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Nonprofit sector grows into powerful national player

| Thursday, Dec. 25, 2014, 10:45 p.m.

Nearly 16 percent of Pennsylvania's non-government employees worked for a nonprofit organization in 2012, federal jobs data show.

Nonprofits employ roughly 780,000 people in Pennsylvania and 11.4 million nationwide, accounting for more than 10 percent of all jobs in the United States outside the public sector, according to Bureau of Labor Statistics figures released for the first time.

That puts nonprofit employment ahead of all but two industries — retail trade and manufacturing — and signals that tax-exempt organizations are becoming an increasingly prominent player in the national economy, experts say.

Knowing just how big the sector has become and how nonprofit behavior stacks up to fiscal trends is important for job seekers, policymakers and anyone involved in economic development, said Wojtek Sokolowski, senior research associate at Johns Hopkins University's Center for Civil Society Studies.

The data can help drive decisions on where to invest public and private dollars, highlight regulatory needs and provide pertinent information for specific legislation — such as estimating how high the federal price tag could soar by making nonprofits eligible employers in the public service loan forgiveness program , which discharges a student's loan debt after 10 years of payments.

“So many still believe that nonprofits are completely volunteer-led,” said Rick Cohen, spokesman for the National Council of Nonprofits. “To be able to have official statistics is just a huge development, in terms of helping nonprofits demonstrate to policymakers ... that nonprofits are significant employers.”

Nearly 268,000 nonprofit employers doled out $532.1 billion in wages in 2012. In Pennsylvania, more than 18,000 nonprofits paid $32.2 billion in wages.

Particularly striking is evidence that nonprofit employment climbed steadily between 2007 and 2012, even as the private sector shed jobs amid the 2008 housing bust and ensuing nationwide recession.

“They behave differently than for-profits,” said Sokolowski, who spent the past decade working with the federal agency to compile data specific to nonprofits. “That's an important message, not just to nonprofit people but to everyone who is interested in job creation and how the economy works.”

Most nonprofit jobs are in health care and social services (68 percent), followed by education (16 percent).

That's in line with some of the Pittsburgh region's top nonprofit employers: UPMC, Highmark Inc., the University of Pittsburgh and Carnegie Mellon University.

At UPMC, the largest non-government employer in Pennsylvania, a combination of acquisitions and expansion led to a 36 percent increase in employees since 2007. UPMC ballooned by 16,211 jobs from its pre-recession level, up to 61,427 positions in June, data from the health care giant show.

Researchers and economists point to a few explanations for consistent growth in the nonprofit sector — still a relatively new concept itself as a cohesive group of job creators.

Aside from the freedom of not having to make a profit, exempt organizations rely heavily on government funding, which on average accounts for 32 percent of a nonprofit's budget, Sokolowski said. Federal Medicare and Medicaid programs alone, for example, account for more than half of UPMC's patient revenue.

Public-private partnerships are on the rise, which governments use to outsource services.

Health care and education are fields in which demand doesn't plummet when the economy weakens, unlike consumer-dependent industries such as retail and construction.

Anecdotal evidence suggests, too, that college-educated millennials who had trouble finding work during the recession turned to nonprofits to use their skills for public good, said Kurt Rankin, an economist with PNC Financial Services Group.

CMU added about 700 positions between 2007 and 2013, up to 5,425 at the end of last year, university figures show. During the period, University of Pittsburgh employment grew by 381 jobs, up to 12,348 at its main campus and 852 at regional campuses in 2013, the college's annual reports show.

Yet, the nonprofit giants aren't immune from financial pressure.

Pitt persuaded 352 senior-level employees to take early-retirement buyouts in 2012, in an effort to pare personnel costs even though student applicant rates held strong, university spokesman John Fedele said.

UPMC reorganized and scaled back hiring to reduce costs, and Highmark eliminated 520 jobs during 2012 and 2013.

Nationally, Washington had a higher proportion of nonprofit jobs than all 50 states, peaking at 26.7 percent of non-government employment in 2011.

Nonprofit employment topped 18 percent of the share in New York and Rhode Island. It fell below 6 percent of the non-government workforce in Texas, Alabama, South Carolina and Wyoming. Nevada had the lowest nonprofit presence, at 2.7 percent in 2012.

The federal data merge the bureau's Quarterly Census of Employment and Wages with information from the IRS. The figures don't account for part-time versus full-time positions and don't include 501(c)(4) organizations, so-called “social welfare” nonprofits such as volunteer fire departments and advocacy groups.

“The fact that these statistics were released at all is a major victory,” said Cinthia Schuman Ottinger, deputy director for philanthropy programs at the Aspen Institute's Program on Philanthropy and Social Innovation in Washington.

Among others who championed the information release and urge the bureau to do so regularly are GuideStar, the Lilly Family School of Philanthropy at Indiana University and the Center on Nonprofits and Philanthropy at the Urban Institute.

Natasha Lindstrom is a Trib Total Media staff writer. Reach her at 412-380-8514 or nlindstrom@tribweb.com.

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