San Diego Non-Profit Sector Struggles During Recession
Wednesday, January 27, 2010
A new research study from University of San Diego shows that almost 90% of San Diego non-profits report that the economy has had a negative impact on their organization and that they are forced to do more with less.
MAUREEN CAVANAUGH (Host): I'm Maureen Cavanaugh, and you're listening to These Days on KPBS. Have you recently said no to a charitable or arts organization that you usually support? If so, you're not alone. A survey of 125 of San Diego's largest non-profit organizations shows that donations are down, and investment income has plummeted since the start of the economic downturn. And, sadly, many of those charitable and philanthropic groups have seen demand for their services increase during the same period of time. Joining us now to explain how the recession has affected local nonprofits is my guest, Dr. Laura Deitrick. She’s the director of the Caster Family Center for Nonprofit Research, the University of San Diego, which conducted the study. And, Dr. Deitrick, Laura, may I call you Laura?
DR. LAURA DEITRICK (Director, Caster Family Center for Nonprofit Research): Please. Please call me Laura.
CAVANAUGH: Welcome to These Days. Thanks for coming in.
DR. DEITRICK: Thank you so much for having me, Maureen. I really appreciate it.
CAVANAUGH: Can you give us a general impression about how the recession has impacted San Diego’s nonprofit organizations?
DR. DEITRICK: Well, like most individuals, the sector itself has been affected in a lot of ways, and we can get into that in just a moment. But if you would indulge me, I’d sort of like to start with sort of a definition of the sector in some respects…
CAVANAUGH: Please do.
DR. DEITRICK: …because previous research that we’ve done has shown us that a third of San Diegans don’t even know what a nonprofit is. So, you know, I think when I ask you to think, or your audience to think of a nonprofit organization, several probably come to mind immediately. The Red Cross, Father Joe’s Villages…
CAVANAUGH: Sure, right.
DR. DEITRICK: …those kinds of things, the Food Bank. But the sector’s really bigger than that. It includes environmental nonprofits, PTAs, hospitals, Little Leagues, universities. You think of Balboa Park, every attraction in the – in the park is a nonprofit organization so you have things from the Japanese Friendship Garden all the way up to the zoo. And I believe here at KPBS, we’re sitting right inside a nonprofit organization.
CAVANAUGH: I was going to point that out, indeed.
DR. DEITRICK: And people themselves are involved in nonprofit organizations in San Diego every day of their lives. When you think of all those organizations you either probably receive services from them, you maybe donate to them, you maybe volunteer at them, so I think people in San Diego would be hard pressed to say that they aren’t touched by nonprofits every day of their lives. We just don’t – we aren’t really trained to think about those conglomeration of organizations as a sector…
DR. DEITRICK: …of organizations.
CAVANAUGH: You’re absolutely right. We’re not. So I’m glad that you did that. And as you looked across the board at local nonprofit organizations…
DR. DEITRICK: Umm-hmm.
CAVANAUGH: …in that spectrum you’re talking about, from the Museum of Man in Balboa Park to the Food Bank, what did you find the impact of the recession has been?
DR. DEITRICK: Well, in general, we did ask—and the sample that we took was representative of organizations across those various what we call sub-sectors—so we did hear from arts organizations and environmental and hospitals and pretty evenly across the sector. And originally my hypothesis was we might really see one potential part of the sector hurting or doing better than another. For example human services, I would expect maybe to be more hard hit. And really, when you looked down at the sub-sector level, so to speak, some – you know, a small percentage in each group reported doing better this year, less than 10%, and some reported doing – generally being more negatively impacted. And so there really wasn’t something that stood out for me to say, so it’s pretty much sector-wide. 58% of those that we surveyed reported an increase in demand for their overall services, which means, you know, people are either coming more for whatever they provide…
DR. DEITRICK: …food, shelter, those kinds of things. And less than one-third reported being able to fully meet that demand. So…
CAVANAUGH: Less than one-third. Less than one-third.
DR. DEITRICK: To fully meet. They’re doing their best. I mean, some say we were able to, you know, partially meet or whatever. So that means that people are getting turned away in some instances at places where they need services. And, in general, I should step back by saying the overall response was over 90%, not surprisingly, of all the organizations said that they had been negatively impacted. And a small percentage, like 3%, said that there had been some positive impact regarding the economy to their organization. Now, I can’t really tell what that was right now. So, in general, we’re seeing this really strange, you know, what I call the conundrum of supply and demand in the nonprofit sector…
DR. DEITRICK: …which is very different than other places. I think most industries, when you see an increase in demand for services, you don’t start slashing your budget, you gear up to meet that demand. And, you know, I’ll give you a real life example. A friend of mine is executive director at North County Lifeline and they provide a lot of human services in the north county for a long time, a longstanding organization. And they report that they saw a 44% increase in the number of clients that were seeking services like emergency assistance, employment seekers, youth counseling, those kinds of things. And so with the same amount of staff, not adding any staff, they increased their client contacts with the community by 22%. So there’s just a little anecdote to sort of put some of that into perspective. But we saw that sector wide across lots of different kinds of organizations.
CAVANAUGH: Let me ask you specifically where these organizations are taking a hit in their income. Are – where is that primarily coming from? Is that coming from their investments? Donations? Funding from different governments – government entities? Is all of it down or…
DR. DEITRICK: Umm-hmm.
CAVANAUGH: …is there one section more than another?
DR. DEITRICK: Well, across the board, we broke the survey into two sections and we looked – we treated foundations a little bit differently. And we can talk about them separately, if you like. But basically, all across the board, giving was down or charitable donations were down across all categories. That would be individuals, corporations, foundations, etcetera, and state funding for those who receive it. Now, the one area that didn’t – where a majority wasn’t decreased basically was in federal funding and the responses around that were some of our nonprofits were able to access stimulus dollars or to get, you know, make inroads to some federal money. But in the qualitative responses, what they said to us is, we understand this is one-time money. We know that this is not a ongoing source of income that we can rely on. So even that piece of it was interesting. But, yes, definitely those that have had endowments, just like any of us that have retirement accounts or things like that that were invested in the financial markets, really saw a decrease in their overall assets. Now we were in the field with the study more towards the end of the year, so we saw a little glimmer, about 10%, saying, you know, some of their financial investments were going up. In general, still negatively impacted, down anywhere from, on average, 11 to 20% basically, and that really mimics national numbers as well. So, you know, we’re in this together with nonprofits across the nation.
CAVANAUGH: I’m speaking with Dr. Laura Deitrick. She’s director is the Caster Family Center for Nonprofit Research, the University of San Diego. And we’re talking about a survey of 125 of San Diego’s largest nonprofit organizations to see how they’re faring during this economic downturn. And they’re taking a hit. And I’m wondering what that hit, Laura, is doing, how the individual organizations are responding. You know, you pointed out we’re talking about museums, we’re talking about arts organizations, we’re talking about charitable institutions, how are they responding internally to the fact that their endowments and the donations are shrinking?
DR. DEITRICK: Well, they reported taking several tactics and some of them are, you know, what we might expect, and I’ll discuss those in a second. Some of them are concerning. 42% reported that they used – they accessed any sort of cash reserves that they had, so they’re dipping into reserves. However, a very small percentage, well, less than a third, reported having more than six months worth of operating reserves set aside. So how long can that strategy play out for before you’re out of money? Now, those that have endowments oftentimes are precluded by law from invading the principal, depending on how they’re set up so that’s a little tougher too. The other part of the aspect – the other major tactic that we saw was aimed primarily at staff, so we’re talking about – and you all may have experienced some of that here. Staff layoffs, salary freezes, hiring freezes, reduction in benefits or, you know, and this isn’t a sector where already previous research showed us nonprofit workers were already lagged in average hourly wages compared to their counterparts across the state where people generally don’t have the, you know, the plushest benefits packages to begin with, so they’re cutting in that area. And, again, and a lot of the qualitative responses said, you know, we’re getting a team mentality together. We’re going to get – we’re going to do what it takes to keep any of this away from the people that we serve, to the best of their abilities. My question back on that is, again, when you’re stretching, stretching, stretching so thin, how long can that go on for? And your previous guest earlier talked about, you know, I think 2015 before we really see any sort of, you know, economic rebound and the sector, the nonprofit sector, may even lag further beyond that because so much of this stuff is tied up in anything that’s related to employment, helping people that are unemployed or underemployed. And so that may – and employment lags in any sort of recovery, so we may see – You know, this has been a jobless recovery so far, so, you know, this – how long can that stretching of staff go on? There’s a part in the report, too, that talks about increased use of volunteers. And that’s terrific and more people are having time to volunteer because they’ve taken early retirement or they’re laid off currently and those kinds of things so we really need to be able to harness volunteers and make sure that we’re bringing them into the sector in a way that, you know, works best for the clients that are served and for the volunteers as well, so we have some issues around that as well.
CAVANAUGH: Did you find any local nonprofits who were doing subs – I mean, really well? They’re weathering…
DR. DEITRICK: Umm-hmm.
CAVANAUGH: …this downturn surprisingly well, and is there anything that other nonprofits can learn from them?
DR. DEITRICK: Well, in general, I have to protect the identity of most of the people…
DR. DEITRICK: …that responded to my survey but I’ll point out a couple of things. We have heard—and I just spoke to the executive director of this organization, Wild Coast, who – it’s a binational environmental organization, and Serge Dedina is the executive director there. And he had responded that he had done – on the survey, that their organization had done well, better this year than previous years. So I said, please, tell me the secret…
DR. DEITRICK: …to your success, Serge. And he did have an interesting perspective. He really talked about having foresight, remembering the seventies and the eighties and having gone through these kinds of things before and working with their board of directors. And he felt like they were ahead of the game and made some tactical decisions within the organization to prepare so they weren’t caught unaware. They really upped their use of free media and things like that to share their message, to fundraise, all those kind, you know, Facebook and Twitter and all those kinds of things, really access that. He had some interesting comments about his staff, too, and them being younger and not ever having had to live through this kind of stuff before so it’s been an education process for him with his rather young staff and their ideas and suggestions were brought to the table. Another group that I’d like to highlight because it’s been a tough year for funders and a tough year for foundations because they really rely on their assets, the Jewish Community Foundation, located here in San Diego, actually had their best grant-making year ever last year. So that was due, I think, in large part to some real tremendous determination. And in both cases, with Serge and with the Jewish Community Foundation – with Wild Coast and the Jewish Community Foundation, both really mentioned the need to stay tightly connected to their donors. And that’s – and the other thing is the Jewish Community Foundation does a real nice job. They have five tips on their website of what you and I can do when – in this time to help nonprofits. I’d recommend you look at that. But, really, one of those things is to keep giving.
CAVANAUGH: Uh-huh, yeah.
DR. DEITRICK: And to give and give. And, you know, with the issues we have in Haiti right now, there’s competing interest all over the place so really think about where you want to make an impact.
CAVANAUGH: In fact, some of the organizations that you surveyed said the only way they managed to survive…
DR. DEITRICK: Uh-huh.
CAVANAUGH: …was that they found individual donations really kicked in…
DR. DEITRICK: Umm-hmm.
CAVANAUGH: …when they needed it.
DR. DEITRICK: Yeah, and that was purely, I can bet you, through intense personal relations with those donors, drawing those donors in and really letting them – and having an honest conversation about the situation because it’s easy to come off sounding – I think you and I talked about it before, sounding whiney or poor us or whatever. These are organizations that are run by smart, savvy leaders. We’re lucky to have them in our community. And they provide really essential services that are part of the health and wellbeing and cultural aspects of our whole community. So we really want to make sure we know what’s going on with them. And, you know, there’s – there are things that people are doing that are successful but, in general, the news is still pretty – that the sector is still on a pretty precarious position, fragile, I think, because it is stretched so thin right now.
CAVANAUGH: I think that’s very reasonable. I don’t think that’s whiney at all.
DR. DEITRICK: Well, it’s my own little thing. Sorry, so…
CAVANAUGH: Thank you so much. I want to thank you so much for speaking with us today. I’ve been speaking with Dr. Laura Deitrick. She is director of the Caster Family Center for Nonprofit Research, University of San Diego. Thanks so much.
DR. DEITRICK: Thank you very much.
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