Public Policy Forum Blog

Local Nonprofit Sector Shows Signs of Diminishing Capacity

We mentioned in an earlier blog post why the strength of Greater Milwaukee’s nonprofit sector is a policy issue worthy of some attention. Accordingly, in a new report released today, we take a look at revenue trends within the nonprofit sector and examine how charitable giving responds to change in the economic environment.

To start, we find that the local nonprofit sector has grown nearly twice as fast as the overall economy. This growth is great for nonprofits, who collectively reported revenue of $3.7 billion in 2011.

However, total revenue and contributions haven’t grown nearly as fast as the number of organizations. Quite simply, the pie is growing, but the number of organizations vying for a slice is just growing faster, and so there’s a little bit less for each. The size of the average nonprofit, measured by revenue, fell by 17% between 1989 and 2011.

The reduction in revenue per organization is problematic for a few reasons. First, it can unduly increase competition among nonprofits, which now need to spend more time and resources securing funding. Second, the trend threatens existing services and programs. Some programs simply aren’t sustainable below a certain level. For example, you cannot efficiently run a homeless shelter with three beds.

So, even though the nonprofit sector is growing, there are looming threats to nonprofit capacity. Not only may certain programs fall by the wayside, but so will local expertise in running those programs. As we discuss in the report, this has serious implications regarding how much local governments can rely on nonprofits to administer or supplement publicly-funded programs. Furthermore, if no one is able to fill the gap left by shrinking nonprofits, vulnerable populations may see a disruption in the services provided to them.

By identifying these trends and their implications, our report seeks to start a discussion about how we can best support the local nonprofit community. The report’s content and conclusions should help policymakers, informed citizens, and civic leaders identify relevant policy options and objectives.

Read more about the financial state of Greater Milwaukee’s nonprofit sector in our new report Give and You Will Receive. We examine the nonprofit sector as a whole and also profile nine individual subsectors of nonprofits in the following categories:

  • Arts, Culture, and Humanities
  • Education
  • Environment and Animals
  • Community Improvement
  • Health and Healthcare
  • Human Services
  • Public and Societal Benefit
  • Religion
  • Youth Development
Phillip Laper