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Nonprofits are 'force to be reckoned with' in Arizona's economy

February 21, 2016 | The Arizona Republic

Arizona's growing nonprofit sector is an important economic driver for the state and "a force to be reckoned with," but it's also an arena dominated by big hospitals, with much less impact from cultural, environmental and smaller traditional charities.

Those are some of the takeaways from a new study that estimates nonprofits contribute at least $22.4 billion to the state's economy, employ more than 324,000 people and generate at least $2.1 billion in annual sales, payroll and property taxes.

If anything, the report understates the economic impact of the nonprofit sector in the state, said lead researcher Anthony Evans of the L. William Seidman Research Institute at Arizona State University, in the W.P. Carey School of Business. That's because only larger non-profits must file Form-990 financial reports with the Internal Revenue Service. The study is based on financial information for the state's largest 3,000 or so entities that file these forms regularly, plus data from around 600 others that provided it voluntarily, Evans said.

Bolstered by large health-care organizations, non-profits have recovered significantly from the recession, the report said. The sector is still characterized by volunteering, philanthropy and passion for key causes but also by efficiency, innovation and modern business practices.

Nonprofits by the numbers

A new study, Arizona Nonprofits: Economic Power, Positive Impact, estimates that nonprofit organizations in Arizona:
— Contribute $22.4 billion to the state's economy.
— Generate $28 billion in annual revenue.
— Account for more than nearly 324,000 325,000 jobs.
— Pay $2.1 billion in taxes annually.
— Hold nearly $49 billion of assets.

Arizona nonprofits derive the bulk of their revenue from government contracts, service fees and the sale of goods or services. By contrast, gifts and charitable donations — traditional funding sources — account for just 27 cents for every dollar generated.

"Gone are the days of viewing non-profits as simple charities operating on shoestring budgets, heavily reliant on volunteers and donations to stay afloat," wrote Steve Seleznow, president and CEO of the Arizona Community Foundation, which helped fund the study.

While many nonprofits clearly continue to struggle, Seleznow said he senses that the sector is becoming more professional, entrepreneurial and resourceful in finding new revenue sources and defraying costs through partnerships.

"They're showing an ability to sustain themselves," he said in an interview. "They have worked through difficult times."

The report didn't try to measure the economic impact from the vast majority of smaller non-profits — churches, animal-rescue groups, tiny museums and various grass-roots charities.

"We have an awful lot of very small non-profits," said Evans. "But many still do very important jobs locally."

Hospital dominance

The report, Arizona Nonprofits: Economic Power, Positive Impact, shows that the state's nonprofits are largely bifurcated depending on whether they're part of the health-care industry or not. Hospitals and other health organizations make up little more than 6 percent of roughly 21,000 statewide non-profits but account for 43 percent of assets, 56 percent of jobs and 62 percent of revenue.

The study will be released in early March at

Charity check-in: Outlook only modestly better for Arizona charities

Hospitals and other health-related nonprofits generate the highest amounts of program and service revenue, with environmental, religious and other groups depending much more on donations and gifts. The same revenue distinction differentiates larger nonprofits from smaller ones.

The Arizona study was pattered after a report conducted by the California Association of Nonprofits and undertaken by researchers at the University of San Diego. It too showed a dominance by hospitals and other large health organizations in terms of economic impact in California. Few studies have examined the economic impact of nonprofits in other states.

Evans and other Seidman Institute researchers calculated key numbers with help from the Arizona Department of Administration. The researchers supplied a list of IRS-registered non-profits in the state, including employment identification numbers. The department then matched EINs with unemployment-insurance records to figure the number of workers at Arizona-based nonprofits, including part-timers, and their annual wages.

Funding for the study also was provided by Arizona Public Service and the Maricopa County Industrial Development Authority. The Phoenix Philanthropy Group provided insight and expertise, as did the Alliance of Arizona Nonprofits and the ASU Lodestar Center for Philanthropy and Nonprofit Innovation.

How to check out charities before giving

The report places the economic impact of nonprofits on par with the state's retail sector, with revenue similar to that of the construction industry. Nonprofit organizations don't pay federal or state income taxes but do contribute sales, payroll and property taxes.

The employment breakdown includes an estimated 167,000 paid staff and indirect support for another 158,000 jobs at suppliers and elsewhere. Over the 2009-2014 study period, employment in the sector rose by 12 percent and wages by 12.7 percent. Direct nonprofit wages total about $7.7 billion.

Evans said the report didn't determine average wage levels at nonprofits or the workplace benefits typically offered, whether health insurance, retirement plans, paid vacation or other examples.

"I don't know if they pay well or badly," he said. "I'd say they're average payers."

Seleznow said other studies suggest employees and executives in the non-profit field are paid less than counterparts at for-profit businesses, though hospitals and other big health organizations are an exception.

Agents for change

Innovations spurred by Arizona nonprofits that were cited in the report include a bioscience-roadmap study from the Flinn Foundation in 2002, an effort by Expect More Arizonato raise public awareness about educational needs, $4 million in annual college scholarships awarded by the Arizona Community Foundation and an effort to retain young entrepreneurs by the Manifesto Project.

Other innovation examples include a program to tap the volunteer services of seniors by Experience Matters and assistance to homeless people provided by Central Arizona Shelter Services and Housing Solutions of Northern Arizona.

David Smith, spokesman for Central Arizona Shelter Services, said the Phoenix organization has been trying innovative ways to get people out of shelters and into apartments through its "rapid rehousing" program. This effort includes having counselors help homeless individuals by quickly identifying and dealing with barriers, providing search assistance and even paying some housing fees, if needed.

The program focuses on getting people into apartments even if significant barriers remain — whether related to income, health problems or whatever. "The shelter environment ... can be a detriment," he said. "So anytime we can get somebody out of here quickly, the better."

The report also singled out the Diaper Bank of Southern Arizona, which collects and donates diapers to poverty-level households, for creating the nation's first such program.

The report concluded by calling on Arizona's government and business leaders to solicit input from non-profits to spur regional economic development and to set policies in areas such as health care, job training, education, literacy, transportation and the environment.

"In a lot of areas, nonprofits have insights that few others have, and they're working in places where most policymakers don't visit on a daily basis" said Seleznow. "Maybe we ought to have them at the table."

Author: Russ Wiles, The Republic | | | 602-444-8616.


Originally published by The Arizona Republic here.



Beyond Dollars: The Economic and Social Value of Arizona Nonprofits

Graphic reading: "Arizona Nonprofits: Economic Power, Positive Impact"A luncheon presentation and panel at the 17th Annual Forum on Nonprofit Effectiveness featured important information about contributions of the nonprofit sector to the economic well-being of our State. The latest research on the nonprofit sector, “Arizona Nonprofits: Economic Power, Positive Impact” report (2016), was discussed and released during this highly-engaging session. In collaboration with the L. William Seidman Research Institute at the W. P. Carey School of Business at Arizona State University, the Alliance of Arizona Nonprofits, the Phoenix Philanthropy Group, and the Arizona Community Foundation, the ASU Lodestar Center is honored to offer this opportunity to hear first-hand from the State’s most influential business, government and nonprofit community leaders. 

It is our hope that this report will encourage collaboration and dialogue between government, business and nonprofit leaders, as no one sector has all the answers to the challenges and opportunities facing our state. Though an understanding of the nonprofit sector’s contributions to our economy is important, we know too that the story of impact and influence is learned when also considering the social value that occurs at the individual level of transformation. This is where true stories of change occur as the lacing of a community’s social fabric is woven together into a tapestry of hope and opportunity.

As you consider how this luncheon presentation and report may be used to strengthen Arizona, we urge those so inspired to engage collaboratively in ways that honor diverse perspectives while striving for that which we can all agree upon. A vibrant, robust, Arizona that advances its social, economic, cultural, educational, and environmental goals for all, not just some, is within reach.

All 17th Annual Forum on Nonprofit Effectiveness attendees left with a complimentary copy of the “Arizona Nonprofits: Economic Power, Positive Impact” report.

Introduction: Robert F. Ashcraft, Ph.D. | Executive Director | ASU Lodestar Center for Philanthropy and Nonprofit Innovation
Research Presenter: Dr. Anthony Evans | Senior Researcher | L. William Seidman Research Institute
Moderated by: Richard L. Tollefson, Jr. | Founder and President | PPG

Panelists included:

  • Lynne Wood Dusenberry (recently retired) | Attorney | Office of the General Counsel, University of Arizona
  • Jan Lesher | Deputy County Administrator | Pima County
  • Michael McDonald | CEO | Community Food Bank of Southern Arizona
  • Nils Urman | Business and Economic Development Entrepreneur

The 17th Annual Forum on Nonprofit Effectiveness took place Friday, March 4th, 2016 at the Tucson Convention Center in Tucson, Ariz. This annual one-day forum celebrates over 15 years of the ASU Lodestar Center’s role in educating and providing knowledge and tools to the nonprofit community. The day featured an engaging presentation and panel on the research mentioned in the article above. Join us at the next forum as we dive into engaging dialogue that advances the nonprofit organizations that we lead, serve or volunteer for... Network with 200+ community leaders and take away key tips, tricks, and real-time solutions for everyday challenges we face, both personally and professionally.