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On Thursday, I spoke at the 11th Annual Social Justice Conference at St. Ambrose University in Davenport, IA. The conference provided a great opportunity for me to share my work about poverty and the safety net in rural areas, but also to learn from more than 150 social workers in the Quad City region.

During the talk, there was time for the audience discuss the challenges facing safety net organizations in rural Iowa. Several keen observations were made:

Even slight increases in earnings can make working poor individuals ineligible for work supports and income supports, or reduce their benefits, making families worse off for their modest labor market gains.

The discussion that followed reminded me of work by Jennifer Romich at the University of Washington, which has explored the effective marginal tax rates on low-income workers. Indeed, working poor households and the agencies that help them face a dizzying array of different eligibility determinations for cash assistance, housing subsidies, and medical care. Modest increases in work earnings can upend one’s access to supports that help families become healthier, stronger, and more self-sufficient, even though those families are negligibly better off.

Nonprofits in Iowa, as in most states and communities, are struggling with how to serve rising numbers of individuals seeking help amidst significant budget cuts.

This will be a tough challenge moving forward for many public and nonprofit agencies, and one that is likely to endure for the next few years as unemployment and poverty rates remain high - even if there is economic recovery soon. Agencies will be forced to make tough trade-offs between cutting staff, triaging clients and providing help only to the neediest, offering more modest services, and expanding waiting lists. A bad set of choices. Interestingly, one audience member said she used an anonymous web survey to collect ideas from staff about how to cut costs with as little impact on clients as possible. Her board was reviewing the many recommendations and deciding how to move forward.

Because most nonprofit service organizations draw on many different revenue sources, they face the administrative challenge of complying with various reporting requirements from these different revenue sources. At a time when there are greater demands on all staff, these tasks can take time away from case management and providing services.

Another tough challenge. On the one hand, program evaluation and reporting are critical to ensuring program quality and to improving program models. On the other hand, time spent on compliance documents takes time away from clients and from addressing the fallout of the current economic environment.

My visit provided sobering insight into the tough tasks facing the social workers that staff the street-level organizations upon which our safety net rests.

Nonprofit Organizations

Even though the stock market has been on the rise recently and optimism is emerging that the economy may start rebounding in coming months, millions of Americans are still having trouble finding work and providing for their families. News and research highlight the many challenges working poor families and communities face today. Food Pantries are facing unprecedented need for help.  More than 30 million Americans today receive help from the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps). Homelessness is on the rise. Nonprofits that help low-income families are in trouble. The foundations that typically serve as the safety net for nonprofits are struggling. As a result of mounting needs and inadequate assistance to meet those needs, people are turning to family for help.

Even though the outlook for markets may be brightening, the outlook for workers - particularly those at the lower end of the income ladder - may not be so bright. How could a recession end without improvement in the labor market? The end of recessionary periods do not correlate with immediate increases in employment opportunities because the starting and stopping points of recessions are defined by trends in GDP, not by changes in unemployment rates. Recessions are deemed to have ended when sustained GDP growth is observed.  This growth can occur due to a range of factors - like increases in productivity - without increasing overall employment rates.  Thus, unemployment can increase or remain high early on during an economic recovery.

The previous recession that lasted from March 2001 to November 2001 exemplifies this seeming contradiction. According to Bureau of Labor Statistics data, the seasonally adjusted unemployment rate among adults 25 and older without a high school degree rose from 6.8% in March 2001 to 8.0% in November 2001. Yet, the unemployment rate among this group peaked in 2003 and did not fall below 8.0% until 2005. Similarly, the unemployment rate for adults 25 and older with a high school degree increased during the recession of 2001 to 5.0% and remained at or above that level until late 2004.

In March 2009, the unemployment rate was 13.3% for adults without a high school degree and 9.0% for those with a high school degree. Even if GDP and the Dow rise in the latter half of 2009, we should expect jobseekers at the bottom of the income distribution to continue to struggle to find work.  Safety net programs, food pantries, and social service providers should be expected to see historically high levels of demand well into 2010 and 2011, maybe even beyond. In short, rosy stock market news and initial signs of turn-around may distract the news media, but they should not divert our attention from the very real investments we need to continue to make in education, training, work supports, and aid to low-skill jobseekers unable to find employment.

Employment, Nonprofit Organizations, Out of Reach, Poverty

A survey of 986 nonprofit organizations by the Nonprofit Finance Fund (NNF) provides yet further evidence that the nonprofit sector is being crushed by the simultaneous decline of government spending, private philanthropy, and endowments. One-third of nonprofits expect to finish the current fiscal year in a deficit position. Nearly half of respondents indicated they would reduce staff or salaries to cope with budget problems; about 40% indicated they would eliminate programs in an effort to weather current fiscal challenges.

Although we should be concerned with mounting evidence that the recession is creating volatility in nonprofit funding, this is not a new phenomenon - particularly among nonprofit human service organizations. To this point, a related article in the New York Times by Stephanie Strom examines the impact of current fiscal pressures on human service nonprofits. Strom quotes Carrie Karasaw, an executive director of a human service organization in Bensalem, PA, who underscores the persistent fragility of nonprofit human service financing:

‘It’s not a new story that nonprofits like us are struggling,’ Ms. Karasaw said. ‘It’s that we’re just hitting a critical mass of financial problems now.’

My own interviews with about 900 nonprofit human service organizations between 2004 and 2005 in Chicago, Los Angeles, and Washington, D.C., underscore this point. Even in the relatively stable economy of the mid-2000s, 46% of nonprofit human service providers report recent losses in funding. Of those, about half reduced staffing and/or programs available to cope with funding loss. As surprising as it might seem, nonprofit human service providers in my study were still experiencing shocks to funding and programs for several years after the recession that started in 2001.

There are many reasons why the nonprofit sector - particularly the nonprofit human services sector - might not recover quickly from a recession. Perhaps most importantly, program funding streams are normally volatile. Priorities and agendas shift. Focusing events or crises draw attention to particular causes or needs. Government budgets ebb and flow. Moreover, it takes time for foundations and charitable organizations to rebuild endowments and grantmaking capacity. In addition, nonprofits are forced to trim professional staff during tough times, which make it difficult to ramp up fundraising efforts quickly when public and private revenue streams expand.

Thus, we should expect the current fiscal crisis to have lingering effects on the stability of the nonprofit service sector for many years. Although nonprofits are facing tough times now, we should expect tougher times ahead.

Nonprofit Organizations