A new report by The Center for Civil Society at the UCLA School of Public Policy and Social Research finds that nonprofit human-service providers in Los Angeles receive a full 73 percent of their funding from the government, despite the national average of only 37 percent. Given California’s current economic climate, many of the region’s nonprofits are dangerously dependent on public funding.

“There is an expectation on the part of the general public and on the part of policymakers that when funds for government programs are cut, nonprofit organizations will pick up the slack,� said Helmut Anheier, director of the center. “What they don’t realize is that nonprofit human-service providers in Los Angeles County are largely funded by the government.�

As nonprofit organizations face another round of budget cuts by the state, and as local funding allocations appear threatened, the future is uncertain for many nonprofit organizations. The new report finds that a significant number of nonprofit organizations are facing both decreasing funding and increasing demands for service. Moreover, costs also are increasing for nonprofits, with 83 percent reporting increases in workers’ compensation insurance and 73 percent reporting increases in other insurance expenditures.

This perfect storm is driving many nonprofit organizations to operate in the red for the first time ever, according the report’s authors. The paradox and challenge for community leaders is that many government funding agencies and philanthropic foundations won’t fund nonprofits with negative balance sheets. As a result, nonprofit executives are in a state of flux and engaging in significant reorganization.

“Facing Uncertainty: The State of the Nonprofit Sector in Los Angeles, 2004 Report� will be released Tuesday, April 27, at a conference being held in UCLA’s Covel Commons Grand Horizon Room from 10:30 a.m. to 1:30 p.m. The Center for Civil Society’s annual conference is being presented for an audience of more than 200 nonprofit and foundation executives and policymakers.


“This is a major contribution to our understanding of the challenges facing nonprofit and community-based organizations in Los Angeles,� said Barbara Nelson, Dean of the UCLA School of Public Policy and Social Research. “We are only beginning to see the far-reaching consequences of the state fiscal crisis and its effect on services delivered through nonprofits.�

The report finds that the most underserved communities in Los Angeles are Latino and poor neighborhoods. Undercapitalized nonprofits are struggling to keep pace with demographic and economic shifts.

However, issues of diversity don’t just affect human-service provision, they also are apparent in the boardrooms of nonprofit organizations throughout Los Angeles, where nearly two-thirds of board members are white, and only about 14 percent are African American, 12 percent are Latino, 8 percent are Asian and just 17 percent of trustees are women.

Additionally, the report finds that human-service nonprofits are engaging in significant reorganization in the face of uncertainty as 55 percent report adding new programs, while only 40 percent report dropping programs. This may indicate that some organizations are overextending themselves, given the increasing demand for service without sustainable revenue streams.

Budget cuts are affecting a diverse cross section of nonprofits: suspension of Section 8 housing vouchers affects housing agencies, basic needs assistance programs and emergency services organizations; cultural organizations are feeling the impact of the state slashing the California Arts Council budget from $18 million to $1 million a year; proposed cuts in Medi-Cal will affect health care nonprofits and clinics; and cuts in support for homecare for the chronically ill and disabled will affect residential programs.

“What is truly needed,� Anheier said, “is to get the various stakeholders to speak to one another — policymakers, foundation executives, researchers and nonprofit leaders. Currently, there is no forum for this vital dialogue in Los Angeles, and false expectations and misconceptions abound. It is essential to recognize that this isn’t just a problem for nonprofit and community-based organizations; it is a problem for elected officials because of the inevitable gaps in service delivery that will result.�

Researcher Jennifer Mosley said, “Partnership between the state and nonprofits has become a signature characteristic in California, which has a long, rich history of public-private action for the common good. Rather, it is this distinctive and valuable partnership that appears to be the most threatened in the current economic climate.�