2009: Preview of the Year Ahead | PND

Posted on December 30, 2008

2009: Preview of the Year Ahead

PND -- 2009: Preview of the Year Ahead

Just as 2008 was dominated by two stories — the financial/economic crisis and the historic candidacy and election of Barack Obama — the year ahead is likely to present the nonprofit sector with new challenges, opportunities, and surprises.

Nonprofits and foundations will not be immune from continued turmoil in the markets and the broader economy. Most foundations saw the value of their endowments fall by 20 percent or more in 2008, and while a dozen major foundations have publicly announced that they intend to fulfill their commitments and maintain their grantmaking at 2008 levels through the end of 2009, all bets are off for 2010 — especially if markets continue to sink.

Contributing to the gloom among foundations and individual investors, especially those with ties to the Jewish community, was the sudden collapse of Bernard L. Madoff's alleged multibillion-dollar Ponzi scheme in early December. Although it will be years before the full extent of the damage caused by Madoff's fraud is known, at least four private foundations — including the Picower and JEHT foundations — will close their doors in the coming weeks as a result of the scandal; don't be surprised to see more private equity and hedge funds blow up in 2009, with small to medium-size foundations and their grantees counted among the collateral damage.

Indeed, talk of bankruptcies and mergers may become quite common in the nonprofit sector in 2009; when and how much the sector shrinks, through failure and/or consolidation, remains to be seen. But the pressure on the sector to become more efficient and effective — to do more with less — will intensify, for at least two reasons: growing demand, in a slowing economy, for the services that nonprofits provide; and declining tax revenues at every level of government. Simply put: The public sector is broke, and, in its search for more revenue, government at the municipal, state, and national levels will be tempted to squeeze what it can from tax-exempt organizations.

To see the writing on the wall, look no further than Boston, where Mayor Thomas M. Menino created a task force in the fall to investigate ways of increasing payments in lieu of taxes (PILOT) fees from tax-exempt institutions in the city; Pennsylvania, where a group of state senators has been examining ACT 55, which governs how the state's nonprofits are defined and exempted from property and other taxes; and Congress, where Sen. Charles Grassley (R-IA), the ranking Republican on the Senate Finance Committee, is considering whether to propose legislation in the new year that would require nonprofit hospitals to spend a minimum percentage of their revenues on so-called charity care for the poor.

Diversity will be another key challenge for the sector, as state legislators, taking a cue from their counterparts in California, consider whether private foundations and other tax-exempt institutions should do more to diversify the composition of their boards and staff. With baby boomers, many of them in executive and senior management positions, leaving the sector for retirement, few would argue that the time to recruit and develop a new generation of leaders, both from within and outside the sector, has arrived. How that happens — and the appropriate role of government in ensuring it happens — will be one of the interesting stories of 2009.

The most interesting story of the year, however, may revolve around the as-yet-to-be-determined relationship between the nonprofit sector and the first Democrat in eight years to occupy the White House. Barack Obama made change the theme of his historic 2008 campaign for the presidency. And with Democratic majorities in both the House and Senate, real substantive change is a possibility for the first time in more than thirty years. Indeed, nonprofits are hopeful the incoming administration will reach out to them in ways that few administrations in recent memory have. The question in 2009 will be: Are we ready?

Ford Foundation to Increase Grantmaking in 2009, 2010 (12/16/08)

Foundations Close in Wake of Madoff Investment Scam (12/16/08)

Boston to Consider Expanding PILOT Program (12/11/08)

Despite Economic Downturn, Some Philanthropists Are Giving More (12/03/08)

Generation Y Fuels Surge in Nonprofit Leadership Courses (11/16/08)

Nonprofit Leaders Speculate About Sector's Place in Obama Administration (11/07/08)

Nonprofit Leaders Need to Master Changing Environment, Study Finds (10/14/08)

Turmoil on Wall Street Likely to Exact Toll on Charitable Giving (10/01/08)

Pennsylvania Scrutinizes Nonprofits' Tax-Exempt Status (9/07/08)

Young Nonprofit Leaders Concerned About Pay, Work-Life Balance, Report Finds (3/04/08)