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AZ Giving and Leading
Original Airdate: 2012-06-15

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TED SIMONS: Coming up next on this special edition of Arizona Horizon, hope and concern for Arizona’s 21,000 nonprofits as they meet the challenges of the economic recession. Find out how Arizona food banks are responding to the growing number of people who need their services. And we’ll hear how non-profits are becoming more entrepreneurial to achieve their social goals. It’s all next on this special giving and leading edition of Arizona Horizon.

TED SIMONS: Good evening and welcome to this special giving and leading edition of Arizona Horizon, I’m Ted Simons. Arizona is home to about 21,000 non-profit organizations that employ more than 150,000 people. That’s according to the Alliance of Arizona Nonprofits, which notes that these groups provide critical services, improve quality of life. Some even save lives by conducting cutting-edge medical research. But the economic recession has made it difficult for all types of nonprofits to do their jobs. A new statewide report entitled Borderline: Hope and Concern for Arizona Nonprofits took a look at the state of non-profits in Arizona. To learn more about the study, I spoke with Patrick McWhortor, president and CEO of the Alliance of Arizona Nonprofits.

PATRICK MCWHORTOR: Glad to be here, Ted.

TED SIMONS: What, 21,000 nonprofits, 150,000 folks employed, and I'm guessing hundreds of thousands of volunteers?

PATRICK MCWHORTOR: Absolutely. More than half of Arizonans are involved in nonprofits and volunteering. So these are organizations that are a part of all of our lives.

TED SIMONS: Indeed. And this survey, 170 some odd nonprofits surveyed here. Who got the questionnaire?

PATRICK MCWHORTOR: We sent it to nonprofits all over the state. We're a membership organization; at the Alliance of Arizona Non-profits, we have about 600 members, which is pretty reflective and representative of the whole sector. We always make sure that we reach out to get all parts of the sector involved in the survey so, we believe that the results are reflective of the nonprofits as a whole statewide.

TED SIMONS: I understand churches were kind of underrepresented. What was that about?

PATRICK MCWHORTOR: Well we don’t have a lot of churches in our membership; they tend to have their own networks and umbrella organizations. So we have some churches, but they are about 10% of the sector and a very small part of our survey.

TED SIMONS: So what was asked in the survey? And what did you find regarding the impact of the recession on nonprofits?

PATRICK MCWHORTOR: Well, we have been surveying nonprofits for about four years now on the impact of the recession on revenues, the services provided by organizations and ultimately on the operations and staffing of these organizations. So we have followed the trends over four years. In 2011, the trends pretty much continued that the demand for services is up, and yet, revenues are down. So organizations are doing more with less each year. The good news is some of those trends moderated in 2011. Revenues were down for nearly half the organizations but not as much as we've seen in the past three years.

TED SIMONS: Let's talk about some of the revenues here. As far as fewer than half of nonprofits reporting revenue loss, as you mentioned, it sounds like about half of donations expect, though, to increase. That's somewhat optimistic.

PATRICK MCWHORTOR: Well the good news is individuals continue to donate to nonprofits, many times the volunteers we talked about a moment ago. Remember: that is the smallest source of income from the community at large. The largest source of income for nonprofits is earned income, that’s fees for services. If you go to the museum and you pay an entrance fee, that's called earned income. The second largest source for nonprofits as whole is government contracts and grants; those have been really battered during the recession and continue to look pretty grim in the future. Really, donations are strong, but that's the smallest of the three major sources of income for nonprofits.

TED SIMONS: Major funding is still a concern. Sounds as like 31%, a third of the folks you talked to, expect those government sources to continue to decline.

PATRICK MCWHORTOR: Absolutely. For some parts of the sector, that's particularly severe. Human services organizations get about 60% of their income government contracts and grants. State and local funding has been dropping for the last three years. At the federal level, they sometimes fill that gap, but now we're seeing the federal budget put a strain on those resources. The outlook for government resources is still quite grim.

TED SIMONS: As far as which sectors are hit harder than others, looks like arts and culture they’re hit especially hard.

PATRICK MCWHORTOR: Arts and culture were a surprise this year. They expected they were going to see some improvement. The economy is starting to show signs of improvement. They are especially dependent on disposable income that--again, I mentioned the museum or the symphony. A lot of arts programs are dependent upon individual donations. So when people are donating, making those contributions, that's when they have disposable income. So they thought, “Well the economy’s coming back; things should be better.” In fact, especially for earned income, they saw declines as high as 25% in 2011. They were surprised by that.

TED SIMONS: Surprised by that? Any reason? Any idea as to why?

PATRICK MCWHORTOR: People are still pretty conservative with their dollars in these tight times; families are still struggling. Even wealthier individuals maybe are not -- they are putting their money away into savings instead of using it to partake of the arts. We are concerned that that trend -- we don't want to see that continue because arts organizations are especially dependent upon that earned income and those donations.

TED SIMONS: It sounds as though strains on the nonprofit workforce seem to be easing a bit. Is that what you got from the study, as well?

PATRICK MCWHORTOR: Yes, the fact is the way nonprofits have done more with less for the last four years has put a lot of stress on their staff. They have cut positions, or they’ve cut hours. They have certainly frozen or cut pay and benefits. And that has required people to do multiple jobs. People leave positions vacant. If somebody leaves, somebody is doing two or three jobs. We are seeing a little less of that, but we asked this year if organizations are replacing positions that they cut during the recession, and a very small percentage say they are replacing these positions. And yet, demand continues to rise.

TED SIMONS: I want to get to demand in a second, but what about services suffering because of the lack of stable employment and restoring some of those jobs that were lost.

PATRICK MCWHORTOR: The good news that is that nonprofits have not laid off people to the extent in the for-profit sector that we've seen that trend nationally as well. Now some of non-profits in our sector tell us that they had lean staff to begin with: “We didn't have anybody to lay off.” We are hopeful that we’ll be able to see those positions start to come back to meet this continuing growing demand.

TED SIMONS: And we’ve talked about demand a couple of times here. The demand just keeps on growing, doesn't it?

PATRICK MCWHORTOR: Remember: nonprofits are on the front lines of dealing with this recession. Many, many families in Arizona are still suffering the effects of the recession. You have organizations helping with foreclosure assistance, financial literacy, obviously homeless shelters, victims of domestic violence, and on and on. These are issues that are getting worse not better, yet these organizations are out there trying to meet those needs with fewer resources.

TED SIMONS: I was going to say it’s very different from the private sector, isn’t it? I mean the nonprofits look at a recession and all of a sudden demand, increases. Private sector, just the opposite.

PATRICK MCWHORTOR: Exactly. There is a link between the private sector and the nonprofit sector because we also are partners with them; we need their support. Their employees are expecting there be community reserves for them. We need to be partners with the business community, but they have to realize that we really struggle when we don't have the resources to be able to continue providing services.

TED SIMONS: And yet, 90% of nonprofits expect to meet demand this year.

PATRICK MCWHORTOR: Yes that's the amazing thing: it is an incredibly resilient sector. Sometimes maybe to our own peril people say, “Gee, you keep doing this year after year. I guess you don't need more donations.” That's not really true. The staff are especially strained. We have a small joke which is if jobs start to picking up in the private sector again, that'll be bad news because their staff will flock to the better jobs. So maybe it’s good the economy isn’t picking up. Of course that's not really true, we want to see the economy improve.

TED SIMONS: It sounds like the underlying aspect of the whole report is fiscal stability in one way shape or form. Lots of deficits out there, lots of folks tapping into reserves. What’s the overall picture there?

PATRICK MCWHORTOR: We are very concerned that organizations have been tapping what are already fairly meager reserves. Over half of organizations have fewer than four months of operating reserves on hand. That is how they’re covering these deficits--how they are able to do more with less. That is not sustainable. We're seeing some indication that organizations are going to merge and consolidate or find other ways of working in partnership with other nonprofits--other entities in the community. That's probably the trend for the future. We've been a little surprised we haven't seen more examples of that. We have examples of mergers but not as many as we might have expected. But it’s very complex and time consuming to do these mergers. We think we may see more in the future.

TED SIMONS: The survey says half of nonprofits are committing resources to advocacy. What does that mean, and is there kind of a balancing act that needs to be done when you talk about nonprofits and advocating things?

PATRICK MCWHORTOR: Well advocacy is broadly reaching out into the community, telling your story, talking about your mission, how you make a difference in the community. It also includes public policy advocacy: so, going to the legislature or the City Council or federal government and trying to get help on your issues there. There are some rules, of course, that nonprofits have to follow with the IRS around that. But there's a lot of room to see otherwise to do a lot of advocacy as a nonprofit.

TED SIMONS: Sounds like just raising the profile of nonprofits is the major goal.

PATRICK MCWHORTOR: That is the most critical issue going forward. We also saw in our survey that 70-some% of organizations are increasing their marketing outreach efforts and their fundraising efforts, trying to get more people in the community to understand how they are meeting these vital community needs. And they need the community's support in order to continue that.

TED SIMONS: Last question: Cautious optimism from this report?

PATRICK MCWHORTOR: Very cautious. We’re still concerned about other shoes yet to drop. We mentioned arts and culture. We're very concerned about the health sector going forward the AHCCCS cuts at the state level: they could lead to the most significant layoffs we have yet to see in the recession. These are still very dangerous times for nonprofits in Arizona.

TED SIMONS: It’s good to have you here. Thanks for the information; we appreciate it.

PATRICK MCWHORTOR: Glad to be here. Thank you.

TED SIMONS: How are Arizona food banks responding to the challenges of ending hunger in difficult economic times? I'll talk to two food bank leaders, but first David Majure takes a look at an East Valley food bank that's been serving those in need for 30 years.

DAVID MAJURE: Four days a week, the Apache Junction Food Bank distributes mountains of food to people in need. Early in the afternoon, volunteers are busy sorting and bagging groceries while dozens of clients line up outside.

NICK KUZMICH: We service families that are low-income. They are able to come in here every 30 days to get food.

GREG STANTON: It's been exactly 30 days since Dale's last visit. The disabled veteran says his SSI and VA benefits don't quite cover the extra mouths he now must feed.

DALE: My daughter got left by her boyfriend – husband, and she moved back in. And we are taking care of her financially. And her baby.

NICOLE: I’m not getting food stamps right now. I have been trying to for the past three months, and I got four kids. So that's why I'm here today. We have nothing to eat.

MICHAEL: I work at the 99-Cent Store down the road from my house, and I am working for minimum wage right now. And it's too small of a check to really support me and pay the rent and the bills and food and all that stuff.

BETTY BOWES: At least two loaves and a roll.

DAVID MAJURE: Volunteers like Betty Bowes make this food bank work.

BETTY BOWES: These people are hurting. They don't have jobs. They don’t have homes. They are in financial situations that are depriving them of a basic life necessity: food. So if we can do anything to help ease that pain, then, that's a good thing for everybody.

NICK KUZMICH: All our people are all volunteers. Our Operations manager, who is a part-time person, he is the only one that's financially paid. But everybody else is. We have something like over 300 volunteers, names, a year.

BETTY BOWES: Have your picture ID and proof of residence.

DAVID MAJURE: Doors open at 2:00 p.m. Clients are asked for a photo ID and proof that they live in the food bank service area. They have to meet poverty guidelines and provide documentation for any dependents. The amount of food they get is based on size of their family.

NICK KUZMICH: we believe we are the largest in this area, and we give them the most food.

DAVID MAJURE: Board President Nick Kuzmich takes pride in how much food the organization collects for its clients. Some of it comes from the St. Mary's Food Bank Alliance.

NICK KUZMICH: We are an agency under contract with them. We get food from them once a week, and that's based on the number of families we feed in the previous week. If we had no other food, that would be the minimum requirement that we would give out.

KEVIN VOIGHT: This is what we consider the basic minimum for a family of one or two. It's a three to five-day emergency food box.

DAVID MAJURE: But clients leave the Apache Junction Food Bank with carts full of food. Most of it donated by local grocery stores.

KEVIN VOIGHT: If it wasn't for them, 90% of what we have wouldn't be here. I mean all the extra stuff.

DAVID MAJURE: the local community is also very giving.

KEVIN VOIGHT: People donate here. Whether it be money, whether it be food. There's something about Apache Junction area. People donate.

DAVID MAJURE: Food and financial donations slow down in the summer months when snow birds go home and others go on vacation. But the number of people seeking help remains on the rise.

NICK KUZMICH: We have increased our families who come here by 30%. Two years ago we were a little over 17,000. Last year was 22,000-plus.

KEVIN VOIGHT: I noticed last year, probably around July, I noticed that the vehicles were looking nicer and nicer and nicer that the people were showing up. And that kind of scared me. Because it tells me that there's a lot more people hurting than we even thought. And, of course, the numbers went up. And that's why I say we don't really feed the hungry. We feed the financially distressed.

DAVID MAJURE: People like Nicole, who hopes this food will last two weeks.

NICOLE: It’s really important. I'm glad they’re here.

DAVID MAJURE: And Michael, who says this is helping him make ends meet.

MICHAEL: I'm very grateful for this place. I'm very grateful for Apache Junction that has places like this. Just very happy.

TED SIMONS: Here now to talk about the food banks and efforts to end hunger in our state are Ginny Hildebrand, President and CEO of the Association of Arizona Food Banks, and Beverly Damore, Chief Operating Officer for the St. Mary's Food Bank Alliance. She becomes President and CEO of the alliance the 1st of July. Good to have you both here. Thanks for joining us. We appreciate it. We saw how that particular food bank works. In general, people hear food bank, and I think they think they know what it is. What is it?

BEVERLY DAMORE: We are basically a giant gatherer-in of food and distributor-out of it. We are getting a lot of our food through the grocery stores. You saw that in the video. A lot of manufacturers will directly--they will overproduce on purpose in order to give food us to. That's to the tune of 6 million pounds a month, to give you an idea. We distribute it out through other nonprofit agencies. So Apache Junction is a good example. Either smaller food banks or pantries, or it will be a nonprofit that has a need to feed people. Maybe it's a domestic violence shelter or a soup kitchen. If you come to the food bank, it looks a lot like a Costco warehouse. It's a very big very, efficient operation.

TED SIMONS: That's your experience as well?

GINNY HILDEBRAND: Absolutely. St. Mary's is one of the largest food banks in Arizona and in the nation, for that matter. And our food banks, United Food Bank here in Mesa area, Desert Mission Food Bank in North Phoenix, Community Food Bank in Tucson, Community Food Bank in Yuma, they all serve all 15 counties in the state. So they are putting out a lot of food.

TED SIMONS: Are they putting out more food in tough economic times? You would think so, but are you seeing that? Are you hearing that?

GINNY HILDEBRAND: Well, some of the food resources have diminished some. For instance, federal commodities that we receive through the US Department of Agriculture. That has decreased about 30%. But we have seen some increases in other areas that have made up for some of that--not all of it. And so, oftentimes our food banks are having to purchase food to fill in the gaps.

TED SIMONS: I was going to say the price of food, the cost of purchase, federal subsidies. All of these things, how does impact? Give us that dynamic here as far as the food bank is concerned.

BEVERLY DAMORE: Every time do you something from a dollar standpoint, it doesn't have to be the cost of food. The cost of insurance. Any time you are getting at a family's bottom line it's going to stretch their money elsewhere, and the first thing they can give up is food, which means they are going to probably show up at our door. The flip side to that is we also have more money--we have to spend more money in order to supplement the food. So we get it coming and going.

TED SIMONS: So are you seeing more of that? Less of that? Again how has that picture changed here in the past few years?

BEVERLY DAMORE: Much, much, much more. St. Mary’s in particular. We have doubled in terms of the pounds we distributed in the last two years. We have been very quick to say that we can only do that because of donors, people donating food, time, and money to the food bank is absolutely critical to our being able to exist. The thing that is my worst nightmare now is that you start to see a little bit of easing in the economy is that people are going to forget, and we can't let them because the people that we are serving are the ones that need the most help, and it's going to take them the longest to get out of this.

TED SIMONS: Good times and bad times, people donating food, time, and money. What are you seeing--again, it's so difficult to figure out when it's the tough economic situation, do people donate more? Do organizations donate more? Do you see less?

TED SIMONS: What our food banks have seen, Ted, is that we have got more people stepping up. Those who have resources, realize that these basic needs like food are things they want to contribute to. So we have seen some folks, some corporations, some foundations even step up this in the last couple of years to a very, a very difficult situation and giving more than they have ever given before.

TED SIMONS: Interesting. Are you seeing that as well? The private relationship with private industry and such? Has that changed?

BEVERLY DAMORE: Yes, because I think people are more aware of hunger. As you heard in the piece they were worried because they saw nicer and nicer cars starting to arrive. If anything there's an awareness that hunger isn't necessarily the homeless guy on the street but probably your neighbor struggling with. Most of our clients are working; they are just not working enough. So they have either had their hours reduced, or they have been furloughed, and just whatever it is is impacting their ability to make it all way through the month. And that's why we stepping in. We are providing food to just get them to that next paycheck.

TED SIMONS: People watching right now. Is there a misconception? What do you want them to know about food banks?

BEVERLY DAMORE: That we are serving families and that there is -- we have a horrible childhood hunger problem in this state. I don't think people see that a lot because hunger is hidden. We need do a job in getting that out there. Almost 30% of the children in Arizona are living in hunger, and that has enormous impact on their ability to learn, for their families to function, and so what food banks we are trying to do is fill that gap and give those families some hope.

GINNY HILDEBRAND: I think food banks bring hope. When people have food on their tables or a little bit in their cupboard, they are able to be more stable and do a better job.

TED SIMONS: It's good to have you both here. Thank you so much for joining us.

TED SIMONS: With grant money and government funds harder to come by, non-profits are looking for new ways to fund their social causes. In some cases, it means acting a little bit more like entrepreneurs. I recently spoke with Ellis Carter of the Phoenix-based Carter Law Group. She’s a nonprofit attorney with 15 years experience advising nonprofits and socially responsible companies. The idea of nonprofits reinventing themselves, what are we talking about?

ELLIS CARTER: Well, we’re talking about nonprofits acting more like mission-based businesses, going out and looking for more streams of income and thinking of out-of-the-box, innovative ideas to create recurring streams of revenue.

TED SIMONS: The idea is here because the impact of declining resources on nonprofits. It's real, isn't it?

ELLIS CARTER: It absolutely is. We have seen since the beginning of the recession—we’ve seen quite a few non-profits go out of business. Other, luckier nonprofits have been able to merge or collaborate with other organizations to keep their programs going, but these pressures continue to persist.

TED SIMONS: What about taxpayer funds, government grants? Again, that well drying up a little bit?

ELLIS CARTER: You know, that is probably the area where we have seen the most shrinkage--the most cuts with respect to government funded organizations; organizations dependent on government contracts have seen huge cuts to their bottom line, and they see more coming.

TED SIMONS: So, thus, reinvention. Give us an example of how nonprofits are “reinventing themselves” with that kind of climate.

ELLIS CARTER: Yeah, well there is a lot more interest in collaborating with other nonprofits, for profits, government--nonprofits are starting to look at not just how can we increase our bottom line, but who do we need to partner with in the community to make a real impact on the mission that we were created to address? And so, if that means collaborating with other nonprofits to have a more cohesive approach to a problem—with government agencies, even with business, then there -- they're becoming more open and more aware of the need to do that.

TED SIMONS: There are also all sorts of ways for nonprofits to act a little more like for-profits. Give us some models there--examples.

ELLIS CARTER: We’re seeing a lot more of that: I’m getting a lot more calls from nonprofits who are looking for ways to take their assets, whether it be their expertise, intellectual property that they’ve developed, maybe software, tools to help them do their job and actually turn them into for-profit businesses. Some of those for-profits--we call them social enterprises. Sometimes they are work force development programs where they're creating a business in order to help train their clients and help them become more employable. Other times, they are taking a tool or some sort of expertise that they have on their staff, and they are trying to turn that into a business or another service that they're able to provide.

TED SIMONS: Is that viable, though? In an economic climate where everyone is trying to get as much as they can, and the bottom line is really a bigger bottom line, is it viable?

ELLIS CARTER: You know, I think it is. I think nonprofits struggle just as much as any company, and -- as you know, many new companies fail. But what we find is that a lot of people are more interested in working with a company that has a mission basis for it -- not just about making money; it’s also about accomplishing a social purpose.

TED SIMONS: And I know that there are things called hybrid organizations and benefit corporations. Talk about those particular avenues.

ELLIS CARTER: You know, that is really an interesting development. There is an interest around the country among for profits of having a legal forum that permits you to pursue both a mission and making money. So, there are some new legal forms that have developed in other states. The benefit corporation and the flexible purpose corporation in California, something called the low profit limited liability company. And those are all mechanisms for someone who wants to create a for-profit business but has a mission basis as well. A dual-purpose company essentially.

TED SIMONS: That’s it for this special Giving and Leading edition of Arizona Horizon. I’m Ted Simons. Thank you so much for joining us. You have a great evening.

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