The state of Kauai’s nonprofit sector

The nonprofit sector on Kauai serves a wide variety of valuable functions – distributing food to those in need, assisting the homeless, providing afterschool programs, offering health care, and so much more.  We have come to rely on this sector whose purpose, according to tax law, is to provide charitable and mutual benefit. But how important is this sector to our economy and how have they weathered the recession?

The Hawaii Community Foundation provided an overview last week and some compelling statistics on the nonprofit sector in Hawaii came to light. The nonprofit sector in Hawaii is a $5.2 billion industry.  With almost 50,000 employees, nonprofits account for 7.7 percent of the state’s workforce and 8.2 percent ($2.8 billion) of the state’s total wages.

Of the 5,200 nonprofits in Hawaii, about 3,200 nonprofits report receipts of income the IRS. The vast majority of those reporting income (2,368 or 74 percent) are located on Oahu. The remaining 2,000 are so small they report having no income.  The largest nonprofits — such as hospital and health care systems and private schools or universities — account for half of the state’s nonprofit revenue.

Most nonprofits rely on donations, grants and charitable gifts. The larger nonprofits may also receive tuition, fees-for-service, reimbursable expenses and government contracts.

Kauai has a total of 339 nonprofits; only 125 (37 percent) of these reported receiving income in 2011.  Of those reporting income, 42 had budgets between $25,000 and $100,000, while 49 had a budget between $100,000 and $1 million. Only 5 had a budget over $5 million. Of the 339 Kauai nonprofits, 146 are sports/social clubs or congregations and religious organizations.

How did the recession impact nonprofit revenues?  Hawaii Community Foundation reported that the number of nonprofits has remained about the same but the total revenue for nonprofits in Hawaii has decreased significantly from 2005 levels.  

Charitable giving in the U.S. decreased 6 percent between 2005 and 2010. While more than 90 percent of Hawaii’s households donate money or goods to charity, the amount they give decreased 12 percent during the same period, a much larger increase than for the U.S. as a whole. Adjusting for inflation, that means a 21 percent drop in contributions from eight years ago.  

Along with the drop in charitable giving, government funding to nonprofits has decreased. This combination is troubling news for the nonprofit sector.

What does this news mean to our community? The demand for nonprofit services has increased 60 percent in the past two years in Hawaii. It is projected that the service demand will increase an additional 75 percent in the next two years. This significant increase in demand provides major stresses to the nonprofit sector as they try to meet the demand for services with less revenue.

What can be done to help? Hawaii Community Foundation suggests the following:

• Legislative action to remove the cap on tax deductions for charitable gifts will help promote the continued generosity of Hawaii’s donors.

• Those able to give are encouraged to provide unrestricted gifts to nonprofits so they can use the funds to keep their organization strong while they are providing services and programs.  

• Government and nonprofits need to explore ways to work together toward shared goals and pooled resources.

Nonprofits continue to provide needed services and programs and are an important sector of the community. In return, we as community members need to offer our support and donate as we can to ensure their ability to serve.

• Diane Zachary is the President/CEO of the nonprofit Kauai Planning & Action Alliance.  She can be reached at kpaa@kauainetwork.org.  To learn more about KPAA, visit www.kauainetwork.org.

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