Nonprofits have major impact
on regional economy
Sector brings millions of dollars,
thousands of jobs to region
by Jill FitzSimmons

In 2004 there were 685 nonprofits in Whatcom County, 364 in Skagit County, 255 in Island County and 182 in San Juan County, according to the National Center for Charitable Statistics.
When we think of nonprofits, we tend to think of agencies that are putting the greater good of the community above making a profit. While this may be true, there’s much more to the story. Nonprofits in Northwest Washington are big business.
In fact, nonprofits have a major impact on the local economy.
Last year, nonprofits in Whatcom, Skagit, Island and San Juan counties reported revenues of more than $324 million and employed thousands of people, according to the National Center for Charitable Statistics.
And statistics tell us this sector of our region’s economy is only growing. Revenues generated in 2004 from local nonprofits grew by at least 28 percent in all four counties in only four years, according to the National Center for Charitable Statistics. Revenues have grown 74 percent in Island County alone.
“We are essential to the community in terms of economic impact,” said Lynn Templeton, executive director and CEO of the Boys and Girls Club of Whatcom County.
Peter Theisen, president of United Way of Whatcom County agrees. Nonprofits are critical to the economy in several ways, he said. If the nonprofit sector, particularly human services agencies, were hit hard, certain parts of our community would break down.
“The rest of the business community would probably start struggling,” Theisen said. “(The nonprofit sector) is not a luxury.”

Numbers, revenues growing
Nonprofits are often referred to as the third rail of the economy. Alongside private businesses and public entities, nonprofits make up a wide scope of agencies and organizations. They include hospitals and clinics, universities and community colleges, credit unions, service clubs, youth organizations, human services organizations and more. The largest nonprofit organization in Whatcom County is St. Joseph Hospital, the second largest employer in the county with nearly 2,100 employees.
Many people often get hung up on that word ‘profit,’ Theisen said. In most cases, nonprofits generate revenues and have the resources to keep their operation moving forward.
In fact, Templeton said, if you’re an effective nonprofit, you’d better be making a profit.
“A nonprofit should be making a profit because, like any other business, they are going to have up years and down years,” Templeton continued.
Over the past decade, the number of nonprofits in Washington has increased by more than 50 percent, according to numbers from the Secretary of State’s Office. The Evergreen State Society reported that in 2004, there were 47,480 nonprofits, a 19.7 percent increase from 1999.
Though there are a few large nonprofits in Washington, most are small. About 90 percent of nonprofits in the state report assets of less than $800,000, according to the Evergreen State Society report.
Data from 2001 show nonprofits in Washington received more than $13 billion in contributions annually, had assets of more than $53 billion and generated more than $30 billion in service revenues.
The National Center for Charitable Statistics breaks down some of these numbers by county. In 2004 there were 685 nonprofits in Whatcom County, 364 in Skagit County, 255 in Island County and 182 in San Juan County.
Whatcom County nonprofits in 2004 reported $209.8 million in revenues. Skagit County nonprofits reported $50.5 million. Island County nonprofits reported $28.8 million. And San Juan nonprofits reported $34.8 million.
Looking at statistics from just four years ago, the number of nonprofits is on the rise in each of the four counties. The number of nonprofits in Whatcom County increased 32.7 percent, with revenues increasing nearly 40 percent. In Skagit County, the number of nonprofits increased by 22.5 percent, with revenues increasing nearly 29 percent. In Island County, the number of nonprofits jumped by 44 percent, with revenues increasing nearly 74 percent. And in San Juan County, the number of nonprofits grew by nearly 33 percent, with revenues shooting up by 66.5 percent.

Impact comes in many forms
While the increases are impressive, the directors of the nonprofit organizations interviewed stress their agencies impact the local economy in several ways.
The YMCA in Whatcom County operates on a $4 million budget, about $2.3 million of which is payroll, said Dave Harding, CEO of that agency. Economic models in the past advise multiplying that payroll number by 10 to determine the impact on the local community, Harding said. Using that formula, that would mean the YMCA alone has a $23 million impact on the Whatcom County economy, Harding said.
The YMCA employs 110 full-time equivalent positions. Many part-time employees are college students, Harding said. While his agency is one of the largest job providers to area students, the YMCA often isn’t recognized as an economic partner with Western Washington University, Harding said.
One of the YMCA’s largest contributions to the economy is its youth and childcare programs, Harding said. About 700 children attend YMCA childcare programs. Approximately 35 percent of the families using these programs have subsidized childcare. The YMCA program helps people earn a wage and is a stabilizing factor in many of these homes.
The Goodwill store in Mount Vernon employs more than 40 people, said T.J. Larrick, employment training program coordinator for Goodwill of Skagit County. That organization has brought in $2 million in revenues the past two years, Larrick said – and some of that money is donated to other nonprofits.
Much of the money also goes toward the store’s five-month job training program. Free to its participants, the program puts eight people at a time to work, paying them for their work while also teaching them new skills to make them more employable. In seven years, more than 80 people have graduated from the program. Those are people who otherwise probably wouldn’t be in the workforce today, Larrick said.
Chinook Enterprises in Mount Vernon employs 45 people and operates on a $2 million budget, said Rob Martin, the agency’s executive director. About 70 percent of their budget is for salaries and benefits, Martin said. Less than 1 percent of the budget comes from grants.
Chinook Enterprises also focuses on training people for the workforce. The agency trains 200 people with various disabilities every year. Chinook Enterprises is helping find jobs for people who otherwise probably wouldn’t be employed but drawing government assistance, Martin said. In the past 25 years, the organization has placed 800 people into the workforce, he said. Those people, over the years, have probably earned about $2.5 million collectively, he adds. And that’s money circulated in the community.
Don’t forget the impact these organizations have when they expand, renovate or build a new facility in their communities, Templeton adds. For example, the Boys and Girls Club of Whatcom County in 2001 completed a $3 million construction project, Templeton said. That’s money that went to building materials and more than 100 craftsmen who were hired for the project.
And the nonprofit sector also provides opportunities for the profit sector to be community minded, Harding adds. Most businesses are looking for a way to give back to their communities; and they look to their local nonprofits as a way to do this, he said.

Operating like a business
With nonprofits being such a vital part of our local economies, it’s important they be run like a for-profit business, say the local nonprofit directors interviewed.
In the past, many nonprofits worried about providing programs first and then finding the money. In the early 1980s, that mindset changed; struggling nonprofits started repackaging themselves, Harding said. Still, not all regions of the country have come around to this way of thinking.
United Way has for some time been educating nonprofits, providing intense training to help these organizations and agencies adopt better business practices and beliefs, Theisen said.
Operating like a business makes sense on two accounts. First, having funds in reserve ensures an organization’s mission isn’t jeopardized, Templeton said.
Nonprofits that think only in the short-term typically are running from crisis to crisis and periodically have to close their doors, Theisen agrees.
Whenever he speaks to groups about the Boys and Girls Club, Templeton routinely talks about how a nonprofit is a business. The agency employs 45 people, has a payroll of $900,000 and brings in revenues of nearly $2 million a year at its seven sites, he said. The Boys and Girls Club has a business plan so its programs, which touch 10,000 families, will be there in the future, Templeton said.
The only difference between his store and another retailer is the tax status, Larrick said. Modern nonprofits even have to know how to market themselves in today’s world, he said. And that means advertising, something nonprofits haven’t done in the past, he said.
“This is a business,” Larrick said. “You have to run it as a business. You have to be 100 percent professional.”
Operating like a business also makes sense from the viewpoint of donors, Harding said. They want to know the nonprofit they are donating their money to is effective and well run, he said. The nonprofit that isn’t run well won’t be considered for donations, he said.
“That encourages nonprofits to act like a business,” Harding said.
Directors of nonprofits today, often times, are some of the best business people, Templeton said. They are, after all, providing the maximum amount of services with typically limited funds.
“We don’t have a lot of extra dollars,” he said. “I don’t know of a nonprofit director who isn’t very good at living on very limited resources.”

Competition heats up
Like any business, nonprofits are facing stiff competition. As the population in Northwestern Washington continues to surge, existing nonprofit organizations are serving more people. However, these organizations face the fact that there also are more nonprofits starting up, creating competition for donors’ dollars. It’s a double whammy to all nonprofits.
And reports have shown contributions from individuals in Whatcom County aren’t keeping up with the growth in the number of nonprofits, Theisen said.
Many of the experts interviewed say most nonprofits today shouldn’t rely heavily on grants and donations. While every nonprofit is different, numbers from the National Center for Charitable Statistics show that public charities, for the most part, continue to get a large portion of their revenues from gifts and grants. However, the money brought in from program services and contracts is also a big chunk, often nearly half.
Typically in Whatcom County, about 50 percent of a nonprofit’s money comes from public support. Another 40 percent comes from program services. And then the balance is from net gains and investments, Theisen said.
“You can’t survive if you’re looking for handouts,” Martin said. “There are none.”
It’s a mistake for any nonprofit to expect the donations to come rolling in, Harding agrees. Less than 2 percent of the YMCA’s budget comes from grants and about 6 percent comes from fund-raising campaigns, he said. The other 82 percent is self-sustained, Harding said.
The YMCA also tries not to be competitive with other nonprofits, Harding said. When another agency offers a similar program to the YMCA, then his organization won’t offer that program. You can’t have your program looking like another in town, Harding said. However, this can be frustrating when the program is a moneymaker for his organization, he said.
The world of nonprofits today also requires strict ethics, Martin said. You have to be able to deliver what you say you can and be more sophisticated in how you approach people for money, he said.
Nonprofits, except for hospitals and universities, have been slow in getting into endowments, Templeton said. This takes time, sometimes even generations to develop, Templeton said. But if the Boys and Girls Club, for example, was gifted $10 million in cash, that money could draw $400,000 a year on 4 percent interest, he said.
“Really, that’s the future of this organization,” Templeton said.
Nonprofits with marketing strategies will continue to flourish, Theisen said. The ones that align their programs with the interests of the donors, who want to see net results, also will be successful, he said. Donors want to see that people are better off because your nonprofit has done its work, he said.
“And those nonprofits that are able to articulate this will be most successful,” Theisen said.

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