State must help vital nonprofits

Christopher Gergen
Christopher Gergen

Nonprofit organizations in North Carolina have never been more influential. They have also rarely been under greater stress.

Two important new surveys – one from the N.C. Center for Nonprofits and the other from the national Nonprofit Finance Fund – frame the situation in hard data. Together, they show both the tremendous promise and the spreading fault lines within our state’s nonprofit sector, which plays a crucial role in advancing education, health care, arts and an array of social services.

Nonprofits provide more than 400,000 jobs in North Carolina – or 1 out of 10 jobs in the state, contributing $38.5 billion to the state’s economy, according to a new economic impact report produced by the N.C. Center for Nonprofits. Most of these nonprofits are labors of love. Forty-three percent have budgets of less than $100,000 and 84 percent operate on less than $1 million, the N.C. Center for Nonprofits report shows.

Their assistance provides a crucial social safety net for residents whose lives continue to be upended by the decline of the state’s manufacturing base and shrinking access to government services. Increasingly, though, nonprofits are grappling with their own problems.

The 2015 State of the Sector Report by the Nonprofit Finance Fund found that 78 percent of N.C. nonprofits experienced an increase in demand last year. But 60 percent said they were unable to meet those needs.

Nonprofits try to extend their services as broadly as possible anyway because they are often the last resort for many people – and that puts nonprofits themselves at financial risk. In 2014, 17 percent of our state’s nonprofits had an operating deficit and more than half didn’t have enough cash on hand to operate for more than three months.

What can be done to help accelerate this sector’s growth and ensure its stability?

Our state government has an outsized impact on that answer.

The Nonprofit Finance Fund survey found that 71 percent of N.C. nonprofits that provide public services through state grants and contracts say the state government rarely or never covers the full costs of programs they deliver on the state’s behalf.

When the money does arrive, it frequently isn’t on time. Nonprofits receive payment from state agencies more than a month late between 30 and 50 percent of the time.

Meanwhile, nonprofits’ financial burdens would increase if current bills become law. A Senate bill would put a cap on sales tax refunds for nonprofits, primarily hitting nonprofit hospitals and educational institutions, but also potentially affecting smaller nonprofits. The House is considering a bill that would create a study on the impact that the acquisition of previously taxable property by tax-exempt nonprofits has on local governments. This could potentially have significant implications for many nonprofits that acquire real or personal property from individuals or businesses that pay property tax.

When he arrived in America in 1831, Alexis de Tocqueville was struck by how nonprofits, or what he called “associations,” elevated the quality of life. He wrote: “Wherever at the head of some new undertaking you see the government in France, or a man of rank in England, in the United States, you will be sure to find an association.”

Democracy in America, he knew, would not be the same without a flourishing nonprofit sector. Nearly 200 years later, we shouldn’t forget it.

Christopher Gergen is CEO of Forward Impact and a fellow in Innovation and Entrepreneurship at Duke University. Stephen Martin is a director at the nonprofit Center for Creative Leadership.