Impact of the Economic Crisis on Nonprofits

The Economic Bailout aka The Economic Revitalization Act passed by a vote of 74 to 25 in the Senate last night.  Now, we'll just have to wait and see if partisan politics and crushed egos get in the way of the House passing the legislation on Friday.......Tune in.

There has been a lot of focus on the impact of the economic crisis on Main Street USA over the past couple of weeks.  Stories of families struggling to pay for rising fuel costs and groceries. Small businesses unable to access credit to keep their operations flowing.  Families unable to obtain credit to purchase a car.  These examples are ubiquitous throughout the mainstream media.  The media has also given a lot of attention to corporate America and the impact the crisis is having on this sector.  But, what about the nonprofit sector?

Essentially, the role of government is to redistribute the public wealth back to the people through programs like Medicaid and services like Temporary Assistance for Needy Families (TANF).  However, with over 700 billion dollars of the "public wealth" going to the sheepily clad Economic Revitalization Act, common sense will tell you that there will be far less resources to support public programs that address some of the most dire needs in our communities.  It is the nonprofit, community-based organization that relies heavily on government funding to provide the much needed services.  Then there is the war in Iraq.......I better not even touch this one.

The crisis also heavily impacts private philanthropy.  Most of America's large foundations, like WK Kellogg operate and distribute wealth through endowments.  These endowments are tied to the stock market.  The interest income on these large endowments fund programs around the globe ranging from anti-poverty programs to AIDS reduction to youth development. Obviously, if the market is in a recession, the interest income from these endowments sharply declines.  This basically means that there will be fewer resources to support the after school program your child attends.  Fewer resources to support the food banks and homeless shelters and fewer resources to support the public health institutions where the poorest, most disadvantaged in our communities receive health care.   

So, when you think of who this plan REALLY impacts, it is those who are living at or below the poverty line.