Minnesota's nonprofit economy is growing 8%--the Fed is not done tightening
<< Like for-profits, Minnesota's nonprofit economy is booming
Patrick Kennedy and John J. Oslund | Star Tribune
--------------------------------------------------------------------------------
Call it Minnesota's other booming economy.
The state's biggest nonprofit organizations grew 8 percent in 1998 -- not quite as fast as their private-sector counterparts, but still strongly enough to show that the not-for-profit sector remains a vital, growing economic force.
The revenue gain for the organizations surveyed in the fourth annual Star Tribune Nonprofit 100 compares with an 8.8 percent revenue growth for the Star Tribune 100, a ranking of the state's 100 largest public companies.
"There is a new worldwide view that a mature market economy will have a healthy [nonprofit] sector," said Jon Pratt, executive director of the Minnesota Council of Nonprofits. That's certainly the case in Minnesota, where nonprofits provide one in 12 jobs -- the highest percentage in the nation.
The nonprofit growth findings are consistent with the council's October report showing employment in the nonprofit sector rose 4.2 percent in 1998, outpacing the state's overall job growth rate of 2.79 percent and the national rate of 1.5 percent.
The 4,410 financially active nonprofit organizations in Minnesota account for 8.4 percent of the state's work force, or 209,664 employees. The most comparable national figure is 6.9 percent, Pratt said. The higher Minnesota figure is explained, in part, by the relatively large number of nonprofit health care providers here. About two-thirds of the state's nonprofit jobs are in hospitals, nursing homes and other nonprofit health care organizations.
And like their for-profit counterparts, nonprofits are consolidating -- a trend that is expected to continue. Joseph Galaskiewicz, a University of Minnesota sociology professor, found increasing concentration in the nonprofit sector in a recent study. In 1980, Galaskiewicz found that nonprofits with annual expenses exceeding $10 million accounted for 63 percent of all nonprofit expenses. By 1992, the figure was 76.8 percent.
"On average, the numbers are going up," he said. One of the obvious reasons is that charitable giving is rising, he said. Minnesota foundations and corporate givers increased grants to nonprofits by 57 percent between 1994 and 1997, according to the Minnesota Council on Foundations.
The Star Tribune list and the council's report rely on forms filed at the Minnesota attorney general's office.
To arrive at the list, the Star Tribune surveyed more than 130 of the state's largest nonprofit groups and ranked each by annual revenues. Then they were placed into five categories -- health care, education, social services, arts and culture and "other."
The social services category led the pack in revenue growth with an average 10 percent increase, followed by the arts and culture group (6.9 percent), health care (5.9) and education (4.8).
Health care
Health care nonprofits occupied the top 11 spots on the Star Tribune list. The Mayo Foundation remained No. 1 on the strength of its 12.6 percent revenue gain, edging out Allina Health System.
Larger health care nonprofits tended to have higher expenses relative to revenues than the group as a whole. The expense ratio (costs as a percentage of revenues) was 96.8 percent for the Top 10, meaning they spent 96.8 cents for each dollar of revenue. The category includes health insurers, HMOs, hospitals and long-term care providers.
Ten health care nonprofits spent more than 99 cents for each dollar of revenue. At seven of those, expenses exceeded revenue. Last year, 14 spent more than 99 cents for each revenue dollar, and six had expenses exceeding revenue.
Education
A 46.7 percent revenue increase, to $194 million, helped Carleton College surpass the University of St. Thomas for the first time.
The survey included 26 education nonprofit organizations, which had an average 4.8 percent revenue increase.
Ten of 26 education nonprofits showed revenue declines, four of them in double digits. The largest decline (23.4 percent) was at St. John's University.
A large portion of the revenue increase at Carleton, which has a relatively small enrollment (approximately 1,700 students compared to nearly 11,000 at St. Thomas), can be attributed to the conclusion of Carleton's most recent capital campaign and to the growth of its endowment.
Carleton's endowment has grown from $356 million on June 30, 1997, to $551 million on June 30, 1999 -- a 55 percent increase.
Other colleges well into long-term capital or endowment campaigns include Concordia College in Moorhead, which is seeking $60 million by April; Macalester College, seeking $50 million by May; St. Thomas, seeking $120 million by September 2001 plus additional money for a law school, and St. Olaf, seeking $125 million by 2004.
Combined revenues for the 26 education organizations on the Star Tribune list were $1.36 billion, about half the size of the University of Minnesota. The land grant university is in a category by itself, with systemwide revenues in excess of $2.15 billion. The University of Minnesota and related organizations are excluded from the survey.
Many colleges, universities and private secondary schools have revenues that are from nonoperational activities, which include gains on endowment investments and gifts for endowments and capital fund drives. The large excesses of revenues over expenses in this category can be explained by these restricted funds.
Social services
Thirteen of the 33 social services nonprofits surveyed showed double-digit revenue increases -- including Parents in Community Action Inc., which operates Head Start Programs (up 49.9 percent) and Minnesota Diversified Industries Inc. (up 44.2 percent).
MDI, which provides sheltered employment and educational, social and vocational training programs for the welfare-dependent, jumped 11 places to No. 26 on this year's Nonprofit 100 list, and was first among social service organizations.
The American Cancer Society merged its Minnesota office with other offices on Sept. 1, 1998, to form the Midwest Division. The 197 percent revenue increase reflects this merger. The Minnesota division alone had fiscal 1998 revenues of $14.5 million, up 10.7 percent.
Seven of the 33 social services nonprofits saw revenue declines, including Goodwill Industries Inc./Easter Seal Minnesota (down 38.4 percent) and Community Action of Minneapolis (down 30.7 percent).
Arts & culture
Aggressive fund-raising characterized the arts & culture group, where seven of the 11 organizations boosted revenues by double-digits. Leading the way were the Minnesota Orchestral Association (up 39.9 percent), Twin Cities Public Television (up 26.2 percent, and the Guthrie Theater (up 24.4 percent).
Revenue at the Science Museum of Minnesota, meanwhile, decreased by 49.3 percent, the result of the completion of a capital campaign the year before.
Three 'others'
Three of the nonprofit organizations on the Star Tribune's list do not fit neatly into the four main categories. They are the Billy Graham Evangelistic Association, the Minneapolis-based headquarters for Graham's international ministry; Augsburg Fortress, an affiliate of the Evangelical Lutheran Church of America and publisher of religious texts; and Pheasants Forever, a conservation group.
Compensation
Nonprofit workers are paid less than their private-sector and government-sector counterparts. While accounting for 8.4 percent of the jobs, they account for just 7.2 percent of the wages paid, according to the Minnesota Department of Economic Security.
"A defining feature of the nonprofit sector is, in general, more modest compensation -- and in particular for top officers," said Pratt. The gap is narrowing, however. In 1998, the average nonprofit employee earned $537 per week, or 12.9 percent less than the statewide average weekly pay of $617. In 1997, the gap was 13.9 percent; in 1987, it was 18.2 percent.
Median total compensation for the top officers of Minnesota's 100 largest nonprofits rose a modest 3.4 percent in 1998, to $174,640. That compares with median total compensation of $775,000 for the 100 highest-paid executives of Minnesota-based public companies.
The nonprofit analysis found the lowest median total compensation for top executives is in the social services category ($110,963) and the highest in the arts and culture category ($178,742).
Blue Cross and Blue Shield CEO Andy Czjakowski was the highest-paid active nonprofit executive on the list, with 1998 compensation of $703,943.
Newcomers
Newcomers to the list include two health care organizations, Itasca Medical Center at No. 69, and the Lakewood Health System at No. 93. Also new to the list is the Greater Minneapolis Convention and Visitors Association, at No. 80.
Organizations that gained on the list include St. Francis Medical Center, up seven spots to No. 100; the Professional Association of Treatment Homes at 98; the Children's Home Society of Minnesota at 94; the Volunteers of America -- Minnesota at 82; and the American Refugee Committee, which just missed the list last year at 101 and now has jumped to 78.
For a closer look
While this survey aims to give an overview of Minnesota's nonprofit sector, more specific information is available from a variety of sources. For example, the Charities Review Council of Minnesota (CRC) has compiled a detailed list of standards it applies to nonprofit organizations to see if they are effectively and ethically providing the services they promote.
The CRC, a nonprofit organization itself, reviews organizations that solicit funds directly from the public.
To get the CRC's stamp of approval, the organizations must meet standards for public disclosure, governance, financial activity, and fund-raising.>>
startribune.com |
