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COMMENTARY | Organizations that work in areas ranging from social services to arts and culture have had to scale back their operations and cut staff because of inadequate funding.
More than 60% of nonprofit social services, arts and culture organizations obtained Paycheck Protection Program loans during the first nine months of the COVID-19 pandemic. These very low-interest loans for small businesses and nonprofits turn into grants that don’t need to be paid back as long as borrowers meet certain conditions, such as using at least 60% of the money to pay their employees.
Even so, almost 50% of nonprofits providing social services, such as food banks and shelters for people experiencing homelessness, still had to scale back their work and cut staff because of inadequate funding. Almost 80% of arts and culture groups, including everything from big museums to small schools that teach children to speak Mongolian, faced the same problems. Also, about 15% of the nonprofits eligible for PPP loans either didn’t apply or were denied loans they sought.
These are among our latest findings from an ongoing national survey of nonprofits we’re conducting. As scholars of nonprofits, we aim to understand the impact of COVID-19 on the sector as a whole, and get a stronger understanding of how these organizations can become more resilient, better run and more effective in serving their communities.
PPP Loans Made a Difference
A total of 573 nonprofits responded in November and December of 2020 to questions we asked about how the pandemic was affecting their budgets at the time, along with their fundraising efforts and operations.
About 43% of social services groups and 52% of arts and culture groups said they got other emergency government grants from the Paycheck Protection Program, including Economic Injury Disaster Relief Loans or emergency food distribution through the U.S. Department of Agriculture. In addition, nearly half the social services organizations we surveyed got emergency help from private foundations.
Yet about 1 in 3 nonprofits said they still had to fire or furlough at least some of their staff. Just under 10% anticipate having to do additional layoffs.
Since March 2020, most of the organizations we’ve heard from have cut staff, reduced programs and canceled events. Nearly half of social services groups and almost 80% of arts and culture organizations have had to suspend their operations at some point.
At the same time, half of social services organizations have seen an increase in demand for their services, and about one-third have had to increase staff hours. Arts and culture groups, however, have seen demand for their services fall by over 60%, and more than one-third have cut staff hours.
Thankfully, this federal funding appears to have helped stabilize the finances of some organizations. Although about 25% of the nonprofits that responded said they still worry that their donations will decline, only 2% of arts and culture organizations and 5% of social services groups anticipate making new cuts.
Many Nonprofits are Reeling Anyway
Despite the key roles they play, U.S. nonprofits still are reeling, and the pain is intensifying for many arts organizations.
While hundreds of thousands of nonprofits have secured PPP support, that money hasn’t covered all their needs.
These loans and grants helped save an estimated 4 million nonprofit jobs. All told, large donors, including foundations, corporations and wealthy people, gave or pledged an estimated $15.4 billion in gifts and grants in 2020 to U.S. nonprofits, and another $4.8 billion globally, according to a joint report from Candid, an organization that provides information about philanthropy and nonprofits, and the Center for Disaster Philanthropy.
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Many museums, theaters and other arts organizations have creatively found ways to reach old and new audiences. But for the most part, they have been forced to cancel performances, delay exhibitions and, once reopened, welcome fewer people to their museums or galleries for the past 12 months.
The same is true for many culture nonprofits, which include a wide range of groups, such as those that support activities tied to ethnic and geographic heritage or other common interests that do not involve music, art or drama.
More Help on the Way
Smaller organizations, especially those in rural areas, appear to still struggle to compete for available funding. Additionally, only an estimated 5% of the funds from large donors supported Black and Indigenous communities, or other communities of color, despite these groups being hit harder than white people by the COVID-19 pandemic.
But the federal government, both during the final weeks of the Trump administration and the initial months of the Biden administration, has made additional funding for small businesses and nonprofit organizations available. Currently, PPP loans for businesses and nonprofits with fewer than 20 employees are a top priority.
The package includes an additional $7.25 billion in PPP loans and $15 billion for Economic Injury Disaster Relief loans. It also has $470 million in support U.S. arts and cultural organizations, to be disbursed by the National Endowment for the Arts, the National Endowment for the Humanities and other government agencies. And the Agriculture Department will get billions of dollars to buy food in bulk for distribution to food-insecure people, often through nonprofits.
While our earlier survey in the first part of 2020 showed that nonprofits with bigger rainy day funds were more likely to avoid layoffs and program cuts, we are continuing to look at what government and private donors are doing and can do to help to shore up social services, arts and culture organizations.
Dyana Mason is an associate professor of planning, public policy and management at the University of Oregon and Mirae Kimis an associate professor of nonprofit studies at George Mason University.
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