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Inflation Seen As Shock To Nonprofit Sector

After two difficult years facing the challenges of COVID, nonprofits are dealing with yet another threat, inflation. Combined with the falling stock market, declining consumer confidence and war in Ukraine, it's a problem one nonprofit coalition leader calls “a fiscal cliff.”

February's inflation rate reached 7.9%, a rate we haven't seen in 40 years. This hits nonprofits in a lot of ways.

  • Served populations - Tough times drive demand. People living paycheck to paycheck can't afford a sudden increase in the cost of basic necessities.

  • Donors - In their simplest form, donations are discretionary money, extra cash that supporters can give to charity and still pay their bills. Inflation eats into discretionary money.

  • Nonprofit employees, especially hourly workers - The majority of nonprofit workers in Texas earn less than $42,000 per year. The United Way uses a measure called ALICE (Asset Limited, Income Constrained, Employed) to define people who are struggling to make ends meet. Guess what...$42,000 is way below the ALICE limit for a single parent with a child in daycare in Harris County. The current inflation rate threatens your staff's ability to make ends meet.

  • Your Mission - Nonprofits may be founded on hopes and dreams, but cash fuels them. Higher prices mean less buying power, which hits nonprofit budgets. Organizations that distribute food or other consumer goods are really feeling the sticker shock.

Gasoline prices are the latest shoe to drop. Gas prices were already rising, as COVID receded, and Americans started driving again, then the Ukraine invasion hit. All told, gas prices are up 50% in the last year and threaten to keep rising. In Houston, where driving seems to be a way of life, this is hitting nonprofits especially hard. Here's a report about what gas prices are doing to the local food nonprofit, Second Servings and here's one on the impact on Meals on Wheels.

All of this is hits a nonprofit sector that was already on financially shaky ground, according to a new report from the BKD CPA firm. The survey of Nonprofit 2021 results shows a sector that is still struggling to overcome the impact of the pandemic:

What nonprofits can do about it. Lyndon Johnson was once quoted as saying, "Being president is like being a jackass in a hailstorm. There's nothing to do but to stand there and take it." Faced with inflation, stock market meltdowns and the continuing presence of COVID, nonprofits may feel the same way, but there are some important steps they need to take:

  • Be honest with donors. This is an unprecedented time, and it takes more funding to do the same job. Remember, it's not about what you need; it's about what allows your donors to have real impact and the price of that impact is rising.

  • Be sympathetic with staff. No one on your staff has seen this type of inflation during their careers and they are struggling. One nonprofit has been giving gas gift cards to staff that need to drive.

  • Be empathetic with your served population. We hope this is a temporary economic problem, but for someone living in poverty, it feels like forever.

  • Be focused on communicating your story with a fierce determination! This is when boards want nonprofits to tighten their belts and focus on their mission. In a normal period that makes sense. However, two years into the pandemic, with so much uncertainty about the economy and the world around us, nonprofits can't afford to crawl into a cave. If you are not telling your story, no one will. To donors, it will be a case of "out of sight, out of mind" and, giving the state of nonprofits, that could be fatal.

Finally, diversify your fundraising to make sure you are not missing opportunities. When the fishing is bad, you cast a wider net. We can help develop communications strategies to find those opportunities.


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