In the aftermath of the most acute phases of the COVID pandemic, thanks to a surge in charitable giving and government aid, it appeared that most nonprofits had avoided going under. Organizations were emerging from the crisis “wounded, but still open,” as one 2021 analysis found.
All things considered, we’re left with a relatively upbeat picture of the sector, with many nonprofits even reporting increased revenues in the COVID era. But it’s a picture that overlooks a still-large number of nonprofit shutdowns and cutbacks over the past two and a half years, particularly among small, local charities hammered by the health crisis, record inflation, and other issues, such as dwindling government aid. Coupled with staffing shortages and increased need, it’s been a particularly rough period for human service charities.
The level of disruption in the nonprofit sector — as well as substantial cuts in safety-net services for vulnerable groups like low-income seniors and people with disabilities — may be obscured by overall encouraging national philanthropic data. Country-wide surveys show record pandemic-related giving in 2020 and additional, albeit smaller, increases last year. For example, the Fundraising Effectiveness Project found that giving grew by 2.7% last year, on top of a 10.6% giving spurt in 2020.
But when taking into account the highest inflation in 40 years, charitable giving is actually down. Giving USA found that contributions increased last year by 4% but dropped by 0.7% when 2021 inflation (4.7%) was factored in. Inflation has only worsened this year, reaching 9.1% according to the consumer price index, and the jury is still out on how giving will fare in response during 2022.
Pandemic-era disruption
In any case, looking beyond aggregate data reveals signs that large numbers of nonprofits have been severely affected since 2020:
According to an investigation by USA Today in April, more than 300 nursing homes nationwide, mostly nonprofits, have closed or have been in the process of shutting down since early 2020. Nursing homes serving primarily poor residents in urban and rural areas have been hit the hardest.
Childcare providers have been shutting down at an alarming rate. A report published this month estimates that nearly 16,000 providers permanently ceased operations between December 2019 and March 2021. A possible solution under discussion: allowing nonprofit childcare providers to apply for loans formerly reserved for small for-profit businesses.
In July 2021, a survey to assess pandemic-related woes among Ohio nonprofits found that 9% of the more than 3,000 charities surveyed had ceased all operations.
And in Minnesota, between April 2020 and March 2021, 186 nonprofits filed paperwork with the attorney general’s office to say they were disbanding. Others that managed to survive have cut their programs and services down to nothing, one Minnesota official told Forbes.
And we’re seeing many other cases of long-running nonprofits closing their doors. For example:
The Annenberg Space for Photography, in Century City, California, shut down for good in December 2020 after a decade of offering free exhibits to the Los Angeles community. The reason: Founding donor Wallis Annenberg refocused her giving on COVID recovery and social justice.
After more than a year of financial losses because of pandemic-related closures, Amana’s Old Creamery Theatre, in Iowa, permanently shut its doors.
In February of this year, St. John’s Village, a nonprofit senior living facility in Woodland, Washington announced it will close because of pandemic pressures.
Founded in 1865 in honor of Abraham Lincoln, Lincoln College survived the 1918 influenza crisis, multiple recessions and two world wars. But the college permanently closed this spring, blaming COVID and cyberattacks. Nearly 260 college employees lost their jobs, and local business leaders complained about financial losses of tenants, customers and their own employees after the closure.
Last month, New York’s Spotlight Theatre Group of the East End announced its final performance, ending a 10-year run of offering theater for young people. “We were branching out prior to COVID,” said Kim Galway, a Spotlight founding director. “And then COVID hit and shut us down. Really, unfortunately, financially it was a huge hit.”
In Wheeling, West Virginia, an animal shelter was forced to shut down after the pandemic substantially damaged its ability to raise money and the county cut its support for area nonprofits.
For Goodness Sakes, a Plainville, Connecticut, charity that donated products to people emerging from homelessness and other crises announced that it was unable to recover from the pandemic. As a result, it ceased operations this year in February.
Philly Reclaim, a nonprofit allowing people to check out power tools and other materials for construction projects in and around Philadelphia, is closing this month. It can no longer afford the cost of renting its warehouse as inflation soars. One sign of the charity’s desperation: giving away tools and other supplies for free in order to meet its deadline for evacuation.
Marketing EDGE, a tax-exempt organization that trained more than 100,000 students to enter nonprofit marketing careers, shuttered in March. While the organization had struggled financially in recent years, officials explained that the pandemic turned its fiscal woes into an insurmountable challenge.
Government cuts affecting social services
A significant factor in closures, particularly for safety-net groups serving the needy: These charities had experienced years of cutbacks and even elimination of support from federal, state or municipal sources after long relying on reimbursements and other government aid, said Kathleen Enright, president of the Council on Foundations. This is especially unfortunate, she added, because the demand for their services then grew exponentially with COVID and related issues.
Even though local charities managed to survive government cuts, the pandemic and high inflation, many organizations serving the needy have suspended vital programs and services, damaging the country’s safety net, especially for the most vulnerable populations.
For example, maternity wards in nonprofit hospitals across the nation have been closing, a trend that has only accelerated during the pandemic. Some hospitals closed their maternity wards during COVID, only later to announce the shutdowns are permanent. The main culprits cited by such hospitals: declining birth rates and pandemic-related staffing shortages. Maternity ward closures have most often been in rural or suburban locations, making it more difficult for expectant mothers who must travel greater distances, and sparking protests and even lawsuits in some communities.
Vox reported one telling example: In 2020, Shantel Jones, a young pregnant woman, was unaware that her local maternity ward at nearby Windham Community Memorial Hospital, in Willimantic, Connecticut, had closed. Neither was her ambulance driver, who had to take Jones to another maternity ward some 30 miles away. Unable to make it to that hospital in time, Jones delivered her baby on the side of a road. Finally arriving at the second hospital, she was told her new son needed intensive care, which the hospital could not provide. She was re-routed to a third medical facility another 30 miles farther away.
Programs serving people with mental and physical disabilities are facing formidable new challenges, with many scaling back services or closing down altogether, even as the need among people with disabilities grows. A 2020 report identified 665,000 people with disabilities on waiting lists, some of them waiting for years in vain for outpatient or residential care.
Like hospitals, organizations serving individuals with disabilities have lost employees who are increasingly lured away by less-demanding jobs. In the competition for workers, those jobs pay more than nonprofit employers can afford. And while some organizations offering disability services rely on Medicaid and other government reimbursement, Medicaid has not increased the money it provides for administrative and general expenses for 17 years, according to one long-time chief executive at an organization serving the disabled in Connecticut.
Food banks are another type of human-service charity feeling the crunch from an elevated demand for service and soaring costs, both due to high inflation. In Fairfax, Virginia, Food for Others reported a dramatic increase in new clients since the pandemic started. More recently, prices for basics like eggs, cheese and meat have skyrocketed. With the price of eggs doubling, the food bank recently told clients that eggs are no longer available; exceptions are made for some “emergency clients” referred by doctors or social workers.
Over the last year, the cost of groceries rose by 13.1% but, distressingly, food donations dropped by 42%, said Anna Slaten, director of development at Food for Others. At the same time, she added, some donors have said they cannot give as much money now due to inflation.
While the past few years have introduced several new challenges, for years, the think tank Institute for Policy Studies has been sounding the alarm about the shrinking number of smaller donors and American households participating in giving as the sector has become increasingly reliant on the wealthy.
Implications for fundraisers
Given the challenges still facing charities coast to coast, how should grantmakers respond as the nation emerges from COVID? Should changes many made in the pandemic — dropping reporting requirements, increasing operating support and making additional funds available to existing grantees — be maintained or phased out?
A 2021 Center for Effective Philanthropy survey of more than 280 foundation officials, supplemented by more in-depth interviews with foundation and charity officials, offers clues about funders’ future giving.
Virtually all the grantmakers surveyed said they changed how they work in the pandemic. The two most frequent changes were making application, reporting and other processes easier for grantees and providing them with more general operating support. Among the respondents, 65% said they would maintain increased operating support after the pandemic, while 25% were undecided. Only 10% said they would go back to pre-pandemic levels of operating support. The vast majority of grantmakers said they would maintain streamlined application and reporting practices when the pandemic ends.
Other changes reported by grantmakers are efforts to confront racial equity issues after multiple events during the pandemic — such as the killing of George Floyd by Minneapolis police — as well as the demonstrations and violence that followed them. Nearly 60% of grantmakers surveyed said they changed their grant application process to reach more people of color, while 67% reported they had changed their grant-selection process to achieve the same goal. More than 80% of grantmakers said they would maintain those changes after the pandemic.
“After George Floyd’s murder, a social justice movement swept the country,” said Kate Treanor, senior program director at Grantmakers in Health, which represents some 200 member organizations. “This gave foundations a chance to look for partners they have not worked with before. Many leaned into organizations they had relationships with before the pandemic and used those contacts to look at getting support to organizations serving people of color. Or they went to community foundations to reach these groups.”
Treanor also believes the pandemic drove home the need for more operating support and multiyear grants. “More foundations in the pandemic saw the good these grants can do for struggling organizations,” she said. “Boards have come to see that these grants are critical.”
Both Treanor and Enright, the Council on Foundations’ president, said the crises surrounding the pandemic also helped grantmakers embrace ideas espoused by the Trust-Based Philanthropy Project, which aims to address the power imbalance between grantmakers and grant seekers through six practices, among other steps. During the pandemic, for example, the Missouri Foundation for Health, in St. Louis, reviewed its agreements with grantees to try and lessen any power imbalance, paring down legal language that could be intimidating and shortening the number of pages in those agreements.
One irony is that with shutdowns, high inflation and other challenges facing charities now, raising money from private foundations and other grantmakers is easier in many cases. And there’s greater understanding between funders and the organizations they support. To ease demands on grantees, for instance, many foundations have replaced required written reports with more informal meetings on Zoom, providing for a better exchange of information between the two parties. While some organizations didn’t make it to the other side of this crisis, for fundraisers that did, the future may just be a little brighter.
“Fundraisers and other nonprofit leaders have been asking for these kinds of changes for years and years,” said Enright. “It took a global health crisis to finally make it happen.”