THE FUTURE OF

NONPROFIT AMERICA

Lester M. Salamon

Leading Age Leadership Forum Chicago, IL, July 15, 2015

NONPROFITS: A MAJOR ECONOMIC FORCE

11.4 4.5

0.8

1.2

5.1

5.6

5.8

12.0

14.9

15.9

Utilities

Agriculture

Transportation & warehousing

Finance & insurance

Construction

Manufacturing

Retail trade

NONPROFIT SECTOR

Millions of workers, 2012

Paid workers

FTE volunteers

Source: Lester M. Salamon, The Resilient Sector Revisited: The New Challenge to Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2015).

WHO WE ARE 4 IMPULSES SHAPING NONPROFIT AMERICA

NONPROFIT AMERICA

Voluntarism Professionalism

Commercialism Civic activism

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

Federal retrenchment

WHO WE ARE CHALLENGES I: THE FISCAL CHALLENGE

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

WHO WE ARE GOVERNMENT SOCIAL WELFARE SPENDING

0%

20%

40%

60%

80%

100%

120%

140%

160%

1950 1955 1960 1965 1970 1975 1977 1980 1985 1989 1994

Total Pensions Education Health Welfare

1950 - 1994 1980 = 100

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

3.2%

Total

4.7%

3.2%

2.3% 2.2%

0.8%

Health Social insurance

Education Welfare & social

services

Housing

WHO WE ARE AVERAGE ANNUAL CHANGE IN GOVERNMENT SOCIAL WELFARE SPENDING, 1990-2009, BY FIELD

Source: Lester M. Salamon, America’s Nonprofit Sector, A Primer, 3rd Ed. (Washington, DC: The Foundation Center, 2012).

WHO WE ARE LEVEL OF FISCAL STRESS REPORTED BY NONPROFIT ORGANIZATIONS, 2003

14% NONE

35% MODERATE

Severe: 20% Very severe: 31% SEVERE OR VERY SEVERE 51%

% of organizations

Source: Johns Hopkins Nonprofit Listening Post Project Financial Health Survey, 2003.

Federal retrenchment

Changing forms of government support

Tepid giving growth

WHO WE ARE CHALLENGES I: THE FISCAL CHALLENGE

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

WHO WE ARE PRIVATE GIVING AS A SHARE OF PERSONAL INCOME, 1970-1997

1.64% 1990-97

1.78% 1980-89

1.86% 1970-79

PERIOD

GIVING AS % OF PERSONAL INCOME

Source: Lester M. Salamon, Ed., The State of Nonprofit America, (Washington, D.C.: The Brookings Institution Press, 2002).

WHO WE ARE CHARITABLE GIVING TO NONPROFIT OPERATING ORGANIZATIONS: 1997, 2007, 2011

Source: Lester M. Salamon, The Resilient Sector Revisited: The New Challenge to Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2015).

TYPE OF RECIPIENT ORGANIZATION

GIVING AS PERCENT OF TOTAL REVENUE

1997 2007 2011

Service and expressive 9.5 10.0 9.4

WHO WE ARE CHALLENGES

THE FISCAL CHALLENGE

THE COMPETITION CHALLENGE

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

WHO WE ARE NONPROFIT & FOR-PROFIT ROLES IN SELECTED FIELDS, 1982-1997

% Nonprofit % Change in 1982 a 1997 b relative nonprofit share EMPLOYMENT Child day care 52 38 -27% Job training 93 89 -4% Individual & family services 94 91 -3% Home health 60 28 -53% Kidney dialysis centers 22 15 -32%

FACILITIES/ENROLLMENT Dialysis centers 58a 32 -45% Rehabilitation hospitals 70a 36 -50% Home health agencies 64a 33 -48% Health maintenance organizations 65a 26 -60% Psychiatric hospitals 19a 16 -16% Hospices 89c 76 -15% Mental health clinics 64b 57 -11% Higher education enrollments 96d 89 -7%

Source: Lester M. Salamon, The State of Nonprofit America, (Washington, D.C.: The Brookings Institution Press, 2002).

WHO WE ARE CHANGE IN NONPROFITS’ SHARE OF EMPLOYMENT, SELECTED FIELDS, 1997-2007

FIELD CHANGE IN NONPROFIT SHARE Individual & family services -23

Community care facilities for the elderly -20 Home health care facilities -19 Specialty hospitals (other than psychiatric) -13 Outpatient facilities -8 Nursing care facilities -3 Other residential care facilities -3 Child day care -2

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

WHO WE ARE NONPROFIT NEED FOR & SUCCESS IN RAISING INVESTMENT CAPITAL, BY PURPOSE

42%

31%

26%

25%

39%

37%

2%

52%

53%

67%

77%

80%

91% TECHNOLOGY

BUILDINGS / LAND

PROGRAM DEVELOPMENT

STAFF DEVELOPMENT

STRATEGIC PLANNING

VEHICLES, EQUIPMENT

NONE

P E R C E N T O F O R G A N I Z A T I O N S

Need capital Secured capital

Source: Lester M. Salamon, “Claiming the Future: Nonprofits and Investment Capital,” Nonprofit Listening Post Project Communiqué No. 5, 2006.

WHO WE ARE NONPROFIT PROBLEMS ACCESSING INVESTMENT CAPITAL, BY SOURCE

Fairly or extremely difficult source to access Don’t know about source

P E R C E N T O F O R G A N I Z A T I O N S

41%

36%

53%

58%

55%

55%

55%

46%

3%

4%

1%

5%

32%

36%

39%

53%

INDIVIDUAL DONORS

FOUNDATIONS

COMMERCIAL BANKS

GOVERNMENT

VENTURE PHILANTHROPISTS

CREDIT UNIONS/SAVINGS BANKS

INSURANCE COMPANIES

PENSION FUNDS 99%

94%

91%

87%

63%

54%

45%

39%

Source: Johns Hopkins Nonprofit Listening Post Project Nonprofit Capital Needs Survey, 2005.

CAPITAL CONSTRAINED

WHO WE ARE CHALLENGES

THE FISCAL CHALLENGE

THE COMPETITION CHALLENGE

THE LEGITIMACY CHALLENGE

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

WHO WE ARE SHARE OF ORGANIZATIONS REPORTING VARIOUS TYPES OF FEES AND TAXES

Source: Lester M. Salamon, S. Geller, and S. W. Sokolowski, “Taxing the Tax‐Exempt Sector—A Growing Danger for Nonprofit Organizations,” Nonprofit Listening Post Project Communiqué No. 21, 2011.

63%

42%

36%

17%

9%

ANY TYPE OF TAX, FEE, OR PILOT

USER FEES

OTHER PAYMENTS

FIELD-SPECIFIC TAXES

PILOTS

P E R C E N T O F O R G A N I Z A T I O N S

WHO WE ARE NONPROFIT RESPONSE

1. OVERALL GROWTH

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

WHO WE ARE AVERAGE ANNUAL GROWTH IN NONPROFIT REVENUES & U.S. GDP, 1977-1996 & 1997-2007

3.0% 3.0%

3.6% 4.0%

1977-1996 1997-2007

PERC

ENT G

ROW

TH

GDP Nonprofit revenue

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

WHO WE ARE ANNUAL CHANGES IN EMPLOYMENT NONPROFIT vs. FOR-PROFIT, 2000-2010

L. M. Salamon, S. W. Sokolowski, and S. L. Geller. “Holding the Fort: Nonprofit Employment during a Decade of Economic Turmoil.” Nonprofit Listening Post Project Communiqué No. 39, 2012.

3.3%

2.8%

1.6%

1.8%

1.9%

2.2%

2.5%

2.6%

1.2%

0.8%

-1.0%

-1.9%

-0.6%

1.3%

2.0%

1.9%

1.0%

-1.1%

-6.2%

-0.9%

PE

RC

EN

T C

HA

NG

E

Nonprofit

For-profit

2000-2001

2005- 2006

2004- 2005

2003- 2004

2002- 2003

2001- 2002

2009- 2010

2008- 2009

2007- 2008

2006- 2007

WHO WE ARE CHANGES IN NONPRIOFIT REVENUES, BY FIELD, 1997-2007

41.0%

50.0%

51.0%

53.0%

111.0%

75.0%

53.0%

CULTURE, RECREATION

EDUCATION, RESEARCH

SOCIAL SERVICES

HEALTH

OTHER

ENVIRONMENT

TOTAL

32.0% U.S. GDP

P E R C E N T G R O W T H

NONPROFITS

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

WHO WE ARE NONPROFIT RESPONSE

2. COMMERCIALIZATION • Successful marketing to paying customers

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

WHO WE ARE SOURCES OF NONPROFIT GROWTH, 1997-2007

FEES, 58%

GOVERNMENT, 30%

PHILANTHROPY, 12%

TOTAL GROWTH = 457 BILLION

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

WHO WE ARE SOURCES OF NONPROFIT REVENUE GROWTH, BY FIELD, 1997-2007

18%

40%

45%

64%

67%

58%

17%

41%

11%

34%

20%

30%

66%

20%

44%

2%

14%

12%

ENVIRONMENT

SOCIAL SERVICES

CULTURE, RECREATION

HEALTH

EDUCATION, RESEARCH

TOTAL

FEES GOVERNMENT PHILANTHROPY

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

WHO WE ARE NONPROFIT RESPONSE

2. COMMERCIALIZATION • Successful marketing to paying customers • Successful pursuit of public funds

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

WHO WE ARE NONPROFIT RESPONSE

1. OVERALL GROWTH

2. COMMERCIALIZATION

3. MANAGERIAL PROFESSIONALIZATION

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

WHO WE ARE THE RISKS

• Growing identity crisis

• Increased demands on nonprofit managers

• Threat of mission creep

• Disadvantaging small agencies

• Potential loss of public trust Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

WHO WE ARE RESETTING THE BALANCE

• THE SURVIVAL IMPERATIVE

• THE DISTINCTIVENESS IMPERATIVE

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

WHO WE ARE THE ROAD AHEAD: 3 POSSIBLE SCENARIOS

CELEBRATION AND DRIFT

THE SOCIAL ENTERPRISE SCENARIO

THE RENEWAL SCENARIO

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

WHO WE ARE THE RENEWAL OPTION: AN ACTION AGENDA

• Renew the nonprofit value proposition

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

WHO WE ARE RENEW THE NONPROFIT VALUE PROPOSITION

THE PE3R2C STANDARD Productive Effective Empowering Enriching Responsive Reliable Caring

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

WHO WE ARE THE RENEWAL OPTION: AN ACTION AGENDA

• Renew the nonprofit value proposition • Improve the government-nonprofit partnership • Improve access to capital

– Foundations as Philanthropic banks – Broadened tax credit – New Frontiers of Philanthropy

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

PHILANTHROPY’S BIG BANG

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~ Rip Rapson, Kresge Foundation

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WHO WE ARE THE RENEWAL OPTION: AN ACTION AGENDA

• Renew the nonprofit value proposition • Improve the government-nonprofit partnership • Improve access to capital

– Philanthropic banks – Broadened tax credit

• Replace tax deduction with tax credit • Improve public understanding

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

WHO WE ARE CONCLUSION

“It has been said that the quality of a nation can be seen in the way it treats its least advantaged citizens. But it can also be seen in the way it treats its most valued institutions.”

Source: Lester M. Salamon, Ed., The State of Nonprofit America, 2nd Ed., (Washington, D.C.: The Brookings Institution Press, 2012).

LATEST UPDATE FROM BROOKINGS INSTITUTION PRESS

The Resilient Sector Revisited is a must-read for every nonprofit governing body and senior team. It has important numbers about our sector and—even more importantly—offers wisdom and perspective on the ever-changing dynamics we must navigate. It is a reference guide that nonprofits will want to keep handy for the data and compass that it offers as we address our current problems and future strategies.

~ Larry Minnix, President and CEO of LeadingAge

TO ORDER: bit.ly/Resilient2_Salamon

WHO WE ARE FURTHER INFORMATION

LESTER M. SALAMON lsalamon@jhu.edu

Website: ccss.jhu.edu Twitter: @JHUCCSS