What Will be the Impact of the "Non-Profit Bubble"?

"From the arts to education, soup kitchens to housing organizations, nonprofits perform an array of functions that shape the texture of daily life in communities across the country, often by helping people whose situations were precarious even before the economy crashed. Now, with foundations watching their endowments shrivel, many individual donors maxed out and states across the country staring at massive budget deficits, nonprofits are scaling back their services at the very moment when the need for them is escalating.

Community Service Society (CSS) of New York, [is] a 160-year-old advocacy and direct service organization for low-income residents. Its president, David Jones, describes the forces that are making the work of charitable groups like his seem like an increasingly Sisyphean task: on the one hand, cash-strapped cities and states slashing programs; on the other, private foundations reducing outlays by as much or more. Jones's colleague Frank Kortright works with a network of nonprofits that help tenants in New York City avoid eviction. The network has been fielding more and more calls lately from high-income residents it rarely heard from in the past. Yet CSS recently had its city funding sliced in half.

Some of the losses that soup kitchens, homeless shelters and job training centers are experiencing may soon be offset as money from the stimulus bill trickles down from Washington to agencies that contract with state and local government, says Lester Salamon, director of the Center for Civil Society Studies at Johns Hopkins University. But the relief won't spread to everyone: cultural institutions such as museums and orchestras rely mainly on charitable donations and the sale of tickets and subscriptions. Many are canceling exhibits and shows. The situation is similarly dire for advocacy organizations that don't take government money and are now competing for a limited--in some cases, nonexistent--pool of funds."