Nonprofits form United Front to weather economic storm

United Way gathers business, nonprofit sectors for a first-of-its-kind brainstorming session on the recession and challenges to the Twin Cities human service sector

By Laura Billings

The worst economic downturn in 50 years has prompted an unprecedented response from nonprofit leaders in the Twin Cities, who have just begun a first-of-its-kind brainstorming effort aimed at shoring up the region’s increasingly hard hit human service agencies against a still growing tide of economic uncertainty.

Sponsored by Greater Twin Cities United Way, the Minnesota Council of Nonprofits, and General Mills Foundation, the first-ever United Front event brought together more than 650 executive directors, board members, and nonprofit service providers, along with public officials and policy experts, for an intensive four-hour session aimed at understanding where the current economic recession is hitting hardest in Minnesota, learning how nonprofit agencies are struggling to meet an ever growing demand for services with even fewer resources, and exploring how new approaches such as strategic alliances, mergers, and refocused missions could help fill the gaps in a social safety net that is likely to be stretched even more in the coming months.

Unprecedented times, unprecedented demand
“These are unprecedented times which will require a different response than we’ve ever thought about before,” United Way CEO and President Lauren Segal told the United Front conference, held Friday, March 13 at the Minneapolis Hilton. Recent United Way 2-1-1™ referrals have seen a 15 to 20 percent increase in calls about basic needs, such as food and shelter. Emergency food calls in January were as high as they’ve been in five years. At the same time, funding for these services is down in all sectors by an estimated 15 to 30 percent.

“That’s why we thought it was so important to invite not only the executive directors of these human services organizations, but board members as well to be part of this discussion,” Segal said, noting that about 30 percent of the attendees at United Front were board members who came to learn about the recession and its impact on human service agencies in the region.

“This recession will not skip Minnesota”
Minnesota state economist Tom Stinson began the session with a bleak economic forecast, predicting that while previous downturns hadn’t hit the state as hard as the rest of the nation, “This recession will not skip Minnesota.” Right now, more Minnesotans are receiving unemployment insurance than in any other quarter in the state’s history. Nearly 75,000 jobs have been shed since January 2008—the largest number of job losses in 50 years.

“It’s going to be a really difficult situation, and the recovery is not going to be quick,” Stinson said, noting that with interest rates flat, and consumers more interested in recouping lost savings than spending, the recession which started in December 2007 is likely to be the longest and deepest downturn since World War II.

Though Stinson predicted the effects of the recession could be felt into 2012, United Way’s Segal, and incoming United Way board chair Jon Campbell, CEO Minnesota Region for Wells Fargo Bank, N.A., added that the cycle could take even longer for nonprofit agencies, who may require another six to 24 months to feel the full effects of an economic recovery.

Funds from the federal stimulus package have helped stem some of the losses in Minnesota, lowering a predicted budget deficit of $6.4 billion down to $4.6 billion. But that number may paint a rosier picture than is the reality, said Christina Wessell, deputy director of the Minnesota Budget Project, who added “the bad news is that spending cuts will be an important element” in the upcoming budget process, and that stipulations about how federal stimulus funds can be used may further complicate the process in the human service sector.

For instance, Gov. Tim Pawlenty’s initial budget proposal called for $1.4 billion in cuts to Health and Human Services, but in order to draw down federal stimulus funds the state can’t make any changes in eligibility to Medicaid programs. While this requirement may protect families covered under Minnesota Care, up to 65,000 childless adults could still be at risk for losing coverage. “But simply cutting people off health insurance doesn’t stop them from getting sick,” Wessell told the United Front audience. “It just shifts where and when we pay the price for that.”

Nonprofits staffs under stress
Human service providers have not been immune to the stresses faced by workers across all sectors of the economy. A recent United Way survey found that eight out of 10 agencies had lost some revenue from at least one source in the last year, and that hiring freezes and staff layoffs were the most frequently cited solutions to balancing 2008 budgets. Minnesota Council of Nonprofits director Jon Pratt described recent events as “the biggest shock to the human services system in 50 years,” noting that 2,794 nonprofit employees had filed unemployment claims in the fourth quarter of 2008.

With reduced staffs, agencies have had to cope with a surge in clients. “The spike in demand has been really disturbing,” said Suzanne Koepplinger, executive director of the Minnesota Indian Women’s Resource Center, who added that clients are increasingly likely to have many pressing needs at once—emergency food, shelter, or health care concerns. In a survey of 85 United Way agencies, 83 percent reported that they have seen more clients in the last three to six months, with half reporting that the needs of clients were more intense, requiring more attention and resources.

Among other recent findings:

• More than 50,000 default judgments in 2008 show that more Minnesotans are having trouble paying their debts. Defaults were up by 39 percent over 2007, and are 133 percent higher than in 2006.
• Food shelf usage rose between 20 and 50 percent across food shelves in Minnesota.
• Homeless families increased by 21 percent in Hennepin County, 27 percent in Ramsey County, and 30 percent in Dakota County.
• Ramsey Count food stamp cases have climbed from 14,500 in an average month to 16,600 in the last two years.
• The state’s unemployment rate rose to 8.1 percent in February, up from 7.5 percent in January.
  

Dealing with a new reality
At the United Front conference, Karen Himle, Vice President for University Relations at the University of Minnesota, presided over a wide-ranging panel discussion that included St. Paul Mayor Chris Coleman, Hennepin County Commissioner Mike Opat, MIWRC's Koepplinger, General Mills Foundation Executive Director Ellen Goldberg Luger, and Wells Fargo’s Jon Campbell. Himle asked each panelist to share their perspective on how nonprofits should navigate what she termed “truly a game-changing economy.”

Mayor Coleman said cuts to local aid have forced the City of St. Paul to make many of the hard choices nonprofits may now be considering, and added that the recession has called “for us to do things in ways we never would have done them before.” For instance, faced with closing a community rec center, the city recently created a partnership with a local soccer program, allowing the group to take over the building’s programming, while the city continues to maintain the grounds. Coleman said such alliances need to be “smart partnerships” that allow each party to “build a base that is stronger and more nimble” as they move forward.

Commissioner Opat agreed the recession may force agencies to reassess how they use their space, and how to use buildings more efficiently. But he added the downturn may also require nonprofits to hone their core values. “I would encourage to you consider things you’ve never considered before,” he told the United Front audience. “You’re not in the business of managing your clients lives in perpetuity…and if we want to do the best for the most, we’re going to have to resolve that fact.”

Koepplinger said one serious challenge nonprofits will face in the near term is fighting “mission creep”—changing the course of an organization’s goals to meet the growing needs of its client base, or to meet the requirements outlined in a new Request for Proposal (RFP). General Mill’s Luger echoed that idea, advising agencies to focus their attention on projects that are “mission critical.” Luger added that in the future, foundations may shift their orientation toward meeting more basic needs in the community, and will be even more focused on accountability, asking agencies to prove that what they are doing for their clients is making a real difference.

Follow the cash
An electronic keypad response system provided courtesy of IML allowed United Front attendants to respond to questions posed by moderator Karen Himle in real time. For instance, 57 percent of respondents said they would consider co-locating their services with another agency during this downturn. Another 49 percent said they would consider narrowing their mission in light of significant financial challenges. When asked about the funding outlook for 2009 and 2010, 48 percent of respondents predicted revenue would be down slightly, between 1 and 9 percent. Another 23 percent of United Front respondents predicted a fall-off of 10 percent or more.

Wells Fargo’s Campbell, suggested to the United Front audience that some of those estimates may be too hopeful. “We’re at the front end of a change in revenue streams,” which may only worsen in the coming months, he said. Campbell urged the board members and executive directors in the audience to “look at the cash” and “be prepared to take action. This is not the time to be timid, this is the time to be bold, this is a time to have a lot of courage, a lot of stamina.”

Campbell added that the current financial crisis may also force nonprofits to be creative in ways that may secure their future for the long-term. “If you like to stir the pot a little bit, this a wonderful time to be around,” he said.

Brainstorming bold ideas
Following the panel discussion, nonprofit leaders broke off for a series of ten roundtable sessions, focused on disabilities, domestic violence, early childhood and parenting, jobs and training, homelessness, hunger and food, primary medical and mental health care, seniors, youth foster care and juvenile justice, and youth and after school programs. A designated facilitator and a panel of featured content experts offered each human service cohort a status report on the issues, followed by a brainstorming session about how to streamline services, and prioritize their plans.

Leaders in homeless services have already been coordinating many of their efforts through Heading Home Minnesota, a statewide initiative started in 2006 with an aim to end homelessness by 2010. While that goal appears even more challenging now than it did three years ago, Cathy TenBrook, Coordinator to End Homelessness for Minneapolis and Hennepin County, told other leaders gathered at the homelessness brainstorming session, “I’ve never seen the community come together in the way they have now. I don’t see this as a time to batten down the hatches,” TenBrook said. “More than ever we have to be confident about the importance of what we’re doing….we can’t just think in a scarcity mentality.”

At the hunger and food break-out session, nonprofit leaders shared ideas about consolidating data collection to identify gaps in area food distribution; expanding the Minnesota FoodShare program to twice a year; locating and operating a centralized warehouse that would allow smaller agencies to accept large donations they don’t have the space or resources to accommodate now.

Ideas discussed by leaders in early childhood and parenting included consolidating certain metrics or RFP processes to streamline time spent on administration, and developing “cash cows” such as for-profit childcare centers that could help subsidize nonprofit efforts.

Leaders in primary medical and mental health services discussed how community health workers might be enlisted to cut costs, and were encouraged to share their own ideas for trimming expenses and increasing health care coverage with Minnesota’s legislative leadership. “We don’t want this to be the end of the conversation,” said facilitator Sharon Oswald, Community Impact Manager, Health and Independence, United Way. “We want this to be the beginning.”

Next steps
United Way’s website now features a summary of the United Front event, video and podcasts of the panel speakers, and information from each cohort session. Staff from United Way and the Minnesota Council of Nonprofits will draw out major themes from each cohort discussion and participant feedback to create plans for action.

Plans are already in the works for a dedicated United Front website where participants and others in the human service sector can learn more about outcomes and ideas, and carry on these United Front conversations in the coming months.