January is a time to look back and look ahead. I’m committed to reflecting with you all, staying informed, and staying nimble to navigate what is ahead. Here are a few trends to watch:
The 2017 Tax Cuts and Jobs Act is likely to affect charitable giving. Among other changes, about 25% of middle-income taxpayers will lose the ability to itemize and deduct their charitable giving on their income taxes. Since nonprofits receive up to 40% of their donations in December, we don’t yet know how big the impact will be. In addition to watching how overall giving is affected, we are watching the overall number of donors, trends related to average donations, and what types of nonprofits are winners and losers since people at different income levels prioritize different causes.
Labor costs are rising in Washington state due to the increasing minimum wage, new paid sick leave requirements, and rising health insurance costs. Next year, we’ll adjust to the new paid parental leave program and an additional rise in the minimum wage. And still in process is a proposed increase in the minimum threshold for overtime exempt staff. Unfortunately, these increases have generally not been matched by increases in government and foundation funding, putting a squeeze on many nonprofit service providers.
Philanthropy is changing, in positive and negative ways. Wealth is shifting into the hands of fewer and fewer individuals, giving them disproportionate say in what is worthy of funding. More philanthropy is coming from business and tech leaders who demand more data about impact, placing new and different demands on nonprofits. Our economic activity is dominated by large, global corporations who are not involved in local community affairs and typically do not fund local, grassroots projects.
Racial equity is a big deal. The evidence that racial disparities are present in health, education, housing and most every aspect of our lives is ever more well-documented and visible to us all. Nonprofits need to look carefully at their own practices to ensure that they are not blocking leadership diversity or perpetuating disparate treatment of people based on race.
The economic outlook is shaky. Many analysts are predicting a recession by 2020. Already, the lack of affordable housing statewide and growth in homelessness is very visible to the nonprofit community. If we do experience a recession, human service providers are likely to face rising demand coupled with decreasing revenue. Budget cuts coming down from the federal level could create a perfect storm.
What Gives Me Hope
Nonprofits are resilient because they are rooted in communities and centered around a core mission. They are fueled by caring, passionate people. Nonprofits may evolve to look different based on the pressures they are experiencing, but they will remain integral to the American experience.
Nonprofits are valuable. Time and time again, communities come together when a valued community organization is at risk. When threatened with the loss of important community institutions, I believe our state will band together to preserve our “critical civic infrastructure” and take actions to strengthen our democracy.
I can get discouraged at times about the ways in which nonprofits are imperfect, inequitable, fragile and human. Yet, I regularly see evidence that we are working to improve our practices and challenging the systems we interact with to be more just. As Martin Luther King says (paraphrasing Theodore Parker), “The arc of the moral universe is long, but it bends toward justice.”
In 2019, I look forward to working with you to ensure that nonprofits evolve and grow, and that community leaders across all sectors understand the role that nonprofits play in maintaining healthy communities.