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Non-Profits Weather Economic Storm

As businesses and individuals cut back on spending to cope with the current economic downturn, charitable agencies that depend on donations from businesses and individuals are seeing contributions fall. At the same time, requests for their services are going up.

That's been the case at Special Kids, a faith-based, non-profit organization located in Murfreesboro, Tennessee. It provides physical and occupational therapy, as well as day care for medically fragile children.

Patrick Prince gets an hour of therapy here each week. Speech therapist Michelle McGaughy is helping the 2-year-old expand his vocabulary. When Patrick began therapy four months ago, "mommy" and "daddy" were the only words he could say. Most children Patrick's age have mastered 50 or 60 words and can string together short sentences.

Special Kids Executive Director Chris Truelove says that, as a result of the economic downturn, his agency is treating significantly more children like Patrick.

"In 2008 our referrals increased by about 24 percent, and I think they've increased, roughly, by about another 5 percent in '09. So we are seeing an increase in the need."

Non-profits step in when for-profit groups don't

Many of the children Special Kids treats are enrolled in a government health insurance program for the poor offered by the state of Tennessee. But the state program pays well below the open market rate for health services, and Truelove says few for-profit practitioners will accept clients with state insurance.

"There's not very many organizations who can or will accept the lower reimbursements," he explains. "And so, our commitment through our ministry and our mission is to take care of the children regardless of money or regardless of a family's ability to pay."

Patrick's father is able to pay, but not quite enough on his modest salary as a teacher. When the family's health insurance also declined to help with the cost of therapy, they turned to Special Kids for assistance.

"If we had to pay the going rate, he just wouldn't be able to get what he gets," Kara Prince, Patrick's mother, says. "They worked with us to get what we could afford."

She realizes that it costs the agency more to provide the service they're getting than what they are paying.

In fact, clients pay about half what their therapy services cost Special Kids to deliver. The ministry solicits donations from individuals, churches, foundations and businesses to make up the shortfall.

Because of the recession, however, contributions to charities have fallen dramatically nationwide.

Lawrence Lavine, president of the Center for Non-Profit Management in nearby Nashville, says Tennessee's charitable agencies are feeling the pinch.

"Their revenue base has dropped by anywhere from a quarter to a third. Nashville and Middle Tennessee are doing better, generally, than other areas of the country; the impact of the downturn being felt later here, and perhaps not as severely."

Cultural charitable programs hit the hardest

Lavine also says the recession's impact varies by the type of charity involved. Organizations providing benevolent services - food banks, health clinics and shelters - are in reasonably good shape. Special Kids' funding was off 10 percent last year, another 5 percent so far this year; painful, but not devastating.

However, non-profits that cater to the humanities - museums and arts groups, for example - are generally in far worse shape. One such agency is the Murfreesboro Youth Orchestra.

The orchestra was formed in 1997, primarily to provide performance experience for children learning to play stringed instruments. It's an opportunity public schools here rarely provide. Executive Director Danny Jones says he has seen a 40 percent decline in contributions from supporters this year.

"The stock market downturn, the loss of income on investments, has just really significantly impacted their ability to give. They're just not able to support as many organizations as they would like, or support them to the extent that they were formerly able to."

To save money, Jones may close the charity's office and conduct business out of his home. But if the situation gets any worse, he says he'll have to consider canceling performances scheduled for later this year.

If that happens, Jones worries that Murfreesboro's young musicians may receive fewer college scholarships.

"It's one thing to play a solo instrument, but quite another to learn the skills and the discipline required in playing in an ensemble such as an orchestra," he explains.

Nashville non-profits doing better than New York's

Lawrence Lavine of the Center for Non-Profit Management says Tennessee's experience is being repeated all around the country, with one notable exception.

"In the New York area, there have been a number of agencies that have suffered. Not only because of the Madoff debacle, but also because of Wall Street's diminished ability to contribute to the community. Around the country more generally, I think the picture is very similar to Nashville."

Of the 700 or so Nashville area agencies associated with Lawrence Lavine's Center for Non-Profit Management, only about 12 have been forced out of business as a result of the economic downturn. Lavine is encouraging the rest of them to plan for what many pundits are now calling "the new normal": a much diminished American economy and a much smaller pool of donations.