With public help lagging, nonprofits seek new funding sources
By Paul Schott
STAMFORD — Velma Clark has taken on a number of roles during her 19 years with Pacific House — client-services advocate, shelter manager, residential services manager and now manager of all the nonprofit’s properties.
While her responsibilities with the organization that runs a Pacific Street homeless shelter and a number of affordable-housing properties have changed, her approach to her work has not.
“I love this nonprofit,” Clark said in an interview last week. “It’s my passion to work with and help people.”
The work of Clark and others in her field are recognized in a report on Connecticut nonprofit organizations released last week by Stamford-based Patriot Bank. Nonprofits like Pacific House play a crucial role in their communities, delivering essential programs for their clients and creating a major source of employment, the study said.
The report also highlights the formidable challenges they face.
As demand has escalated, they have struggled in recent years to find funding to maintain their programming. But the report also lays out a path to sustainability: Nonprofits will need to cultivate strong relationships with public and private partners, including local businesses.
A needed industry
Nonprofits comprise a crucial part of the state’s economy, with more than 20,000 agencies employing nearly 200,000 people. That equates to about 14 percent of the state’s private workforce, according to the report, up from 13 percent in 2007.
Those organizations are arguably more important than ever, with 78 percent of nonprofits reporting an increase in demand for programs or services in the 2014 fiscal year.
But partly because government support is not matching the increasing needs, only 56 percent of agencies said that they were able to meet that increased demand. Between 2011 and 2014, federal funding as a percentage of nonprofits’ budgets decreased or remained the same for 74 percent of organizations. Support from the state declined or stagnated for 66 percent of nonprofits, and about 80 percent faced a similar predicament with local government funding.
“During the recession, it was tough,” said Michael Cotela, executive director of the Stamford Boys & Girls Club. “A lot of nonprofits folded, but we came through it. We do have an endowment, and we could always count on that.”
The lack of funding has forced nonprofits to become more frugal, which creates its own issues.
“We’ve been operating on a balanced budget for the last eight years and have been able to at least make up some of those differences in funding,” said Rafael Pagan Jr., Pacific House’s executive director. “The challenge has been that I’ve not been able to really develop a reserve fund so we can be more viable in the case that something happens.”
Overall charitable giving has accounted for about 2 percent of the country’s gross domestic product since the 1970s, the study said. In 2014, the total came to about $358 billion.
Adapting to changes
With tighter budgets, nonprofit leaders said their organizations have been forced to become more efficient.
Fewer employees means greater workloads. Around the time of the recession, Pacific House had about 40 people. The employee roster now totals 28.
“You worry as an executive about burnout,” Pagan said. “It’s hard when people take vacation time — if I only have one office manager and that person goes on vacation, who does the work?”
Nonprofits are reluctant to shift the burden of covering expenses onto clients. The Stamford Chamber of Commerce has not raised its rates since the last recession, said President and CEO Jack Condlin.
“It’s been a struggle, but we’ve survived,” Condlin said. “We meet our budget because we have to. It’s not like we can borrow money or raise dues. If I raise the dues rate, people drop out. If you raise dues (and) small business are struggling, that means they struggle more. We have to be there for them; they need us now.”
And prudent fiscal management can only go so far. Patriot Bank’s report cited research from the Nonprofit Finance Fund showing that 56 percent of Connecticut nonprofits reported having three months or less of operational cash on hand in the 2014 fiscal year.
While they still face formidable financial challenges, nonprofit leaders increasingly see reasons for optimism about their long-term outlooks. As grant funding for Pacific House has dropped, corporations have increased their sponsorship, Pagan said.
“Many of them put aside a certain amount for marketing, and it’s a lot easier to sponsor something because they’re also getting marketing,” Pagan said. “It’s an effective partnership.”
For-profit businesses have stepped up their support in other ways.
Among its programs that support nonprofits, Patriot Bank last month held a “Give Your Nonprofit Organization a Fundraising Edge” series of events, featuring nonprofit board leadership coach Michael Davidson. More than 130 leaders from organizations serving southern Connecticut and Westchester County, N.Y., participated.
(Left to right): Stamford Mayor David Martin, Board Coach Michael Davidson, Patriot Bank President Kenneth Neilson, Norwalk Mayor Harry Rilling and Stamford Chamber of Commerce President Jack Condlin at an event at the Stamford Yacht Club
“Patriot Bank values the nonprofit sector and understands that establishing a secure financial future is critical for so many important community-based organizations,” Robert Hojnacki, who leads Patriot Bank’s nonprofit and government banking divisions, said in a statement.
In some cases, public funding is picking up significantly. The State Bond Commission this month approved a $4.4 million allocation for the Boys & Girls Club to support construction of a $15 million teen center, which would expand the club’s facility on Stillwater Avenue.
“We’ve worked really hard to create partnerships with individuals (and) the corporate world,” Cotela said. “Both the city and the state governments have been very generous. When we have what we need to get the job done, it’s a win-win for everyone.”
Amid the travails, nonprofit mainstays like Clark said their commitment to their work has not wavered.
“I see so many people prosper who come through the shelter,” Clark said. “It’s not a 9-to-5 job. I do what I have to do to get the job done. I want to keep doing it as long as I can.”
The 2016 Connecticut Nonprofit Industry Outlook can be downloaded at https://bankpatriot.com/white-paper/2016-connecticut-nonprofit-industry-outlook/.