New York City human services nonprofits facing public and private funding shortfalls amid the current recession are scrambling to reduce their expenses, but most have managed to avoid cutting the programs and services that they provide to city residents.
A new survey of 250 executive directors at the city’s human services organizations, released last week by the Human Services Council of New York City and Baruch College’s Center for Nonprofit Strategy and Management, found that more than half of nonprofits surveyed had laid off staff in the past year. Sixteen percent of those organizations reported losing more than 15 percent of their workforce.
In the wake of the financial crisis, demand for nonprofits’ services has increased significantly in New York City, just as city and state government, foundations and private donors – all hard hit by the crisis – have been reducing funding for nonprofits. That combination has prompted the city’s human services organizations to adopt a variety of new cost-saving measures. (See details in City Limits’ recent article, Nonprofits’ Outlook After A Year of Living Dangerously, which appeared in advance of complete survey results.)
But while layoffs and attrition, salary and hiring freezes, and cuts to employee benefits were common among the nonprofits that took part in the Baruch/Human Services Council survey, the majority of organizations’ programs and services have survived largely unscathed, so far. One-third of respondents had eliminated entire programs in the last year, and one-quarter had significantly reduced their services.
Compared to the even more quickly disintegrating safety net feared by some, however, those numbers almost come as a relief.
“It’s a surprisingly low number,” said Michael Stoller, executive director of the Human Services Council. “We’re trained to just cobble stuff together and to work the hours that we’re not paid for…people do what they have to do.”
The survey, conducted as a follow-up to Baruch’s annual survey of the city’s nonprofit executives, last administered at the end of 2008, found that 80 percent of the organizations surveyed this summer had lost at least some private funding in the last year, with almost half saw cuts amounting to more than 20 percent of their total budgets. Meanwhile, two-thirds of respondents reported decreases in public funding. Of these, almost one-quarter had lost more than 20 percent of their total budgets.
The near-ubiquitous cuts have left many of the city’s nonprofits struggling to keep enough cash on hand to cover salaries, rent, utilities, and other operating expenses. Among the organizations surveyed by Baruch and the Human Services Council, 60 percent reported difficulty maintaining cash flow during the last year.
For nonprofits without backup funding options, such cash flow problems can have serious consequences. The Baruch/Human Services report found that two-thirds of survey respondents have no endowments, 30 percent have no lines of credit, and 20 percent have no financial reserves of any kind.
“In a time like this, when money is being cut, you need reserves as your life line,” said Micheline Blum, director of Baruch College Survey Research and a co-author of the new report. “If they don’t have a life line, some organizations could actually go under.”
For now, layoffs and reductions in employees’ fringe benefits have succeeded in preserving the bulk of New York City’s human services, but these cost-saving measures rarely provide long-term solutions.
“This is not a problem that you can cut yourself out of,” Alan Goodman, executive director of the Brooklyn Bureau of Community Service, told an audience of mostly nonprofit insiders who gathered at Baruch College to mark the report’s official release on Sept. 9. “You can’t keep cutting and reducing – there is only so far you can go in terms of reducing costs, reducing staff.”
In the near term, such cuts can negatively affect staff morale, recruitment, and retention at nonprofits, where experienced, dedicated staffers are often the key to delivering high quality services.
“[Nonprofit] organizations are really stretching to maintain services and programs and they’re doing it by taking the impact on their staffs and on the infrastructure of the organizations,” Jack Krauskopf, director of Baruch’s Center for Nonprofit Strategy and Management and a co-author of the new report, told the audience at Baruch last week. “If things worsen, something is going to snap in the human services community.”