people in the nonprofit world to think about increased efficiency through partnership.” Just like for-profit companies.

Until that shakeout runs its course (or giving returns to prerecession levels), nonprofits largely are faced with doing more with less, including fewer personnel. “The nonprofit sector, like the public and private sectors, has experienced a lot of job loss,” says Thalhimer. 

The budget blow
Southern Virginia is one area where nonprofits could face stiff challenges meeting growing needs. The region along the North Carolina state line was struggling before the recession because of the loss of thousands of textile, tobacco and furniture manufacturing jobs since the late 1990s. The recession hampered promising efforts to rebuild the economy with new industries, including companies with foreign ties. In March, Martinsville’s jobless rate was 22 percent and Danville’s was 14.6 percent at a time when the Virginia unemployment rate was 7.6 percent.

The Free Clinic of Danville has seen what director Denise Buckner calls a “huge boom” since the economic downturn.  “It was frightening how many were calling,” she says. “People who’ve never sought our help, people who were suddenly out of work and without insurance.”

The rising demand threatens to overwhelm the region’s already weakened nonprofit sector.  “We don’t have nearly the resources necessary to make up the budget cuts or re-create the social safety net,” says Karl Stauber, executive director of the Danville Regional Foundation, an organization created to help the region using money from the sale of Danville Regional Medical Center.

Nonetheless, in the face of extraordinary needs, nonprofits feel compelled to help as much as they can.  The foundation’s mission includes funding long-term, “game-changing” initiatives that improve the region’s economy.  But, says Stauber, it will continue to provide short-term emergency assistance.  “We’re helping make sure people and families are not damaged in a major way.”

Not bread alone
While the critical needs of newly unemployed and uninsured families have put the spotlight on programs offering emergency aid, the vast majority of Virginia’s nonprofits — 86 percent according to one study — do not provide human services.  And no segment of the nonprofits — the arts, recreation or education — has escaped the bruising effects of the economy.  The results have been deflated endowments and deep budget cuts.  The Virginia Commission for the Arts, for example, will lose 15 percent of its state support, roughly $1.34 million, over the next two fiscal years.  That’s on top of a 30 percent cut in 2008.  Yet the agency considers itself lucky. The budget proposed by the House of Delegates would have phased out all public funding.

“2009 was difficult for the arts, but defunding them is short-sighted because of the economic impacts,” says Thalhimer. “It’s not a matter of either-or.  It’s a matter of degree.  Don’t expect any major capital campaigns or expansion projects at universities or the arts, but the loyal will keep giving.”
Those loyal donors include Richmond-based Altria Group Inc., which donated more than $3 million to the arts and culture in 2009, with the majority of the money staying in Virginia. 

Meanwhile, Virginia’s public colleges and universities likely will become more reliant on faithful donors as the schools cope with waning state support. At the University of Virginia, for example, state money now represents only 6.9 percent of its budget, down from 26.2 percent 20 years ago. In response a series of budget cuts, many universities have raised tuition and student fees for the next school year in a range of 6.7 to 24 percent. 

While no one expects a quick fix to their problems, hope for all nonprofits lies in the continued recovery of the economy. “Companies are making money again,” says Thalhimer, who expects giving to rise with profits.  “If you’re making your living in a community, you have a commitment to support that community.”

The current situation is a crucible that tests the resourcefulness and commitment of nonprofit leaders, says Hutson, the fundraising consultant. “Think how much stronger the nonprofit sector’s going to be coming out of this.” 


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