As nonprofit organizations continue to regain footing from the pandemic, many are also preparing for another wave of difficulties due to inflation and a looming recession.
Heather Iliff, executive director of Maryland Nonprofits – the statewide organization that supports and advocates for nonprofits in Maryland – said many nonprofits do not even consider themselves fully recouped.
“Many of our balance sheets have not recovered, as well as the nature of funding. Many organizations have had to scale up their funding to reach their mission and high levels of need from the pandemic,” Iliff said.
Rising costs for transportation, gas and food are creating financial pressures for many organizations, especially smaller ones. Inflation costs and economic trends have a disproportionate impact on organizations that are led by people of color, Iliff said.
“Whenever we go into a recession or there are trends that impact the entire nonprofit sector, smaller nonprofits are the hardest hit and have the most difficulty weathering the storm because of financial pressures and a decrease in donations and grants,” she said.
While the Arc of Prince George’s County is not a small-scale nonprofit, they have seen a sharp increase in food and transportation costs, according to Rob Malone, Executive Director. The Arc provides services to people with developmental disabilities and runs group homes, transportation, and other services to help them live with dignity and respect. The organization has seen a 10 to 12% increase in food costs – food that goes directly to feeding the residents in their group homes.
Malone’s main concern, however, is funding. The organization gets most of its funding from the state, and in past years, has not received full funding. As a result, the organization is understaffed and there is a waitlist for people to enroll in services.
“In past years, the state calculated what they believed would be an adequate rate to provide our services, so we were receiving 90 percent of the funds, which is basically telling us to provide something for $10 when it really costs $12. We are hoping that the new administration – who is coming in with a budget surplus – will fully fund our services 100 percent,” he said.
While Malone hasn’t seen a decrease in individual donations, many other organizations have. According to Iliff, the nonprofit sector is seeing a decrease in individual donations, which is a good predictor of the economy.
“The real issue is retaining donors year after year. The regular American household may not have as much room for giving these days with other financial pressures. Data is showing that we are seeing a loss of retention and we haven’t seen that data point before,” Iliff said.
In an effort to lessen the impact on nonprofits, Maryland Nonprofits, along with national partner organizations are advocating representatives in Congress to put provisions in omnibus bill HR 1704 that would bring back the Universal Charitable Deduction. She is hoping policymakers will react favorably and push for it to be enacted before the end of the year. The Universal Charitable Deduction allowed people to deduct charitable contributions up to a maximum amount, regardless of their income and regardless of whether they itemized or took a standard deduction. However, the Trump Administration’s Tax Cuts and Jobs Act doubled the standard deduction, which eliminated the opportunity to claim a deduction for charitable donations.
“These incentives make a difference to individual donors. Historically, we saw a huge portion of donations coming from households with less than $30,000 and we have seen a huge drop off in that tax bracket since the new standard deduction took effect,” she said.
Iliff and her team are also working on resources that nonprofits could outsource – such as administrative, fund development and marketing – so they can keep costs down, but still maintain their levels of assistance within their communities.
Both Malone and Iliff said this time of year is the time when nonprofits need the most help. “The end of the year is a perfect time to give to charitable organizations,” Malone said. “We rely on giving during the holiday season and every little bit helps.”