Inflation hits nonprofits’ services and their ability to raise funds
Last Mile Food Rescue in Cincinnati began purchasing a refrigerated truck in November to transport perishable donations from food retailers to distribution sites. The purchase would alleviate some of the pressure on overwhelmed volunteers, who would have to make three or more trips in their cars to haul as much food as a single truck.
But Last Mile is experiencing a sticker clash. Prices for the type of truck its executives have in mind have soared by thousands of dollars in recent months, all the way up to $80,000. For an organization with an annual budget of $650,000, that’s too big to absorb.
Frustrated, the charity began looking for used trucks, but prices for used vehicles also rose.
“We search every day,” says Julie Shifman, executive director of Last Mile. “We’re hoping we’ll be able to afford it, or that a major donor might come and help us.”
Last Mile is far from the only one. Nonprofits of all kinds are being hit hard by inflation, experts say. Price and salary increases hurt nonprofits in myriad ways, making it harder to track their own core operational expenses while forcing them to cut back on the services they provide.
At the same time, there are early signs that the surge of donor generosity shown in the first year of the pandemic could slow significantly.
“It’s not a pretty equation,” says Shannon McCracken, chief executive of the Nonprofit Alliance, an advocacy group.
Nonprofits that offer annual cost-of-living increases to their employees, as many do, face higher payroll costs of about 6% even without any increases based on merit or seniority, says McCracken.
David Lipsetz, CEO of the Housing Assistance Council, says inflation has eaten away at the amount of affordable housing his organization can provide.
The council underwrites loans for housing estates at below market rates in some of the poorest parts of the country, and it strives to maximize the number of homes it can build with limited resources. “We operate with extremely thin margins,” says Lipsetz. “We grant these loans at the best possible price.”
When the price of building materials goes up 10%, Lipsetz says, there’s usually no room in the loan to accommodate that increase. Lipsetz says sometimes her nonprofit can rework loan terms or find additional funding sources, but that doesn’t always work out.
“It has stalled countless projects for us, right in the middle of a time when housing and shelter are the most important things needed to weather the storm of a pandemic,” Lipsetz says. “For us, a modest increase in costs can end a project in an area of the country where it is most needed.”
Jesse Tree, a Boise, Idaho nonprofit that pays rent to people about to be evicted, has seen a surge in demand for help in recent years. Ali Rabe, the organization’s executive director, says research shows housing prices in his area rose 75% from 2015 to 2020 at a time when local wages rose 18%.
The situation has only gotten worse since 2020, says Rabe. Pandemic-spurred work-from-home policies have allowed well-paid city dwellers to move to rural areas, she says, and house prices have risen another roughly 40% in the past year.
Local courts in the Treasury Valley area of southwestern Idaho, served by Jesse Tree, hold about 20 eviction hearings a week, Rabe says.
“We can only help about a quarter of people who ask for help,” she says.
A government grant provided through federal Covid aid has helped the nonprofit maintain operations, but that grant expires in September, Rabe says. The nonprofit hopes donors will fill the void, she says.
Nonprofits, by their nature, are ill-placed to adjust to rising costs, experts say. While McDonald’s can offset higher beef costs by increasing the cost of a Big Mac, for many nonprofits the only options are to cut services or hope donors come to the rescue.
Kelley Kuhn, CEO of the Michigan Nonprofit Association, says nonprofits that provide basic goods and services, like food and shelter, are hardest hit. At the same time, nonprofits struggle to retain workers who are attracted to companies that can offer higher wages, Kuhn says.
“It’s something any nonprofit is going through now, trying to meet demands for higher wages and salaries,” Kuhn says. She added that a passion for the mission won’t stop nonprofit workers from seeking higher salaries elsewhere if they can’t afford basic expenses.
“That’s a lot of pressure on human capital that’s going on for nonprofits,” she says.
Billionaire philanthropist MacKenzie Scott recently took the sting out of inflation for some nonprofits with another round of major gifts. The Housing Assistance Council, for example, got $7 million. And Habitat for Humanity, which has had to cut the number of homes it builds due to rising lumber and land costs, got $439 million, which will allow it to backtrack and expand. speed up its operations.
Corinne O’Connell, CEO of Habitat for Humanity Philadelphia, says the cost of replacing a roof on a townhouse has gone from $5,000 to $8,500 in just one year. And though her local Habitat for Humanity affiliate received $5 million from Scott’s donation, she notes that most nonprofits can’t count on being bailed out by a generous billionaire. . “The screws keep getting tighter on the nonprofits working on the front lines,” O’Connell says.
Like Shifman in Last Mile, Diana Lara runs a charity organization that collects and distributes food that was otherwise headed for the trash. The nonprofit Food Finders in Lara, Southern California, has three trucks and a van, all refrigerated, and fuel costs are eating up more of its budget.
At the same time, grocery stores are hanging on to perishables longer, she says. Instead, food that would have been donated before is marked down for quick sale.
The group buys non-perishable food to supplement the donated goods, and those costs go up, Lara says. Meanwhile, new hires are demanding a higher starting salary.
In short, a wide range of expenses exceed the budget.
“So we’re starting to feel that in our pockets,” she says. “It’s just crazy.”
This article was provided to The Associated Press by the Chronicle of Philanthropy. Dan Parks is editor of the Chronicle. Email: [email protected] The AP and the Chronicle are supported by the Lilly Endowment for coverage of philanthropy and nonprofits. The AP and the Chronicle are solely responsible for all content. For all of AP’s philanthropy coverage, visit https://apnews.com/hub/philanthropy.