Nonprofits in San Diego County have a brighter financial outlook and are looking ahead to the new year with the best outlook since COVID-19 hit, even though challenges remain, particularly when it comes to filling certain positions.

The Nonprofit Institute at the School of Leadership and Education Studies at the University of San Diego (USD) released the latest data from the 2021 State of Nonprofits and Philanthropy report, “Meeting the Moment: Stewarding the Momentum,” which tracks the health and vitality of the region’s nonprofit sector. The 2021 report highlights how nonprofits, their leaders, and constituents are responding to the ongoing disruption wrought by nearly two years of COVID-19.

The report’s authors estimated that the average number of nonprofits with paid employees was 2,849, with average total employment of 105,705 and total wages of $6.63 billion.

Local nonprofit leaders anticipate growth in employment during the next 12 months, with 57% predicting their staff size would increase while 41% expect staff size to remain the same. Four out of five organizations reported actively hiring new employees but 87% indicated it was at least somewhat difficult to find qualified employees. For human service organizations, that number jumped to 95% with one-quarter finding it extremely difficult.

Across all subsectors, the positions most frequently identified as difficult to find qualified employees for were program staff, licensed or specially certified staff, fundraising/development, and administration and operations. During the next 12 months, 80% of organizations anticipate increasing wages while about half of those (41%) anticipate increasing benefits.

Nonprofit leaders report high turnover as a result of low wages, inadequate benefit packages, and burnout. Employees’ desire for a remote work environment, school closures and the lack of child care, the high cost of living in San Diego, and competition with government and private sectors are fueling the shortage of qualified employees.

To attract qualified candidates in a highly competitive labor market, nonprofits have adjusted pay schedules, implemented additional benefits, formed partnerships with other nonprofits, and introduced various professional development opportunities.

Nonprofit leaders projected financial health during the next 12 months. In the October 2020 report, in the thick of the pandemic, 37% of organizations reported they projected their general financial health to be somewhat or much worse over the following 12 months. This year, this percentage was only 9%, with zero respondents predicting it would be much worse. Half of respondents predicted their overall financial health and their fundraising outlook will be better in the next 12 months compared to today.

Nearly two-thirds of organizations (64%) reported faring better financially through COVID-19 than they originally expected and almost exactly as many (63%) reported having six or more months of cash reserves on hand at the time of the survey.

An analysis of the past three years of survey data — from prior to the pandemic to summer 2021 — shows that the general financial health of the nonprofit sector in San Diego County has fluctuated with uncertainty similar to that of the national economy. In 2019, 58% of organizations reported their general financial health as somewhat or very strong, which fell to 46% in 2020 before rebounding to 69% this year. The reasons for that, according to the survey, were COVID-specific relief from government, foundations, and the generosity of loyal individual donors.