Nonprofits cite economic impact as budgets tighten

Alaska’s nonprofit sector wants its voice heard when discussions about the state’s budget future are had.

So, the Foraker Group is convening nonprofit leaders across the Alaska this fall to hear from a large, but often quiet, portion of the state’s economy before the budget battles intensify once again in Juneau.

The first meeting was held Oct. 20 in Anchorage; subsequent meetings are scheduled for Bethel, Fairbanks and Juneau in November.

The Foraker Group is Alaska’s state nonprofit association.

State Office of Management and Budget Director Pat Pitney laid out Alaska’s $3 billion-plus budget shortfall with Alaska North Slope crude selling for less than $50 per barrel. Pitney was followed by Foraker President and CEO Laurie Wolf, who said nonprofits need to be taken seriously when considering the economic impacts of state budget cuts or revenue enhancements.

“We are a big part of (Alaska’s) economy,” Wolf said. “We are the jobs in rural Alaska.”

There are more than 5,000 registered nonprofits in Alaska that account for about $6.5 billion in direct expenditures to the state’s economy, according to an Institute for Social and Economic Research study commissioned by the Foraker Group. Of that, $4.4 billion is from traditional, 501(c)(3) charitable organizations.

The sector also generates 63,000 jobs in the state, which collectively pay $2.5 billion in annual wages.

By comparison, Alaska’s commercial fishing industry supports 78,000 jobs paying out about $1.6 billion in wages, Wolf noted.

“We are driving this conversation both in terms of expenditures but also in terms of employees,” she said.

Direct nonprofit employment accounts for 39,000 positions, about 12 percent of the state’s workforce. Nationwide, nonprofits are about 10 percent of the workforce, the ISER study states.

Despite nearly half of all the nonprofit jobs being in Anchorage, more than a third of all employment opportunities in the Interior, Western and parts of Southeast Alaska are with nonprofits. More than 20 percent of the permanent jobs on the North Slope and in the Northwest Arctic Borough are nonprofit positions, according to the study.

The rural nonprofits often provide health care and other essential functions including utility services, Wolf said.

While Alaska’s overall workforce grew 5.2 percent from 2007 to 2013, the state’s nonprofit jobs increased 22 percent.

Wolf said the sector felt the impact of budget negotiations simply being prolonged last spring. Because the Legislature finalized the operating budget in early June as opposed to the typical late April the state was late in letting usual contracts, forcing many nonprofits to dip into savings in the interim.

Declining government funding is not something new to Alaska’s nonprofits.

From 2009-2013, overall federal funding fell 40 percent, from $8.4 billion to $5 billion. The grant part of that was reduced by more than half, from $3.3 billion to $1.5 billion, according to the Foraker Group.

Still, Alaska’s nonprofits fare better than the national average in terms of grant funding. While it has declined from 60 percent of the sector’s revenue portfolio in 2007 to about 40 percent today, both figures are above the 32 percent national average.

Earned revenue is up to half of what Alaska nonprofits take in, which is “leaps and bounds better” than the 30 percent it was less than 10 years ago, Wolf said.

The entire sector is figuring out how to diversify funding through monetizing intellectual capital and finding new customers among other ways, she said.

If government funding, particularly on the state side, is going to keep sliding, it will be essential for nonprofit leaders to continue to partner with state and local governments, something Wolf said Alaska already does better than most states.

She also noted the sector’s ability to maximize government funding.

“A cut of a dollar in one place is not the same dollar in another place because we as nonprofits, we are leveraging other dollars. Every dollar they cut from us — there’s a multiplier effect,” Wolf said.

Private contributions have held steady, averaging 9 percent of Alaska nonprofits’ revenue over the study years. Walsh said she doesn’t believe donations will fade if the state economy suffers. Rather, she said other states have seen donations increase.

Corporate donations from the oil industry have understandably slipped some, she said, but smaller industries have stepped up giving in the months since the state’s economic situation has become tenuous.

“I think Alaskans understand nonprofits are a valuable investment,” Wolf said.

Foraker Public Policy Director Mike Walsh encouraged the assembled nonprofit staff and executives not just to advocate but also to lobby — within the law.

“As we take our (budget) conversations to the next level it really is going to include the people who make the laws,” Walsh said. “As a sector we have standing in this conversation.”

The Internal Revenue Service allows nonprofits to use an “insignificant amount” of their budgets for lobbying, up to 5 percent to 7 percent, according to Walsh. State law permits individuals to lobby up to 10 hours per month before registering as a lobbyist.

First Alaskans Institute CEO Liz Medicine Crow said including nonprofits in state budget considerations is a “value proposition about inclusivity and equity.”

Alaskans in need of support from nonprofits have been kept out of funding discussions because of the structure of the political system, she said.

Investing in the state’s nonprofits is “a long-term investment in the social, cultural progress of the state of Alaska,” Medicine Crow said. “The vision that needs to drive the conversation at the state level around how to deal with the budget has to be created because there’s not one right now.”

Elwood Brehmer can be reached at [email protected].

11/24/2016 - 3:09pm