Is the Economic Mess Going to Kill 100,000 Non-Profits?

In the days between Christmas and New Year's Eve, Anthony Romero, executive director of the American Civil Liberties Union, sat at his desk in Lower Manhattan and reached out to people who had lavished generous donations on his organization during the long, benighted tenure of George W. Bush. It was a heady moment: the era of Dick Cheney, John Ashcroft and Alberto Gonzales was winding to a close, and Barack Obama was about to assume office, having vowed to rescind some of his predecessor's more egregious assaults on civil liberties.

But Romero wasn't phoning his supporters to share the joy -- he was calling to plead for cash after a season (actually, several seasons) of thwarted solicitations. Throughout the spring and summer, would-be donors had explained, over and over again, that they were too busy writing checks to the Obama campaign. By the time Obama mounted the stage to deliver his acceptance speech in Chicago on election night, many had become preoccupied with something else: the implosion of the economy. As Romero worked the phone from his office on the nineteenth floor of the downtown high-rise, around the corner from the New York Stock Exchange, he could feel the aftershocks of the collapse.

"I'll come back, but I lost it all," one longtime donor told Romero.

"I love you guys, but it's gone -- all gone," said another.

The most expensive presidential campaign in history and the cataclysmic financial meltdown of the past few months combined to produce a "perfect storm," Romero told me recently. The storm blew a $19 million hole in the ACLU's budget, resulting in a hiring freeze and the cancellation of various projects, followed by the announcement, in January, that 10 percent of the national staff was being let go. Employees with decades of experience were told to clear out their offices; no department was left unscathed.

Founded in 1920, the ACLU boasts a membership of 530,000 and assets of more than $200 million. However dire the economic downturn gets, Romero, who has weathered his share of controversy at the ACLU but also presided over a period of impressive achievements and growth, can rest assured his organization will be around in a couple of years. It's an assumption a growing number of his peers in the nonprofit world can't make. At a forum in New York City in November, Paul Light, a professor of public service at New York University, predicted that "at a minimum" more than 100,000 nonprofit organizations would be wiped out in the next two years. Light asked the audience members whether any of them had tuned in to the recent hearing in Washington on the impending nonprofit upheaval. The room fell silent. Light then admitted he'd missed the deliberations as well, because, alas, there hadn't been any. "We should demand a hearing immediately on the state of the nonprofit sector -- immediately," he declared.

Not everyone believes the fallout will be quite so cataclysmic -- historically, the nonprofit sector has proved surprisingly resilient, even growing during some recent recessions -- but the scale and scope of the current downturn is clearly different. And its reverberations will likely extend far beyond the world of high-profile advocacy organizations like the ACLU. 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.