By: Josh Veal, MiBiz
Bolstered by stable growth and strong support from government agencies, Michigan nonprofits look ahead to forging new partnerships to address the state’s unique set of challenges.
After a period of some volatility for the nonprofit sector in the economic downturn, recent data point toward a steady recovery.
A new economic analysis of nonprofits commissioned by the Michigan Nonprofit Association and the Council of Michigan Foundations shows the sector’s assets and expenditures have grown in recent years. Michigan nonprofits reported assets of $240 billion in 2014, up from nearly $171 billion in 2008 after adjusting for inflation, according to the report.
However, the number of nonprofit entities has been in flux. After reaching a high of 49,153 nonprofit entities in 2009, the sector then contracted dramatically, but climbed back to 47,339 by 2014, according to the analysis prepared by Public Sector Consultants Inc.
Despite the fluctuation in the ranks of nonprofits, employment numbers in the sector have remained steady and grown, reaching a record 451,342 people in 2015.
In addition to the promising economic growth, nonprofit leaders have found notable support in a unique relationship between their organizations and the state government. In particular, Michigan boasts a number of public-nonprofit networks not found in other states, according to industry sources.
The first of these connections is the Governor’s Office of Foundation Liaison, a cabinet-level position created in 2003 to advise the Governor directly on matters of policy reform, innovative funding and strategic collaboration. The liaison also relays the state’s main concerns back to nonprofit leaders.
“We are the only state in the country that has the OFL,” said Rob Collier, president and CEO of the Council of Michigan Foundations. “It’s been a very important tool for cross-sector collaboration and looking for opportunities where the nonprofit sector and foundations can complement what the state is doing.”
Michigan nonprofits in 2004 also established the Nonprofit Council for Charitable Trusts, an advisory board to the state’s Attorney General that’s chaired by the Assistant Attorney General. The council provides guidance on issues related to charity and charitable giving.
Yet another collaboration unique to the state is the Michigan Nonprofit Caucus. Formed in 2009, the bipartisan caucus consists of 32 members from the Michigan House of Representatives and the Michigan Senate who work with nonprofits to establish legislation and regulation beneficial to the sector.
“The good news there is that the legislature does understand the value of the nonprofit sector,” Collier said. “The relationship is very positive.”
Nonprofit executives are encouraged by the state’s recent decision to approve a package of bills restoring tax credits lost in 2011, a move that should spur increased individual giving, Collier said. On a federal level, Congress recently made permanent the IRA charitable rollover donation, a policy that had been in flux for years.
“In December, instead of a lump of coal from Congress ... we finally got a gift. It was so exciting,” Collier said. “This is the most significant charitable giving incentive we’ve had in years. ... It’s an incredibly important priority to make sure that Michiganders and their financial advisers realize that this is now permanent.”
Once taxpayers reach age 70 and a half, these rollovers allow them to donate up to $100,000 of their IRA, tax-free, to the charity of their choice. Previously, taxpayers were forced to recognize the amount as income and then ask for a charitable deduction after donating it, which often resulted in tax liability and ultimately discouraged giving.
Collier also has his eye on tax reform at the federal level in 2017, when the nationwide charitable tax deduction policy will celebrate its 100th anniversary.
“Remember, when you think of the giving pie, that the biggest chunk of it, approximately 70 percent, is individual giving,” he said. “The most important thing for a nonprofit sector that, in Michigan, employs about half a million people, is that we continue to encourage individual giving. And while taxes don’t motivate people to give, they do influence how much people give.”
While crafting policy is a large part of the relationship between the the public sector and nonprofits, their work on the ground complements one another as well, said Collier, using the Flint water crisis as an example. At times, nonprofits can step in where the government can’t, and vice versa.
“Clearly, the foundation and nonprofit communities are playing a role in trying to help address the needs in Flint,” he said. “The state understands that we can’t do what government should be doing, but there are ways in which we can strategically help and fill gaps.”
Donna Murray-Brown, president and CEO of the Michigan Nonprofit Association, agreed with that sentiment, saying she’d like to see further coordination with the for-profit sector in working on some of these issues nonprofits have traditionally addressed.
“This notion around ‘networks’ has been a method which nonprofits are looking toward as a way to mitigate some of their challenges. It goes beyond collaboration,” Murray-Brown said. “Obviously, pooling resources is a good way to support what’s needed, but these challenges are really dynamic and that’s why networks are so important — not just to get information, but also to be able to galvanize the troops.”
More and more, nonprofits are working with for-profits to accomplish goals in line with both organizations’ objectives. This is often done through program-related investments, in which a nonprofit invests in a for-profit organization whose activities align with their mission. The Council of Michigan Foundations is currently supporting the federal Philanthropic Facilitation Act, which would make this investment process less costly and less time-consuming.
Collier also pointed to the state’s Great Start, Great Investment, Great Future initiative as an example of successful cross-sector teamwork.
Whether it’s through funding, volunteerism or networking, Murray-Brown said that for-profit organizations benefit from these partnerships because of the revitalizing nature of nonprofits’ work.
“Organizations are comprised of people. People live in a community. They want their community to be strong, and typically where nonprofits excel is creating quality of life,” she said. “It’s a circle, if you think about it. It’s about creating thriving communities. It takes every sector to be able to do that, working together on all cylinders.”
Even within the world of nonprofits, Michigan is home to a spirit of collaboration that’s unique in the country, Murray-Brown said. Decades ago, the foundation community came together and specifically decided to partner with the charity side of the nonprofit sector. This decision spurred the ongoing partnership between the Michigan Nonprofit Association and the Council of Michigan Foundations.
“You can go to other states and (their nonprofits) may not know their council of foundations within their own state, but we work in tandem,” she said. “We have a purview of what’s happening in other states because we are members in the National Council of Nonprofits. We can compare ourselves and say that Michigan is unique, in terms of our partnership and how we go about the process of doing our work.”
Still, nonprofits have a lot on their plate in the year ahead. A large amount of state funding will be going to managing the Flint water crisis and supplementing the Detroit Public Schools budget, which will likely affect nonprofit capacity in the near future.
Collier suggested that using data to help deploy philanthropic capital more creatively and efficiently will be a key focus for his organization, especially if resources become scarce.
The Michigan Nonprofit Association named leadership development and succession planning as a focus for West Michigan, as well as improving diversity, inclusion and equity programs across the state.
“Our population is changing and one of our core values is that nonprofits reflect that,” said Joan Bowman, senior director of public affairs and communication for Michigan Nonprofit Association. “We need to be on the same page as the people that we’re serving.”
Despite all of these challenges, Murray-Brown remains confident in Michigan’s nonprofits. Collaboration is on the rise and funding is improving every year as a result, she said.
“I’m actually quite excited about our funding community,” Murray-Brown said. “They’re looking at building more capacity, recognizing that the challenges we’re trying to mitigate are very dynamic and need long-term support and unrestricted programming. It’s extremely exciting and rewarding to allow nonprofits to do their work.”