Minnesota nonprofits brace for a worse 2021

Minnesota nonprofits are bracing for 2021, with growing concern that government, foundations and corporations that stepped in to alleviate their plummeting revenue in the pandemic won't sustain that another year.

About 40% of nonprofit employees filed unemployment claims from March to September after furloughs, layoffs or reduced hours, the Minnesota Council of Nonprofits reported this week. State data show the nonprofit workforce shrinking by 10% this year.

Now, with coronavirus cases skyrocketing and the latest restrictions announced Wednesday by Gov. Tim Walz, nonprofits fear a comeback isn't imminent.

"The consistent theme now is concern for 2021 or for 2021 and beyond," said Kari Aanestad, director of advancement at the Minnesota Council of Nonprofits.

Minnesota has about 350,000 nonprofit workers — about 14% of the state's workforce. From March to September, 153,000 employees filed unemployment claims, the largest reduction ever in the nonprofit workforce.

As coronavirus cases and deaths spike, the state's more than 9,000 nonprofits are confronting "epic uncertainty," a continued financial crisis and the state's wide racial inequities, the council wrote in this week's report. Plus, in time for critical holiday and year-end fundraisers, some organizations are facing a volunteer shortage.

Starting Thursday, Second Harvest Heartland, one of seven food banks in Minnesota, is canceling all volunteer shifts through January out of concern for the safety of volunteers as the virus surges. Instead, employees will pack food boxes or it will pay for expensive prepackaged foods. The food bank usually needs about 400 volunteers a week to sort and pack food, but it has seen the number of volunteers dip nearly in half compared with last year.

"We are a volunteer led and fed organization, so this was an extremely difficult but necessary decision for us to make," CEO Allison O'Toole said in a statement.

In the Minnesota Council of Nonprofits' survey of 207 nonprofits in late September, most reported they changed or cut programs, budgets, hours and facilities. Most also increased fundraising and halted hiring or pay raises.

"For the most part, nonprofits have ways of adapting to the current environment," Aanestad said.

Arts organizations, though, have weathered the biggest hits, with 76% saying they've faced significant levels of disruption. Theaters have largely closed, losing out on ticket revenue and events that were main sources of income.

"It was very bleak," said Ann Hermes, executive director of Andria Theatre in Alexandria, Minn., which closed from March to October. "We had zero revenue."

The theater furloughed its five employees and canceled youth theater camps, three shows and an annual fundraiser — a total of $175,000 in lost revenue. But the community rallied and collected $470,000 to keep the theater going through the pandemic and it reopened last month with shows at 25% capacity.

The state Council of Nonprofits surveyed about 1,000 nonprofits in its three surveys in 2020. In April alone, nonprofits said they lost an estimated $1 billion in revenue.

But an increase in grants from foundations and corporations helped bolster support and 5,300 nonprofits — more than half in the state — received forgivable Paycheck Protection Program loans from the federal CARES Act (large nonprofits, many that help the homeless and people with disabilities, were disqualified because they had more than 500 employees).

"That temporary shot in the arm [helped]," said Jon Pratt, executive director of the state Council of Nonprofits.

In the meantime, he said, nonprofits could benefit from more state and federal aid and foundations could ramp up grants beyond the typical distribution of 5% of their money.

"They shouldn't be stuck in just the 5% formula because you want to make adjustments based on the times you're in," Pratt said. "This is one of the biggest public health crises in 100 years, one of the biggest economic shocks."

Allison Swanson, 33, of South St. Paul, was furloughed in May and then laid off in July from her job of five years with the Minnesota Historical Society, staffing the front desk and leading tours at the James J. Hill House in St. Paul. Four months later, Swanson is still looking for a job.

"My house has never been cleaner," she joked. "Some museums are hiring now, so that's encouraging. I'm cautiously optimistic."

The Historical Society has laid off more than one-third of its staff and only fully opened three of its 26 historic sites statewide, keeping the James J. Hill and other popular sites closed. Swanson said many of her colleagues who lost jobs are vying for the same few openings, have landed jobs in the for-profit sector or returned to school. But as coronavirus cases rise, she worries that she could land a job only to be laid off again as restrictions return.

Unemployment claims peaked in April with more than 63,000 nonprofit employees requesting aid, 19% of all claims. Since then, the number of nonprofit unemployment claims dipped but is still seven times higher than before COVID-19. In September, about 4,000 nonprofit workers filed, 8.5% of total claims, compared with 579 in February.

The data includes large universities and health care companies, and may also include duplicates if people filed for unemployment more than once. Pratt said it's too early to know how many employees returned to work full time, but that job postings have bounced back close to March levels.

According to the council's surveys, 16 nonprofits closed permanently since April.

Minnesota's nonprofit sector has steadily grown over the years, reaching 391,000 workers in 2019, surpassing the government sector for the first time. But Pratt said government employees have had the least unemployment claims of any sector during the pandemic and nonprofits are being hit harder now than after the Great Recession in 2008, when the number of nonprofit jobs actually grew nationally and in Minnesota.

"I think the big question hanging out there is what does the recovery look like?" Pratt said. "When does the arts community get back to their previous level of activity? Not until people can safely go to large public gatherings."

Kelly Smith • 612-673-4141