Funding, talent — or whether to stay in business at all — top of mind for nonprofit leaders

By Sherri Welch

January 04, 2024 08:01 AM

Funding, talent and mergers — and even dissolutions — are among the issues that are top of mind for Michigan’s nonprofit leaders for the coming year.

Funding and talent issues are nothing new, but those pressures have reached a level that's left some nonprofits talking about winding down their operations, leaders said.

While total charitable giving is flat or increasing slightly with multimillion-dollar donations, giving among middle- and lower-income donors continued to bottom out heading into 2024, leaders said.

That’s an issue especially for the small and community-based nonprofits that make up 93% of the sector and rely on individual giving, said Kelley Kuhn, president and CEO of the Michigan Nonprofit Association.

Medium-sized and larger nonprofits that operate with government contracts to provide services in areas like mental health, among others, are also coming into the new year with added funding uncertainties under the continuing resolution for the federal budget that runs through Feb. 2.

“When there's uncertainty in the state or federal budget … (nonprofits) cannot plan effectively for the year ahead,” Kuhn said, noting the looming elections are adding yet another level of uncertainty around funding and operations.

The drop in mid-sized and small gifts for the past couple of years could also have long-term impacts on nonprofits, something that's a big concern for leaders not only in Michigan but nationally, given that the country is not in recession and giving should not be dropping at the levels it is, said Kyle Caldwell, president of the Council of Michigan Foundations.

“Here's the rub: That (giving) pipeline is going to show up in 10, 15, 20 years when everybody's looking for legacy giving,” he said. “If they don't have their habits of giving early, they cannot form them later, and so there's going to be this drop there that the high end will just not hold for nonprofits.”

The loss of individual gifts will apply more pressure on limited foundation funds to make up for the drops, Caldwell said, and foundation giving cannot grow at the speed to make up for the money thousands of individual givers contribute to nonprofits.

If the nonprofit sector doesn’t build a habit of giving among donors at all levels, it won’t benefit from the wealth transfer that’s underway and projected to continue in the coming years, Caldwell said.

The whole culture of giving is being diminished, he said, with the lack of in-school education on giving back and the losses of federal tax deductions for charitable giving and Michigan’s charitable tax credits.

“Those incentives all used to exist where people had some pretty regular habits and nonprofits marketed … (but) all of that has been largely diminished,” he said.

“We've got to put incentives back in to help people think about giving short and long term.”

Kuhn and Caldwell said their organizations will push hard this year for the restoration of the Michigan Charitable Tax Credits. And CMF will actively advocate for restoration of federal tax incentives, as well, taking one of the largest delegations of nonprofit leaders to Washington, D.C., in late February to meet with legislators and advocate for that and other support for the sector.

At the same time, CMF and its foundation members are expanding efforts to help shape American Rescue Plan Act dollars in communities for the greatest long-term impact aimed at solving chronic issues for residents. Over the past two years, foundations have provided funding to community foundations around the state to help grassroots groups gain a voice in investment decisions.

CMF is working with the Michigan Department of Natural Resources to administer $25 million in ARPA funds, directing them to local units of government in marginalized communities that have not seen state funding to support parks and recreation programs and projects, Caldwell said.

Parks and recreation investments have been a big place-based strategy among Southeast Michigan-based foundations investing in the Detroit riverfront, the Joe Louis Greenway and other projects, he said.

“All of those projects are, have great momentum, but there are still smaller communities…that still just have not been able to access those dollars. This project is designed to help them draw down some of those state dollars to build parks and rec that hopefully is part of a larger strategy for the region,” Caldwell said.

In Southeast Michigan, CMF is talking with cities including Inkster, Pontiac and Saginaw. Statewide, it’s in conversations with local governments in Benton Harbor-St. Joseph, Gaylord and areas in the middle of the state, as well as the Upper Peninsula, he said.

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