Massachusetts nonprofits, especially smaller organizations, will face greater competition for funding and workers in 2017, especially if federal domestic spending decreases and charitable contribution deduction rules change, according to sector leaders who work with a broad cross section of Bay State nonprofits.

Those leaders, in general, told massnonprofit news they believe conditions for nonprofits will become somewhat more difficult in 2017, compared to 2016, in line with results of a recently completed national survey of their peers.

Jim Klocke, CEO of the Massachusetts Nonprofit Network in Boston, the state's nonprofit trade association, said "the biggest issues are at the federal level, where there is a great deal of uncertainty with the president-elect.

"There are a lot of big unanswered policy questions related to tax policy, e.g., federal charitable contributions deduction, discretionary spending items, social welfare policy, and regulatory oversight. If some or all of those issues move in a negative direction, nonprofits might find themselves much more dependent on foundations, state and local funding, and individual donations."

However, state funding, especially for social service organizations, is under threat, especially as Gov. Charlie Baker last month announced $98 million in budget cuts for the current fiscal year, which ends June 30. The state legislature, however, could offset those cuts by enacting a supplemental budget.

Even without state budget cuts, Michael Weekes, president and CEO of the Boston-based Providers' Council, a statewide association of health and human service agencies, said the state's strong economy—the unemployment rate was 2.9% in November—will make it harder for social service agencies, especially smaller ones with fewer resources, to compete with the private sector to recruit and retain workers.

Ann Lisi, president and CEO of the Greater Worcester Community Foundation, based in Worcester, concurred, noting that "uncertainty based on radical changes at the cabinet level if appointments are fulfilled" could prove disruptive, especially to the large refugee and immigrant population in central Massachusetts.

Recognizing that government cutbacks will hurt safety net and social service nonprofits, Geeta Pradhan, president of the Cambridge Community Foundation said, "There will be a shift in focus towards those needing services vs. supporting nonprofits, creating the need for more collaboration and consolidation -- a shift that is much needed."

John Vasconcellos, president of the Community Foundation of Southeastern Massachusetts in New Bedford, who feels overall conditions for nonprofits will remain about the same this year, compared to last, observed that nonprofits "a great not only remain relevant but to lead the charge to get above the ugly noise of today's political discourse and celebrate, encourage, and demand that those better angels win out."

Pradhan, Lisi, Klocke, and Weekes agreed that changing conditions could spur more engagement in nonprofits by individuals, and perhaps drive greater financial support, but that such activity couldn't make up for government funding cuts.

Dave Edwards, president and CEO of the Danvers-based Essex County Community Foundation, "I want to be optimistic but that all ended at about 2:00 am on November 9th. Perhaps the outrage from the “left” will spur more action and giving."

Referencing the coming change in administrations in Washington, D.C., Pradhan said there is 'increased need and stress among constituents served. The sense of fear is palpable and will also have implications on issues of health and mental well-being."

Greatest Challenge for Smaller Nonprofits

Here's what the leaders said smaller nonprofits in Massachusetts will face in 2017:

  • Vasconcellos: How to create and maintain a compelling case for a mission that resonates through the noise and the dominance of larger nonprofits.

  • Klocke: Funding predictability and potential changes at funding organizations, including but not limited to government funders.

  • Lisi: Labor market pressures on smaller organizations.

  • Weekes: Competing against larger nonprofits for talent and funds, as well as more pressures on existing leadership to function in what may be a different operating environment.

  • Pradhan: Competition for limited resources and "the tendency by well-meaning donors and individuals to spawn more organizations to solve problems."

  • Edwards: In addition to competing with larger, more sophisticated organizations, "good hearted, but unsophisticated boards" may be unwilling to consider new operating models and possible mergers.
Other Issues and Opportunities for Massachusetts Nonprofits

Advances in health care that, for example, enable people with autism and those with brain injuries to live longer than has been historically the case, will increase demands on social service nonprofits, which also tend to be more dependent on government funding, Weekes said.

The leadership transition among nonprofits, due to an expected wave of retirements among Baby Boomers, likely tamped down by the recession, "may now come more into the fore" according to Lisi. "I'm excited by new leaders, but there is a training and cultivation issue. Twenty- and 30-year-olds have some seriously talented people."

In addition to changes in government funding, potential changes in foundation giving and other forms of private philanthropy could pose challenges for a broad range of nonprofits, said Klocke.

"Smaller nonprofits need to take advantage of their ability to connect closely with their communities and funders and to be as facile and nimble as possible in response to need" and facilitate local dialogue, suggested Vasconcellos.

Pradhan said the pressures cited by her and others will like shift resources toward larger, more established nonprofits.

Edwards said arts and culture nonprofits "are in for a big bath" due to probable budgets cuts for the National Endowment for the Arts.