Nonprofits Hit Hard by COVID-19

Nonprofits Already Hit Hard by COVID-19

Even at this early stage in the COVID-19 pandemic, nonprofits are already reeling from its effects. And they promise to be devastating. It’s too soon to predict the ultimate impact, but it’s a fair projection that economic ruin will fell many organizations – unless they are saved by patrons funders and legislators.

Performing Arts Hard Hit

Performing arts organizations may be the first victims due to their high reliance on ticket revenue. In recent weeks, thousands of plays and concert performances have had to been canceled across the nation. Some arts organizations have already indicated that the cancellations have created an existential crisis. Take, for example, the experimental opera company, The Industry, which produces one site-specific opera every other year. Its latest work, Sweet Land, opened a four-weekend run on February 29 to rave review. Less than two weeks later, a Los Angeles County ban on large public gatherings forced The Industry to shutter the last half of the opera’s run. This has deprived it of more than 50% of the projected box income for Sweet Land, imperiling the company’s existence.

One of the interactive sets of Sweet Land, shuttered early by COVID-19

It’s not just the company that suffers when a theater, opera or dance company has to cancel performances. Artists, crew and staff are out of work and don’t get paid. Vendors who forebear payment until ticket sales are realized don’t get paid. Landlords may not get the rent owed them. And local economic activity normally generated by artists and patrons withers, hurting local merchants.

COVID-19 Affects All Nonprofits

Arts organizations are certainly not the only nonprofits affected. Extend the metaphor to social service agencies striving to remain open and provide services, and you’ll see the threat to both the nonprofit sector and the general public.

If the public health emergency lasts months instead weeks, as national leaders now predict, we may see vast devastation across our sector. Should boards start preparing? Absolutely. For those organizations hardest hit, it may mean liquidation. Those nonprofits hurt but not existentially may be able to restructure under Chapter 11 bankruptcy. Board members must start meeting with creditors and grantors now and plan for belt tightening in order to best ensure their nonprofits’ survival.

What Can Be Done to Help?

There are some things that can be done by others to avoid these worst-case scenarios. Ticket holders of cancelled performances can forego refunds (and get a charitable contribution in exchange). Grantors and government agencies should meet their funding commitments. (At least one large municipal grantor plans to withhold pending grant commitments invoking force majeure!)  Legislators must act now to make funds available to shore up nonprofit revenues. Another helpful action would be to temporarily ease some regulations. Indeed, I specifically call on the California legislature to repeal AB 5 (which basically does away with independent contractors) or to at least suspend its enforcement for a time to help nonprofits navigate these uncertain times with greater flexibility.

Donors must help, too. Philanthropists and foundations must make grants to local charities to help them weather the funding gap, both now and when this is over. Otherwise some of our most important and beloved nonprofits will die. I especially call on those with donor advised funds to be especially generous. This is the time to mobilize charitable funds and assets set aside for a rainy day.

Those who will personally be hurt by the growing crisis can still do something. Say “thank you” to anyone who helps make your world a little better, such as the food pantry worker or the day care provider. Thank your mail carrier, delivery driver or supermarket clerk. Tell them how much you appreciate their working to help keep society going – and make your life more tolerable. You will be rewarded with a great smile and a heartfelt thank you in return. You both deserve it.

Might There Be a Little Silver Lining?

With good fortune, most of the nonprofit sector will come out of this crisis intact. Perhaps there will even be a silver lining. As performer and activist La Doña said this on Weekend Edition: “How are we going to bounce back from this? Just as, after any type of huge economic blow, you see a huge upsurgence of the arts.” Like La Doña, let’s all look forward to being part of it.

NOTE: The information contained herein is not intended to be legal advice and the reader should know that no Attorney-Client relationship or privilege is formed by the posting or reading of this article which is also not intended to solicit business.

Casey Summar, Partner, The Law Firm for Non-Profits, 4705 Laurel Canyon Blvd, #306, Studio City, CA 91607

One Response to “Nonprofits Already Hit Hard by COVID-19”

  1. Jeffrey Duggan

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