Nonprofits Economic Impact

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Nonprofits are big business in Arizona, generating an impact of over $22 billion. Much of that comes from hospital nonprofits. Anthony Evans, senior researcher for Arizona State University L. William Seidman Research Institute, will tell us more about his report on the economic impact of nonprofits.

TED SIMONS: Non-profits are big business in Arizona, employing hundreds of workers and generating billions in revenue. That's according to a new report authored by our next guest, Anthony Evans, from ASU's Siedman Research Institute.
Good to see you again. Thanks for joining us. This study, what exactly did you look at?

ANTHONY EVANS: We looked at the economic footprint of non-profits state-wide, reaching an idea that came from the Phoenix Philanthropy group in association with the Alliance of Arizona on non-profits.

We focused very much on just the employment and wages of nonprofits in the state.
There are over 21,000 nonprofits of which around 3,000 actually employ people on a full or part-time basis. So our results are really conservative. What we came out with was about $22.4 billion in gross state product contribution each year.

TED: That's a big impact on the economy.

ANTHONY: It's around 8 percent of the state's GSP.

TED: Did I read somewhere that the tax revenue on all this is similar to retail?

ANTHONY: Tax revenue is similar to retail, yes. We are talking about really really significant size to the economy. 167,000 direct jobs, $7.7 billion in wages, they are significant. To put it into perspective, direct employment makes it the fifth largest non-government employer in the state.

TED: My goodness. And again, we should mention that with $2.1 billion generated by taxes, we're talking sales, payroll and property taxes, not income taxes because these are non-profits.

ANTHONY: There will be some income tax, from the employees themselves, but there won't be obviously from the nonprofit company.

TED: The reports seem to indicate that this nonprofit sector was dominated by the big boys, especially big hospitals. Talk to us about that.

ANTHONY: That's true. I mean, they account for fifty-six percent of the employment, but if you actually take them away, you're still talking around $10 billion a year from the other non-profits. So they're very small in terms of number, large in terms of employment, large in terms of gross state product, but the reality is it's such a diverse community. You see 21,000 different non-profits stretching from human services to arts, culture, public and societal benefits, religious groups…there's a wide variety there. I think it would be wrong to purely focus on the health sector itself.

TED: Right. Not to focus on them, but to realize they are the big gorilla in the corner.

ANTHONY: They are, they are over half, around $12 billion.

TED: For the little guys, it seems like they're much more dependent on public donations?

ANTHONY: Not necessarily true again. Around 27% of revenue comes from philanthropic contributions. Around a third comes from government revenue, but four dollars of every ten is actually raised through its own activities that could be events, it could be a wide range of things they embark upon.

TED: For the smaller non-profits, from the report, it sounded like government contracts were the big factor, for the little guys.

ANTHONY: They can be, yeah. They are around a third. What we have noticed we actually backed up a study with a survey as well. And in the survey, around 1-6 non-profits have actually seen a fall in the amount of government revenue over the past year.

You know, the good thing you can see from this is that rather than trying to cut back upon the services they provide to the community they tried to make cost savings in-house and I think that is the benefit of dealing with the smaller non-profits.

TED: It sounds like we are talking services, service fees, sales of goods, these sorts of things as inputting into the economy.

ANTHONY: They are a very significant player. I think it's important when you talk about the economic development of the state, and we always invite some of the main players in terms of business, they need to start thinking about inviting some of the non-profits to that table as well.

TED: Is that not happening?

ANTHONY: I don't think it necessarily happens, no.

TED: Why? Is there a misperception?

ANTHONY: One reason we did the study, or were asked, is to try and convey to the local powers about the importance of the non-profits in our community.

TED: Have the non-profits rebounded from the recession?

ANTHONY: They have slightly in terms of wages, that the wages they pay--that's around 7.7 billion directly to employees--have rebounded over the past four years. They are back to around the 2008 level. But that is not the key message. We are looking at the economic footprint. It is conservative, and I take into account the social return on investment. Think about the services these guys provide. Think about the improved healthcare; think about the improved cultural aspects of living within this state. No major company, no Intel wants to move here unless they feel there are some good cultural components for workers to enjoy and that is what non-profits provide, and we haven't really taken that into account with these numbers.

TED: How do you take that into account? Is there a way to measure that?

ANTHONY: There is a way to measure that and we're exploring that for a subsequent study.

TED: For your next appearance on Horizon.

ANTHONY: Possibly, yes. You know, we are looking at it and a number of things have happened in Europe on that front and we'd like to try and replicate it here.

TED: Innovation efficiency, maybe an increase in modern business practices--is that a factor? Is that making a difference out there in the non-profit world?

ANTHONY: I think so.

TED:: How so?

ANTHONY: I think the term non-profit implies that they are less business, but that is not true. They are probably far more rigorous in terms of the way in which they go about their day-to-day activities then some of the bigger businesses. I think it is important to notice, out of respect, the contribution that the non-profit community makes to this day.

TED: As far as this study, how exactly was this done? We talked about maybe how you can measure the unmeasurable, but for what you did measure in this study, how'd you do it?

ANTHONY: 21,000 non-profits in the state of which 3,000 actually employ people--we had data from the quarterly census of employment and wages and our numbers are based primarily on the data from those 3,000. In addition, we had a state-wide survey and had around 600 surveys back from throughout the state. Good representation down south and up north. We sort of melted the two together. It is a method that has been used in California, and a method that I believe now Oregon is looking to replicate.

TED: Okay, so we have this idea the impact is strong, really strong, stronger than most people realize. If I am a government official, a civic leader, what do I take from all of this?

ANTHONY: I think it is very important to speak to some of the bodies, the Arizona Community Foundation, the Alliance of Arizona Nonprofits, to speak to ASU Lode-Star, and understand the role that non-profits make, have them at the table and explore ways they can contribute to the future economic development of the state.

TED: Are there ways non-profits can sing their own praises a little bit louder? Are they a little bit lax in terms of that sort of thing?

ANTHONY: I think they have been in the past. To be fair, the Arizona Community Foundation actually produced a very good media pack to enable them to utilize these results for their own endeavors, and I think we will see this in the coming years.

TED: Very interesting stuff. Good to have you here.

And Wednesday on Arizona Horizon, we will take a look at a year-long program that gives students a boost in career and education, and a new report on tech talent shows phoenix is ranked number 11 in the country. Those stories at 10 on the next Arizona "Horizon."

That is it for now. I'm Ted Simons. Thank you so much for joining us. You have a great evening.

Anthony Evans: Senior Researcher for Arizona State University L. William Seidman Research Institute

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