Alaska’s Nonprofit Sector – A Major Participant in the State’s Economy
Alaskans are certainly familiar with the good work performed by nonprofits across the state. We are enriched and informed through arts and cultural organizations – helped in times of need by health and human service agencies – cared for at hospitals. We also advance our businesses and industries through chambers of commerce and trade associations – maintain our natural environment through the work of conservation organizations – and participate in a civil society with the help of advocacy groups. These are all nonprofit organizations that contribute to our quality of life. And now we can document how strongly they contribute to our economy.
In a recent report commissioned by The Foraker Group and developed by the University of Alaska Anchorage Institute of Social and Economic Research, we confirmed that Alaska has approximately 6,000 nonprofits – more per capita (110 per person) than any other state. The sector employs 30,000 people or 10 percent of Alaska’s workforce. Taken together, nonprofit organizations spent nearly $3.5 billion in 2005. That’s virtually the same amount they received in revenue. Healthcare providers account for one-third of the spending.
Revenue for nonprofits comes from three sources – fees, government support and private giving – with the federal government providing the largest amount of funding at roughly $1 billion each year, or one-third of all Alaska nonprofit revenue. This percentage far exceeds the amount of federal support seen in other states. At the same time Alaska ranks lowest in the nation in personal giving from households making over $200,000 a year. In all, the percentage of individual charitable support for nonprofits in our state is far less than such support nationwide. This is a dangerous imbalance fed by the notion that government will take care of us, and we don’t have to contribute to our own well-being. Two factors make this revenue balance very troubling. First, federal funding can be fleeting at best and many fear will significantly decrease in coming years. Second, while individual charitable support can grow in our state, it likely will never make-up the difference in the loss in federal funding. Unless we change this thinking and build sustainable nonprofits that operate with a diverse flow of revenue, a major segment of our economy will pay a price – and ultimately our quality of life in Alaska will suffer.
As part of our mission to strengthen Alaska’s nonprofits, The Foraker Group has spent several years researching the best practices of sustainable organizations. We’ve learned that four factors must be present, and integrated, to assure sustainability. First is focus – a clear understanding of the organization’s purpose and values coupled with an equally clear articulation of goals and outcomes. Second is human capacity – adequate human resources, both in quality and quantity, along with a balance in roles and responsibilities between staff and board. Third is unrestricted dollars – revenue, primarily from earned income or individual charitable giving, that nonprofits use to build financial resilience and perform their missions. And fourth is complimentary collaborations – working cooperatively and effectively with other nonprofits and public and private institutions.
This report puts us on the right road to help organizations become sustainable. Our next step is to dig more deeply into other factors that contribute to sustainable organizations. For example: What motivates individual giving? How does the state direct its dollars into the sector? As we answer these questions we can better develop strategies that move organizations from federal dollars to more diverse sources of revenue – a major factor in sustainability.
Achieving sustainability won’t be an easy task for some nonprofits. It will take time, resources, commitment and probably technical assistance for many organizations. But it’s the only answer to assure a viable sector that remains a major contributor to a healthy economy and healthy communities.
A copy of “Report on the Alaska Nonprofit Economy: 2006” and the full ISER study are available one The Foraker Group website. Download the PDF file below.