ASU survey finds state's nonprofits hit hard by pandemic recession

The COVID-19 pandemic is creating huge disruption for many Arizona nonprofit organizations, which are seeing increased demand for services but plummeting revenue.

A new survey of 449 nonprofits released by the Lodestar Center for Philanthropy and Nonprofit Innovation at Arizona State University captured the profound effects of the crisis and the resulting economic distress after only a few weeks:

• Nearly 80% reported a reduction in their normal services.
• 11% of organizations are not operating at all.
• Almost 40% of arts and culture nonprofits are not currently operating.
• Just under 20% of nonprofits say they won't meet payroll in eight weeks.
• Only 5% of nonprofits say they are operating normally.

The nonprofit sector is Arizona's fifth largest nongovernment employer, employing 1 in 16 workers and representing $8.3 billion in annual wages, according to the center's "COVID-19 Report."

“The through line is disruption,” said Robert Ashcraft, executive director of the Lodestar Center and Saguaro Professor of Civic Enterprise at ASU.

“On the one hand, those involved in front-line services such as food insecurity, shelter services and emergency child care are seeing an increased demand for services, but at the same time there are difficulties around the volunteerism piece, with social distancing.”

Arts and culture nonprofits that depend on revenue from tickets, gift shop sales and on-site cafes are especially hard hit, as those institutions are closed during the shutdown.

“They have pent-up demand but no market,” Ashcraft said. “People can’t go to shows or museums.”

As everyone stays home and avoids crowds, events that raise significant funds for nonprofits have been canceled. In addition, the pandemic has driven unemployment to record levels, leaving many people unable to donate money.

The federal and small-business relief funding has helped some smaller nonprofits to avoid furloughs and layoffs for now, but those programs don’t help the larger entities such as Goodwill and the YMCA, Ashcraft said. To help keep revenue flowing, many nonprofits have held online fundraising drives and stepped up their communications with donors in hopes of staying afloat.

The Tempe Community Action Agency is a perfect example of what the survey results discovered: Demand is up, and the financial future is uncertain.

The agency is a front-line provider of food and shelter in the Tempe area and has had to not only help more people, but also find new ways to do it, according to Deborah Arteaga, executive director.

The TCAA food pantry has seen 800 new clients, and the agency increased the meals it delivers to schools from 150 to 500 per month, she said. The home-delivery meal program for house-bound older adults and adults with disabilities increased from 200 to 350 meals per day.

“Those are new clients that we expect to continue for the remainder of the year,” she said.

People also need help with rent. The agency’s emergency-rent assistance program, which can aid about 50 households a month, received 450 requests in April, up from the typical 300 requests. That’s an alarming indication of financial stress, Arteaga said.

“Usually a household will take care of rent before anything else. They want to keep their home,” she said.

When the pandemic hit, the agency pivoted. The Neighbors Helping Neighbors program, in which social workers assist low-income older adults, focused on food- and shelter-related errands, delaying nonessentials like yard work. Other programs, such as support for families with babies and employment assistance, switched from in-person to phone work.

Arteaga has seen a bit of a silver lining. While some of the agency’s older adult volunteers couldn’t come out to help, 45 new volunteers have signed on since mid-March.

“They have helped to fill that gap, and we could not do the work without them,” she said, adding that all volunteers follow the guidelines set by the U.S. Centers for Disease Control and Prevention.

In addition, the Tempe Community Action Agency has gotten some emergency grants from corporate and community sources, and it has an online donation platform. There have been no layoffs or furloughs. But the financial future is uncertain.

“We are seeing donations coming in, and we’re hugely grateful for that that. Some people are saying they’re giving now instead of in the fall or around the holidays.

“But we did have a grant placed on hold,”  Arteaga said. “We’re focusing on the unknowns of the next fiscal year.”

Feeding Matters, a small, Phoenix-based nonprofit with eight employees, has felt the financial pinch.

“Our biggest fundraiser is supposed to be in October, but we didn’t feel comfortable putting money on the line when we don’t know what will happen,” said Jaclyn Pederson, senior director of programs and strategic initiatives.

“What if there’s a second wave or we’re not comfortable with 700 people in a ballroom? We may be able to think about adapting a little bit in the short term, but what does it look like in a month from now or three months or six months?” she said.

“And it’s not only the individual component of fundraising, but on the foundational and corporate side, we’ve seen a shift toward COVID-related relief.”

Feeding Matters raises awareness about pediatric feeding disorder, a condition in which children have trouble swallowing or must use a feeding tube. So it’s not a front-line nonprofit that provides food and shelter assistance, but it does support health care workers and families with children who have underlying health conditions or are immunocompromised, many of whom have had to strictly quarantine.

“Our constituents are very much affected by this,” Pederson said. “Our families have specialty food needs — and even specialty water — and when there was panic buying going on, there was a lot of increased stress.”

Feeding Matters has hosted virtual support groups for families and provided resources for feeding therapists on how to work via telemedicine.

“The biggest thing is what the new normal will look like,” Pederson said. “We’ll be transparent about shifts we’ll have to make because of financial resources.”

Ashcraft said the news isn’t all bad.

“There’s a gloom and doom to this data and I don’t want to be a cheerleader, but there are also stories of amazing innovation and adaptation,” he said.

“We want to be a place that captures that.”

On its website, the Lodestar Center has created a “Nonprofit Innovation Hub” page, where organizations are invited to share how they’ve made the best of this situation. In one example, a small food pantry in Safford bought beer from a closed bar, gave it to a bakery that was unable to source yeast, and then handed out the resulting loaves of bread to its clients.

Arteaga of the Tempe Community Action Agency agrees that the unprecedented circumstances have sparked creativity.

“What we’ve been excited about is this presents an opportunity to try new ways of serving the community, and the use of technology creates efficiencies we want to continue,” she said.

Food-box deliveries and meals-to-go for older adults are two services that had to be added because of the pandemic, but will likely stay.

“One plus that came out of this is a daytime resource center for homeless persons in Tempe,” she said.

“It’s a plan we were working on, but the pandemic emphasized the need to put it in place sooner rather than later, so we expedited the timeline and we’ll have that by June 30.”

Arteaga said the results of the survey are difficult to hear about.

“Nonprofits are the trusted organizations in communities that folks rely on,” she said. “When one nonprofit struggles, it creates a demand and we all suffer.”

The Lodestar Center will survey nonprofits again in June, Ashcraft said.

“As tragic as this pandemic is, there’s been disruption before and this field has shown surprising resilience because it enacts the purpose and passion that people care about,” he said.

“And that care doesn’t go away.”

Infographic by Alex Davis/ASU

Top image by Pixabay