Minnesota nonprofits lost about $1 billion in April because of COVID-19

Minnesota nonprofits lost an estimated $1 billion in revenue in April because the COVID-19 pandemic forced the cancellation of fundraising events and reductions or closures of other revenue-generating programs.

The Minnesota Council of Nonprofits has released the results of a survey of the state's nonprofits, part of a national survey conducted in partnership with the Federal Reserve Bank on how the coronavirus outbreak and economic downturn are affecting the sector.

Arts and health nonprofits took the biggest hits, but the entire sector is facing a financial crisis, with nearly all nonprofits facing some level of disruption.

"It's going to be substantial impact for an unknown period of time," said Jon Pratt, executive director of the statewide council. "We're going to have to do things differently because the needs will have shifted dramatically, but also the resource base."

Minnesota has more than 9,000 nonprofits, with a record 385,000 workers who make up 13.3% of the state's workforce. In late March, Gov. Tim Walz ordered nonessential businesses to close and residents to stay home in an effort to stem the coronavirus contagion.

Many nonprofits don't have much of a financial cushion and have seen critical revenue evaporate — from program fees to charitable giving. Of 528 nonprofits that responded to the survey, nearly half have three months of cash or less on hand, expecting to be in financial distress within a matter of months.

As a result, some nonprofits may not survive the crisis. Others will shrink in size or change how they deliver their services, Pratt said.

To compensate for lost revenue, nearly half the nonprofits either decreased staffing or expect to do so. As of early April, the most recent data available, nonprofits accounted for 6% of unemployment claims in Minnesota. Some nonprofits, such as the Minnesota Children's Museum, Science Museum of Minnesota and Minnesota Historical Society, have issued furloughs or temporary layoffs.

According to the statewide survey, released Friday, about 40% of nonprofits expect to see, or have seen a drop in fees as programs remain closed. About 20% are seeing or expecting to see a drop in government contracts, which many health and human services organizations rely on. And arts organizations, which depend on ticket sales for, on average, half their revenue, now face canceled events.

Half of nonprofits surveyed said they have also lost or expect to lose some donations.

"There's catastrophic revenue loss," Kari Aanestad, director of advancement for the Minnesota Council of Nonprofits.

Individual giving has ticked upward as result of the pandemic, but it's unclear if it will last. Susie Brown, president of the Minnesota Council on Foundations, said she expects foundations to continue giving grants. "Foundations are looking to increase giving right now," Brown said.

Foundations across the state have launched new COVID-19 emergency funds and many have backed a Minnesota Disaster Recovery Fund, about $6 million of which already has been handed out to nonprofits, community organizations and tribes.

It's unclear how many Minnesota nonprofits benefited from the federal Paycheck Protection Program, but another study conducted by the Minnesota Council of Nonprofits this month will seek to answer that question and assess the sector's health.

One silver lining of the crisis: It's prompting nonprofits to develop new skills, to collaborate in new ways, and to diversify revenue sources. One organization that had studied telehealth delivery for four years figured out how to launch a program in just four days because of the crisis, Pratt said.

Kelly Smith • 612-673-4141