David Hoppe

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:: Nonprofits under stress

The cost of income inequality

by David Hoppe

Most of us know something’s wrong with our economy. If you’re a CEO, things are ducky. But the rest of us are barely keeping up with the cost of living. We depend on two-income households and credit to get by. I just passed a bank advertising vacation loans.

So it comes as no surprise that politicians who base their careers on promising tax cuts have generally gotten our votes. Owing less makes us feel like we’re doing better.

For a little while, at least.

Americans have a built-in reluctance to talk about income inequality. Maybe that’s because we believe so fervently in fair play — that if you do your best and stick to the rules, things will work out. The idea that the game could be rigged against us hurts more than we want to admit.

But like everything else, income inequality comes with a cost. And that cost keeps getting higher.

One place where this cost gets calculated is our country’s nonprofit sector. Nonprofit organizations help to weave what’s called our social fabric. Nonprofits use funding from grants and donations to try and fill gaps the government can’t or won’t. As government services are cut back (those tax cuts), more and more people rely on nonprofits for food, shelter, education and healthcare services. The cultural institutions that provide our communities with living links to their histories and arts are also nonprofit.

And guess what? As the gap between the One Percent and the rest of us gets wider, the demand for nonprofit services grows more intense.

Every year, an organization called the Nonprofit Finance Fund, supported by the Bank of America Charitable Foundation and the Ford Foundation, takes the temperature of our nonprofit sector with a survey polling the leaders of more than 5,000 nonprofits nationwide. The 2014 State of the Nonprofit Sector Survey was released in April.

For the sixth year in a row, 80 percent of respondents reported an increase in demand for services. Over half of respondents, 56 percent, said they were unable to meet demand in 2013 — the highest reported in the survey’s history. More than half of nonprofits (55 percent) have three months or less cash on hand. And 28 percent ended their 2013 fiscal year with a deficit.

“The struggles nonprofits face are not the short-term result of an economic cycle,” according to Antony Bugg-Levine, the Nonprofit Finance Fund’s CEO, “they are the results of fundamental flaws in the way we finance social good.”

The survey indicated that nonprofits are doing a variety of things to stay afloat, from changing the ways they raise and spend money to collaborating with other organizations and creating better metrics to assess program impact.

But the larger message of this survey is chilling. As the gap between the rich and everyone else widens, the cost of what used to be called a middle-class life gets higher, putting people deeper in debt and making them more vulnerable to life-changing catastrophes.

These people aren’t the so-called “takers” some politicians would like to blame. They’re our neighbors, our friends, people you pass everyday in the street.