Are Alaska Nonprofits Ready for the Next Recession?

For the last three years, while the rest of the country was in recession, Alaska maintained some sense of normalcy. When I moved here in the early 1990s, the state had just begun to recover from the recession of the late 80’s. What I heard then and since is that in Alaska, we do OK when the Lower 48 is in recession, but when they recover, it’s our turn. I am not sure if that is a fact or a myth, but many of our leading citizens believe it is so. Who am I to question?

When the market crashed in 2008, the Foraker Group (and others) published a series of articles on how to survive a bad economy. To date we have not been as challenged as nonprofits down south, but the last few years have not been easy, even for us. Alaska’s nonprofits had to adjust to decreased support from foundations and corporations – those donations most affected by a recession. (The ISER study, which we’ve mentioned many times in our newsletters, reports on our over-dependence on those sources of revenue.) Many of us had to tighten our belts, reduce services, or delay projects. We also had to adjust to a decreased level of support from the federal government – especially for capital projects. Funding to the Denali Commission continues to be at risk. Yet compared to Outside, we have done pretty well.

Well, it’s obvious that the rest of the country still has a sluggish economy and some predictions are that even if we don’t have a double dip recession, it may be a few more years before the economy recovers. Could that mean if the past is to repeat itself that we have a few more years before we have to worry about our economy tanking?

After hearing from our U.S. Senators in August, seeing the inability of elected officials in D.C. to compromise, and digesting the data from our last ISER study, I am afraid that this time around, we may not have long before the recession hits us.

I hope that my sense of concern is unwarranted, but I feel compelled to remind the sector’s leaders that we should become even more prudent, more strategic, and more adaptive because the worst could be yet to come.

The delegation delivered that message. They were clear that federal funding will decrease and Alaska may feel a disproportionate impact from those cuts. While they are among the few who seem to be looking for a solution, they tell us that this situation is unprecedented – so their options are limited.

Their concern is not just for the nonprofit sector. During this shift in the political climate, they are monitoring funding for tribal services and doing what they can to protect some of the economic strategies, like 8As and CDQs which were implemented during Senator Steven’s tenure. What happens to the gains made in rural, primarily Native Alaska communities if the rules we fought for change?

In addition, since much of the private sector in Alaska also depends heavily on the government for funding – for example, financing for construction projects – proposed federal cuts could further cripple our economy. Add to that a potential decrease in military spending, and what we may face could be even more drastic than the impacts caused by low oil prices in the 80’s.

Consider, too, what happens if our local legislators don’t adjust for the concerns of the industry that pays for most of our state’s budget? The industry argues that the changes made during the last administration should be re-addressed. They claim the data used to make those decisions seem less valid with today’s realities. I worry that since that same industry provides a disproportionate level of charitable support, our sector may be in for conditions that make the 80’s seem nostalgic if adjustments are not made.

So enough gloom and doom. I’ve delivered this message to over 1,500 Alaskans during the spring and summer. People listen – maybe even understand. (For sure some reporters put words in my mouth!) Now it’s time for all of us to collectively take action.

When Foraker assumed the role as the state’s nonprofit association, we became more focused on public policy. Since our sector receives almost twice the level of financial support from government compared to nonprofits nationwide, and since we live in a state where public policy is so close to home, I don’t think we can remain quiet any longer.

When I expressed our sector’s over-dependence on government funding during my presentations, some people questioned why it should be so high. The wrong answer to such a question could create a lack of understanding about the real issue. That is why we all need to become better informed in order to advocate on behalf of the sector and our organizations.

For instance, the high level of government support in Alaska is due in large part to the nonprofit sector providing services here that the government provides elsewhere. Also, because of the significant portion of our population that is Alaska Native, we receive a large amount of funding through the Bureau of Indian Affairs and Indian Health Services – both federal agencies. When you understand these facts, you can better address some of the concerns expressed by biased and misinformed people. Our sector needs to learn the issues and become competent in stating our case.

For instance, you need to be able to state with conviction why our sector and your specific organization are so important to your constituents and the economy. We have an amazing quality of life in this state. That’s because our sector is committed to serving youth and elders, entertaining and informing, feeding and housing those less fortunate, and protecting the environment – we truly matter. We often provide more for less. And if we are not careful, and if we can’t express our truths, we may be doing much less – very soon.

Foraker provides training on engaging in public policy. Our next class — The Rules of Advocacy — is set for Wed, Oct. 26 and is available via video conference in Anchorage, Fairbanks, and Juneau. And we’ll respond with more classes as demand dictates. Through this article, we want to create a sense of urgency and interest. We would like to schedule multiple classes and have them overflow!

For now, know this. Nonprofits have few limitations on involvement in public process. Charitable nonprofits may be limited in how we engage in lobbying activities, but we do not have to be quiet on issues that influence our ability to accomplish mission.

Armed with the evidence from the ISER study, Foraker spread the word about our sector, our challenges, and our impact on the economy. The message was clear. The research suggests that we are a major force in the economy. We told the groups of community leaders, primarily in Rotary or Chamber meetings, that we are not only a major factor in the economy, but because of our efforts Alaska attracts the kind of for-profit economy the state desires.

Still, we need to remember that the study also had negative findings. We found that we have too many nonprofits to sustain – so we should be very conservative in creating new organizations. The study also provides insight into funding uncertainties in the near future so we must continue our quest for sustainable support. Another certainty is that with a limited workforce in all sectors, we need to become more collaborative to accomplish our missions. The last point, too, is an important one – now is the time to re-think how we do business because the models we have depended on for years no longer work.

These insights should not scare us because all institutions throughout the world will have to adapt to these quickly changing times. We can do what we need to do to thrive if we are strategic and flexible.

Here are some thoughts on what your organization could do to determine meaningful engagement on public policy issues:

  • Take a class at Foraker (or somewhere) on public policy in our sector. Learn the facts about what you can and can’t do based on your tax code.
  • Review your involvement with government. Are you receiving funding from government? Does your mission create opportunities to partner with governmental agencies? Has there ever been legislation that affected your ability to do your business? If you are answering no to all of these questions, reflect a little more because we are all affected by the action, or lack of action, of government.
  • Once you have determined how government could or has influenced your ability to do business, discuss it with your staff and board. Many nonprofits have a public policy committee. Still others have a “decision tree” on how and when to engage in public policy.
  • You may decide to increase advocacy on mission related issues. When we presented the ISER study around the state, a clear decision on the part of the Foraker board was made to advocate on our collective behalf. As nonprofits we are not limited in our ability to advocate – so start now!
  • You may find something that threatens your mission or funding. If so, you need to lobby.
  • Last year The Foraker Group joined the National Council of Nonprofits (NCN), the association of state associations. The main reason we joined was because some of the best nonprofit public policy minds in the nation work there. They are not only looking after issues on the federal level, they have aided many state associations that were confronting assaults on their nonprofit sector.

Around the country states are looking for new revenue. Some have tried to develop creative ways of “taxing” nonprofits. Almost every state that contracts with nonprofits plays games with funding. As bad as some of our nonprofits have it here with that issue, in other states bureaucrats are holding onto payments for nonprofit services and creating major cash flow issues. This problem is epidemic. Those assaults could happen here – we need to prepare.

Now that we are a part of the NCN, you can link to their website from ours. In each of our newsletters we share their insights, predictions, and solutions so you can become better informed on these issues. Now it’s your turn to get engaged.

The point of this article is to encourage all of us to become better at stating our position. Every nonprofit should increase its capacity to make its case – especially to elected officials. While Foraker will do its part to advocate on large, statewide issues, sub-sectors like the arts, mental health services, women’s services, children’s services, senior services, etc. need their own strategies. The Key Campaign, mounted by nonprofits working with development delay or disability clients is legend. It is an example of how a sub-sector worked together to advocate for their priorities. Our vision is that all sub-sectors unite around common concerns.

Meg Wheatley reminded us at our second Foraker Leadership Summit that “the cure for despair is not hope, the cure for despair is discovering what we care about and deciding what we want to do about it.”

We can all do better to express our importance to the well-being of this state – and we must.

Read more, take a class, and discuss this issue at your next staff meeting and your next board meeting. Get involved.

More news from the Foraker Group’s October newsletter is available here.

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Dennis Mcmillian is CEO of The Foraker Group.

Dennis has devoted his professional career to helping nonprofit organizations better meet the needs of their communities. For 21 years he served as a development officer, and then as a CEO with United Way in numerous communities around the country. He came to Alaska in 1992 to lead the United Way of Anchorage. Since moving to Alaska, he has helped build the state’s philanthropic infrastructure through his work with United Ways across the state and through his support in developing the Alaska Community Foundation. He is a strong advocate for Alaska’s nonprofit sector. In 2001, Dennis led the effort to start The Foraker Group with the mission of building sustainability and organizational capacity in Alaska nonprofits. During his career, he’s trained thousands of professionals and volunteers, spoken at numerous conferences and consulted across America, Canada, Asia and Russia.

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