Massachusetts Nonprofit Sector Grew During Economic Downturn, Study Finds

While the Massachusetts nonprofit sector has grown over the past decade despite a major financial crisis and recession, it has not addressed financial realities that leave it vulnerable in the long term, a new study by the Boston Foundation finds.

According to Passion and Purpose Revisited: Massachusetts and the Last Decade's Financial Roller Coaster (120 pages, PDF), the more than 34,000 nonprofits in the state held $233 billion in assets in 2011 — up from $207 billion in 2007 — and generated $234 billion in revenue. The report also found that nonprofits accounted for 16.7 percent of all privately employed workers in the state in 2010, up from 14 percent in 2006, and that public charities, which comprise 69 percent of the nonprofit organizations in the state, held $193.3 billion in assets in 2011 and produced $181.2 billion in revenues, up sharply from $168.6 billion and $70.4 billion, respectively, in 2007.

At the same time, while the number of grassroots organizations in the state increased sharply from 1995 to 2010, their number fell 10 percent in 2011 after the Internal Revenue Service moved to revoke the tax-exempt status of inactive organizations. Even so, grassroots organizations were 78 percent of the public charities in the state in 2011, though they accounted for only 1 percent of the sector's revenues and assets.

The report also attributed the lion's share of growth of the nonprofit sector in Massachusetts to 221 "economic engine" organizations, which accounted for 89 percent ($161.2 billion) of the sector's revenues and 81 percent ($157.7 billion) of its assets in 2010. Three-quarters of those organizations are in the health care and education sectors, and just two of them, Harvard University and the Massachusetts Institute of Technology, hold 31.4 percent of all assets held by Massachusetts-based nonprofits.

"Nonprofits have responded, creatively and resourcefully, enhancing their service offerings in recent years even as they faced their own budget pressures, including public funding cuts," said Elizabeth Keating, one of the lead authors of the report. "They have served more clients, creatively tapped new resources, and have done what they can to persist in their missions — but in doing so have had to put addressing their own financial concerns on a back burner."