Layoffs plague nonprofits — some more troubled than others

In the beginning, there were nonprofit agencies — about 15,000 in the five-county region.

Then COVID-19 divided them into essential and nonessential organizations.  On the necessary side, are the nonprofits that provide the basics that millions of Americans depend upon to survive. On the wrong side of the coronavirus tracks is the arts and cultural organizations whose offerings are deemed wonderful but dispensable in this time of pandemic.

And that inequality has begat escalating unemployment.

Russell Johnson, president and CEO of HealthSpark Foundation, said that it’s too early to tell the impact statistically but anecdotally there have been many layoffs. “We are carefully monitoring this question.  Some agencies have laid-off staff. Some were forced to close such as child care centers, senior centers, YMCAs and have either not yet reopened or are slowing reopening.”

HealthSpark was a founding partner and investor in the MontCoPA COVID-19 Response Fund, a partnership effort between local philanthropic organizations, nonprofits, government, and public citizens, which has raised nearly $800,000 towards pandemic relief efforts and has supported 127 nonprofits to date — most of them health and human service agencies.

"Nearly all organizations that are not providing safety net services are laying off their staff especially as their PPP (Payroll Protection Program) runs out."

“Nearly all organizations that are not providing safety net services are laying off their staff especially as their PPP (Payroll Protection Program) runs out and no further allocation is on the horizon, “ said Nancy Burd of The Burd Group, a Philadelphia-based strategic planning consultancy for grantmakers.

According to a recent study, there were 242,000 nonprofit employees earning more than $11 billion in annual wages in the five-county Philadelphia region.

In May, the results of the  Rapid Response: the PHL Nonprofits and COVID-19 Survey, showed that about one out of every five nonprofits in the 10-county region had already laid off staff and one in four anticipated more furloughs to come within the year. Most of these nonprofits were small agencies with a staff of less than 20 people, a large volunteer force and annual budgets between $1 million to $2.49 million.

“The nonprofit sector is one-fourth of the economy of Montgomery County,” said Johnson, “(This survey) gives you a sense of what the nonprofit sector is going through.”

For workers, the pandemic ‘s longevity is turning temporary furloughs into permanent unemployment.  “For the nonprofits that are hibernating programs versus shutting down completely, (they) are trying to keep some programming alive virtually and would hope to re-open in 2021. At that time they would staff up as programs come back. Maybe the staff will be different, but that is the current strategy for many organizations,” added Burd.

In our area, one of the first to announce furloughs was the Greater Philadelphia YMCA of Conshohocken, state’s largest coronavirus-related layoff. “We had to make this really tough choice,” CEO and President Shaun Elliott told the Philadelphia Inquirer, “so that we could survive as an organization to reopen when it’s possible.”

A $100 million organization, the Greater Philadelphia YMCA was taking in only $500,000 a month on expenses of $45 million after the state shuttered the agency.

The YMCA laid off 4,000 people, about 700 of them fulltime employees, leaving a skeletal staff of about 60 people.  Elliott stopped collecting a paycheck and the pay of remaining staff was reduced.

On the stronger side of the corona divide are the health and human service agencies.

“Here in Philadelphia, and elsewhere, nonprofits providing important safety net services are responding to greater demand and resources appear to be plentiful at all levels – philanthropy, government and individuals,” Burd said. “The Covid 19 Fund run by the Philadelphia Foundation has raised $17 million+ and has distributed most all of it, but only to the social safety net nonprofits.”

However, the cultural and arts sector, which was a $4 billion economic driver in Philadelphia alone, is faring much worse. “Donors, who may be historically committed to the arts or their colleges are diverting their philanthropic dollars to those in need, that is their first impulse,“ Burd explained.

The irony is many nonprofits were traveling the right fiscal path and had diversified their revenue streams to decrease dependency on grants and government contracts. It was, in the time before COVID-19, sound business practice.

“The great recession of 2008 was the wake-up call.  We had encouraged the sector to increase earned income, to become less dependent upon contributed income — which has too many strings attached and little control. And those that intentionally recalibrated their business model, were among the healthiest orgs. They became adept at maximizing earned income by monetizing their assets and using them aggressively — all to promote financial health and growth and prepare for crisis,” Burd said.

Then she added: “But today, these are precisely the organizations who have been hurt the most in this pandemic.”

“After careful reflection, we have determined that reopening Please Touch Museum at this time presents a significant public health risk as well as a financial one.” With that, The Please Touch Museum announced it was extending its temporary closure into 2021. After three rounds of layoffs in six months, the staff dropped from 71 employees to 18. Patricia D. Wellenbach, president and CEO of Please Touch Museum called the decision, “agonizing.”

(Photo by P. Meyer for Visit Philadelphia)

Before COVID-19 the museum had an operating budget of $700,000 per month, almost 90% of it was funded from earned revenue including ticket sales and facilities rentals. With the shutdown of the state and schools, its operating budget had slid to $200,000 per month.

The Kimmel Center too earned 93% of its income and had reduced its dependency on philanthropy. But that was before large public gatherings were forbidden. With no audience for its money-making shows and concerts, Kimmel Center President and CEO Anne C. Ewers announced it was furloughing 80% of its staff and cutting pay and hours for the others.

“In general, nonprofits are waiting for state and federal budgets (to provide funding),” Johnson said.  In June, Moody’s Analytics announced that based on their calculations, states collectively would need to find $312 billion while the local governments would need uncover close to $200 billion to balance their budgets.

“We are forever changed,” Johnson. “We will never go back to the way things were.”