Need for nonprofits continues to outstrip funding, survey finds

Linda Czipo. (File photo)

The Center for Non-Profits in Mercerville released Monday its 18th annual “New Jersey Non-Profits 2019: Trends and Outlook” report, tracking prior-year funding and expenses as well as the outlook for the coming year and actions taken by the nonprofit community to address recurring trends.

“New Jersey’s nonprofits are vital to a thriving New Jersey, providing essential services, employing 10 percent of the state’s private workforce, fueling a strong economy and making our state a great place to live and work,” Linda Czipo, CEO and president of the Center for Non-Profits, said. “When the need for their programs consistently outpaces the funding required to provide them, as has been the case over many successive years, that’s cause for concern for everyone.”

More than 34,000 nonprofit organizations in New Jersey employ nearly 324,000 people, not including the nearly 1.6 million volunteers who provide $5.3 billion in service annually.

“Nonprofits matter not only because of the programs they provide, but also because of the economic benefit and impact that they have on the state,” Czipo said. “Plus, the work that nonprofits do day-in and day-out improves and even saves lives — ensuring that they have the resources they need to do this work is sound policy for the present as well as a wise investment for the future.”

More than 200 New Jersey 501(c)(3) organizations responded to the survey launched online in January, with the results not only strengthening and shaping the Center for Non-Profits’ advocacy and programmatic priorities but also shared broadly with the nonprofit community, funders, government and business leaders, media and the public to help in their own planning and advocacy efforts, a spokesperson for the Center for Non-Profits said.

“What we’ve seen time in and time out with respect to our survey is that we’ve got a disconnect and a capacity gap between the demand and the expenses that keep rising faster than the funding and resources needed to provide services,” Czipo said. “This becomes even more apparent when we see how much both the state and federal government offload in terms of expectations and workloads to the non-profit community.”

Two-thirds (66 percent) of organizations that responded to the survey reported an increase in demand for services during the past year. However, just 38 percent reported funding increases in 2018 versus 2017, with 59 percent also reporting higher expenses.

Only 32 percent reported that both support and revenue had exceeded expenses in their last fiscal year.

More than three-quarters (76 percent) expected demand to continue rising in 2019, with 68 percent expecting total expense and 49 percent expecting total funding increases respectively.

“The growing demand for the services and programs that nonprofits provide — a trend not unique to New Jersey but rather all across the country — is consistent with survey results from previous years,” Czipo said.

Regarding specific types of funding, respondents were most optimistic about donations from individuals, corporations and special event attendees, but most uncertain about government funding and planned giving.

“However, it is important to keep in mind that the crystal ball is not precise,” Czipo said. “So, we went back and looked at last year’s predictions versus how those panned out for a couple of different sources.”

In last year’s survey, 49 percent of respondents predicted that individual gifts would increase in 2018, but only 31 percent reported actual increases; 35 percent predicted corporate funding increases in 2018, but only 17 percent reported actual increases; and 34 percent predicted foundation funding increases in 2018, but only 15 percent reported actual increases.

“Predictions are difficult to make, especially in this current climate,” Czipo said.

Of which the most recent tax reform is making that much more difficult, she added.

“What has the impact been of the tax reform? That is the $13 billion to $20 billion question across the country, with $13 billion to $20 billion being the impact that some experts, academics and the joint committee on taxation have predicted would be the reduction in charitable giving based on the passage of the tax law, the doubling of the standard deduction and some other changes,” Czipo said.

While the data from 2018 is not yet in, Czipo said the concern is the large impact it could have on New Jersey donors.

According to the Center for Non-Profits, nearly half (46 percent) of New Jersey households that claimed federal charitable tax deductions in 2016 had incomes of under $100,000 and donated more than $1.5 billion to charity, representing nearly one-quarter of all charitable gifts claimed as itemized deductions.

Four-fifths (81 percent) of New Jersey households who claimed federal charitable tax deductions in 2016 had incomes of under $200,000 and donated nearly $3.2 billion to charity that year, representing nearly half (48 percent) of all claimed gifts.

And more than 35 percent of individual tax returns in New Jersey had taken a charitable deduction in 2016.

“With the doubling of the standard deduction, many households will not be able to or it may not be worth their while to itemize on their tax returns,” Czipo said. “If they are unable to deduct their gifts anymore, what happens to the incentive to give? Or will they be able to be as generous as they were before?”

Czipo said two bipartisan bills have been introduced to both restore the above-the-line charitable deduction at the federal level and to provide an income tax charitable giving deduction for New Jersey-based donations at the state level, both of which the Center for Non-Profits supports.

Legislation also has been introduced in Congress to repeal a new tax on transportation benefits, Czipo added.

“The law somehow inexplicably imposes an unrelated business income tax on the expenses that nonprofits may incur in providing transportation benefits to their employees,” she said. “There are a lot of organizations that may be hit with this that may not be aware that it is coming.”

Tax reform is just one of the top issues facing the nonprofit community today, Czipo said.

“There are many things that reflect concerns about the well-being and sustainability of nonprofits to make sure they have the resources needed to conduct their missions,” she said. “In the case of issues affecting individual organizations’ viability, there are three that tend to rise to the top most frequently: financial uncertainty (53 percent), branding and communications (48 percent) and a need for stronger boards (46 percent).”

Other common concerns cited in the survey included staffing, cost of benefits, low visibility, strategic planning and increased demand for services.

For example, nearly 34 percent of respondents said they may add staff in 2019, but only 12 percent said they definitely planned to and only 5 percent had already done so at the time of the survey.

Furthermore, while 26 percent of respondents said they may raise salaries, 25 percent said they may need to freeze or cut salaries.

“Then, far and away the most frequently mentioned issues for the nonprofit community as a whole were infrastructure and capacity (64 percent), foundation and corporate funding (48 percent) and attracting stronger boards (46 percent),” Czipo said.

Other concerns cited in the survey included escalating administrative costs associated with government grants and contracts; the need for increased funding to cover projected costs of employment law changes in New Jersey; and the need to continue to strengthen relationships with policy makers at all levels of government.

“So, what are nonprofits doing?” Czipo said. “First and foremost, nonprofits are quite reasonably seeking new resources in which to do the work, whether that is through grant funding, earned revenue or volunteers to help leverage resources.”

But organizations also are more frequently increasing their advocacy, collaborating and sharing services with corporate and government partners and other nonprofits, adjusting their programs and budgets and hosting specialized events, according to Czipo.

“The work that nonprofits do is so vital but often taken for granted, unrecognized, or just not on the radar of people who may benefit day-in and day-out from what nonprofits do,” Czipo said. “The Center for Non-profits is committed to speaking out but we also need everybody to have these conversations with your board, your funders, your constituents, your family members.

“Make us part of the conversation.”

Support for this year’s survey was provided by SobelCo in Livingston and Horizon Blue Cross Blue Shield of New Jersey in Newark.

“This survey is one piece of all the amazing things the Center for Non-Profits does, but it is such an important component to be able to have our finger on the pulse of what is happening in our communities — to know that we can use this information to make really smart decisions and stay ahead of the curve instead of racing to catch up,” Sally Glick, principal and chief growth strategist of SobelCo, said.

The full report can be found here.