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  • Nonprofits Paid Staff $634 Billion, Running Deficits

    By Mark Hrywna - October 24, 2016

    Nonprofit employment and wages held their own through the recession and even outpaced other sectors of the economy over the last decade, according to new data presented by The Urban Institute.

    “The growth in the nonprofit sector can be largely credited to the health care and social assistance industry, which includes hospitals, mental health centers, crisis hotlines, blood banks, soup kitchens, senior centers, and similar organizations,” according to “The Nonprofit Almanac, 2016: The Essential Facts and Figures for Managers, Researchers, and Volunteer.”

    The 300-page report is the ninth edition by The Urban Institute but the first comprehensive update since 2012. The report compiles data from around the sector to present an assortment of trends about wages and employment, private giving and volunteering, and the size and scope of charities in the United States.

    In a chapter detailing financial trends, the report concludes that while nonprofit revenue and outlays show increases from 2004 to 2014, average annual growth rates pre-recession and post-recessions reveal lingering effects of the recession. “A more concerning issue for the sector, though, is a gap” between total revenues and outlays.

    Since 2008, the sector has been running deficits between 4 and 8 percent of its total revenue each year, possibly drawing down savings or taking out lines of credit to sustain operations.

    “One of the big trends throughout the almanac was that the size and growth of the sector was robust even during the recession,” said Brice McKeever, research associate at The Urban Institute. The nonprofit sector was the only sector that has seen positive growth every single year since 2000.

    Nonprofits paid an estimated $425 billion in wages in 2003, which grew to $634 billion by 2013 — an increase of 49 percent, or 18 percent after adjusting for inflation. Wages for hospitals grew from $196 billion in 2003 to $313 billion in 2013, by far the largest absolute growth of any industry. If hospitals are removed from the employment trend, nonprofit wages still would have grown 40 percent.

    In 2013, 57 percent of all nonprofit wages were paid by health care and social assistance organizations. Hospitals, residential care facilities, and ambulatory health care services accounted for 49 percent of all nonprofit wages.

    The latest version of the almanac features an update on employment and wages data, showing that the nonprofit sector provides more than 10 percent of the nation’s employment. “I don’t think people realize just how big the sector is; it’s huge,” McKeever said, employing more than 1 out of 10 people. The sector contributed almost $938 billion to the Gross Domestic Product (GDP), representing 5.4 percent of GDP.
    Between 2000 and 2013, nonprofit employment grew at an estimated 22 percent, faster than the overall workforce.

    Nathan Dietz, senior research associate, looks back at the recession (2000-01) as a benchmark for the recent recession (2007-09). Of recessionary periods, the most recent was a lot stronger and did more damage than the early 2000s. There was still a drop but a gradual increase, then steady increases during the early to mid-2000s until the Great Recession. “There seems to be just a lot more turbulence in this recovery period” than the early 2000s. “You’re still seeing recovery but not as slow and steady,” he said.

    That turbulence is best exemplified within volunteering statistics, found in Chapter 3, Dietz said. During the past 10 to 15 years, national statistics on volunteering have shown the volunteer rate consistent, with some oscillation over three or four years, but then a decline to the point it reached an all-time low in 2015. Total volunteer hours, however, tell a different story, with “a lot more bouncing around in the total number the last few years,” he said.

    “The trend has been a slight increase, if you see any change at all,” Dietz said. “What that says to me is organizations that use volunteers are depending on the work at least as much as they ever have, if not more, especially as they take on new assignments and activities.”

    The new edition of the almanac presents detailed information from “before, during, and after the recession, adding context to the recovery of the sector.” Data are gathered from a variety of sources for the most recent year available. In some cases, that might be 2015 and 2014 or even 2013. Data aren’t quite current enough to pick up the influx of new nonprofits that were approved with the Form 1023 EZ, Dietz said. A streamlined Form 1023 application for tax-exemption was implemented last year. But there’s been steady growth over time, which has always been the case, he said.

    Even the number of nonprofits has held steady despite fears of closures as a result of the recession. There typically is a lot of churn at the smaller end of the nonprofit spectrum but there’s still more growth than decline, McKeever said. “There’s a lot there that nonprofit sector is expanding in new ways, taking on new shapes, moving into new areas, and growing,” he said.

    In a chapter detailing financial trends, the report concludes that while nonprofit revenue and outlays show increases from 2004 to 2014, average annual growth rates pre-recession and post-recessions reveal lingering effects of the recession. “A more concerning issue for the sector, through, is a gap” between total revenues and outlays.

    Since 2008, the sector has been running deficits between 4 and 8 percent of its total revenue each year, possibly drawing down savings or taking out lines of credit to sustain operations.

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