Help wanted: Nonprofits enter crisis mode as economy stalls and reserves dry up

There’s a stark – even cruel – irony that anyone involved in the nonprofit sector must come to understand sooner or later: Namely, when times are tough, contributions to nonprofits tend to ebb, just as the rising tide of need begins to overwhelm them.

It’s an irony not lost on Salli Martyniak, president of Madison’s Forward Community Investments (FCI), an organization that provides loans and advisory services to nonprofits serving economically challenged individuals and households.

FCI is due to release a report on the state of Wisconsin nonprofits in about a week, and though the details are still to come, Martyniak outlines a fairly grim overall picture.

“We’ve been doing this now, this is our third year, and the one thing we are seeing now is the fact that, for the last couple of years, the demand on nonprofits has just been huge in terms of there being a safety net in communities and so forth,” said Martyniak. “But the one thing that we’re seeing, and what we’ve seen in the past, is the fact that nonprofits are accepting that role, and even though their equity or reserves were dwindling in some cases, they were still looking at how they could actually increase services to the populations that they serve.

“This year, what we’re seeing is that nonprofits, whether or not they feel financially healthy or financially vulnerable, are starting to either cut back on services or just say we can’t increase them anymore.”

Of course, while the human costs of a vulnerable nonprofit sector are more than evident, even the most callous bureaucratic bean counter has to acknowledge nonprofits’ economic import.

“I think that in the next two years, you are going to see a crisis level as far as where nonprofits are.” – Salli Martyniak, president of Forward Community Investments


  • In Wisconsin, the nonprofit sector employs 10% of the total workforce, or 250,000 people.
  • Ninety-five percent of the economic activity generated by state nonprofits stays in local communities.
  • Wisconsin has more than 20,000 registered nonprofits, which manage more than $43 billion in assets.

    In addition, say advocates, nonprofits often save tax dollars by taking on tasks that would otherwise fall to governments.

    Still, those closest to the nonprofit sector aren’t mincing words: Nonprofits face even tougher times ahead.

    “I think that in the next two years, you are going to see a crisis level as far as where nonprofits are,” said Martyniak. “They’ve gone through their reserves. It’s almost like this rubber band where you stretch and you stretch and you stretch, and at some point it has to break, and I think it’s at that breaking point.”

    Getting the word out

    Of course, tough economic times have touched just about everyone’s lives – not just those who are served by nonprofits. So when budgets are drawn up in corporate conference rooms or families’ dining rooms, the annual check to the local youth program may be among the first casualties. That’s not difficult to see – but perhaps less visible is the full weight and import of the work nonprofits do, and that presents a challenge to many in the nonprofit sector.

    “I think there might be an opportunity for greater communication with the community in how they measure their outcomes and how much they impact, and really shift the story … the services that nonprofits do, how much they save government,” said Deborah Fugenschuh, president of the Donors Forum of Wisconsin, a professional membership association for state grant-makers. “So if there is a Head Start program and they’re working with this young child, and then the child goes to school and has wrap-around Boys and Girls Club, or Boy Scouts and Girl Scouts, and then they get to high school and are in a ‘Y’ program that mentors them, and they go to college, all of those nonprofits saved the state hundreds of thousands of dollars if that child had been neglected and ended up in prison. …

    “So we really haven’t looked at that as a community or as a state, of being more proactive. I mean, hospitals are starting to do this, where they say how much they saved with preventive care. Well, nonprofits, that’s their job. They are preventive care, and they are preventive services, and if they intervene at the beginning when the problem is just beginning to show itself versus waiting until it’s manifested and where it can’t be altered, it makes a big difference, and I don’t think our nonprofits have talked about that.”

    Attacking the problem

    Facing greater demand and dwindling resources, nonprofits are also being forced in many instances to think more creatively.

    “Our unemployment rate is not as bad as the nation’s, but there are people who are still hurting, and how nonprofits are coping with this is that many of them had some savings and they’re using that, many are being entrepreneurial and combining with other organizations, they’re looking to diversify their revenue streams or relying on individual gifts and working with government officials to create successful public-private partnerships,” said Fugenschuh. “I think as our economy turns around, we’re going to have a really strong nonprofit sector, and it’s going to be refined and fine-tuned, and they’re going to know what their mission is.

    “So as much as this is a challenge, it’s also been a real opportunity to rethink the nonprofits’ mission and the nonprofits’ work.”

    Of course, with support from corporate donors and wealthy benefactors – long a major revenue stream for nonprofits – softening across the country, the gap between resources and demand for services has continued to widen. And now, says Martyniak, nonprofits are beginning to see less support from middle-income contributors.

    This is prompting some philanthropic companies to think more creatively as well, and to step up their efforts to close that gap.

    In 2004, Madison advertising agency KW2 launched Goodstock, a benefit that leveraged the talents and resources of the firm to provide advertising and marketing services to local nonprofits. Up until this year, the company supported nonprofits through pro bono work that it did over the course of a single “all-nighter” (noon Thursday to noon Friday). This year, the company is expanding its efforts by doing more work and focusing its efforts in a more meaningful way on fewer nonprofits.

    “Nonprofits are always strapped for time, money, and expertise, and because of the economy, they’re facing shortages in time, money, and expertise now more than ever,” said Andy Wallman, president and creative director for KW2. “And that makes those marketing dollars really difficult for them to spend. And our work is going to really allow them to keep their dollars closer to their core missions of helping their constituents.”

    Far from retreating during tough times, Wallman’s company is planning on expanding its efforts even further.

    “We’re looking at taking Goodstock on the road in 2012,” said Wallman. “We may be doing Goodstock for national brands as a way for them to support nonprofits of their choice. So Goodstock has been important to us locally, but in 2012, we’re looking at blowing that out on a bigger, national stage.”

    Wallman says it’s important for private businesses to continue to support nonprofits in some way, even in the face of continuing economic uncertainty.

    “Money is being cut from the public sector, and I think companies need to step up and, to the degree that they can fill in gaps, catch people who are falling in those gaps by supporting nonprofits,” said Wallman. “My fear is that without the private sector stepping up to do those things, economically, we would be in a bigger world of hurt than we are right now. So I hope other businesses out there feel an impetus to help and do things that show they are a company for good, too.”

    But regardless of whether private-sector support continues to flag or begins to revert to the norm, Fugenschuh remains optimistic about the long term.

    “You know, we’re resilient; the nonprofit sector is resilient,” said Fugenschuh. “The nonprofit sector has flourished even in hard times in the past. During the Great Depression, that was when nonprofits really started being created and began to address social issues and having a voice for the underserved, and I think they’re playing that role now.”

    Sign up for the free IB Update – your weekly resource for local business news, analysis, voices, and the names you need to know. Click here.