Minnesota nonprofits getting creative to crawl out of COVID-19 financial hole

Nonprofits across the spectrum have tackled the constraints of the pandemic in similar ways with…

Nonprofits across the spectrum have tackled the constraints of the pandemic in similar ways with creativity as the watchword.

The work of compiling the annual Star Tribune Nonprofit 100 is always an exercise in looking backward. But relying on 2019 results for 2021 budgeting might edge dangerously close to sepia-hued nostalgia — not reflecting the effect of the coronavirus pandemic or the racial unrest of 2020.

Minnesota’s nonprofit organizations are now focused on a COVID and post-COVID environment, adjusting finances and staffing while staying true to their missions.

The Science Museum of Minnesota replaced more than 6,000 light bulbs with energy-efficient LEDs while the museum was closed. The Greater Twin Cities United Way held a virtual event for volunteers who filled 40,000 backpacks with school supplies for needy students.

Presidents of the 17 private colleges and universities met more often. The conservation group Pheasants Forever shared ideas and best practices with counterpart organizations for elk, ducks, deer and fisheries. Hospitals had to deal with death and healing while enduring restrictive protocols on movements and visitors.

“In 10 years when we look back at the pandemic, we’ll find it wasn’t just about taking care of the virus,” said Dr. Kenneth Holman, chief executive of CentraCare Health. “It was about taking care of our community.”

Flexibility key to health care facilities

With COVID-19 infections accelerating across Minnesota this fall, CentraCare Health found itself in frightening territory: staff shortages at a time when hospitalizations were doubling.

In addition to clinics and pharmacies, the St. Cloud-based organization operates six hospitals and seven long-term care facilities across central Minnesota — places where the pandemic struck hardest and the need for workers greatest.

Staffing shortages are not new in health care. But the coronavirus pandemic cut a wide swath into people’s home lives. Workers were sick with COVID-19 or quarantining; others had child-care issues or sick family members.

“There were days during the pandemic when we were out over 1,000 people,” said Dr. Kenneth Holmen, CentraCare’s chief executive.

CentraCare, which ranks No. 9 on the list, got creative.

Doctors from its clinics were directed to make rounds at the hospitals. Physical therapists and athletic trainers became door screeners. At a time when its ICU capacity tripled, CentraCare trained a team of flexible workers that could move around and free up nurses and others for complex care.

“The adapativeness of our staff was critically important,” Holmen said.

Last spring, CentraCare’s revenue hit the skids — as it did across all of Minnesota’s health care systems. Noncritical elective care was suspended to preserve personal protective equipment and staffing levels, while the public stayed away from doctors offices over fear of catching COVID-19.

CentraCare’s outpatient surgery decreased 73%. Emergency room visits and hospital admissions both fell 28%.

Rather than laying off staff, the Catholic nonprofit hospital system asked everyone who earned more than $100,000 to take pay cuts and reduced benefits. The organization also developed a liquidity strategy, including reducing expenditures, delaying capital projects and lining up several bridge loans.

“It was one eye on [the] current situation and one eye to the future,” said Mike Blair, CentraCare’s chief financial officer. “That was a helpful way to have some optimism as well.”

Technology will play a big role in the future model. About 3,000 nonclinical workers — such as those in human resources, finance and information services — now regularly work from home, said Amy Porwoll, CentraCare’s chief information officer.

Within four days of Gov. Tim Walz’s emergency stay-at-home orders last spring, video became available for patient visits. By May, about 40% of visits were done via video. More patients are being seen in person these days, so usage has dropped. But some areas, such as behavioral health services, will continue to exclusively use video visits.

As coronavirus cases dropped off some over the summer months, health systems were able to make some money, but not nearly enough to offset losses.

For example, Fairview Health Services, No. 4 on the list, had operating income of $9.8 million in the July-to-September quarter, but lost $162.5 million in the first six months of the year.

Mayo Clinic, Minnesota’s largest nonprofit business and the state’s largest employer, cut pay for one-third of its workers in the spring. It also had furloughs. While Mayo did not record a loss during the first three quarters of 2020, earnings during that time were off 20% compared with 2019.

CentraCare officials don’t expect a “return to normal” until 2022, assuming high rates of vaccinations. Fairview officials said the same.

But in the last month, pay cuts have been restored and cost-of-living pay increases given. The strains on staff remain a priority.

“People use the term post-traumatic stress disorder in nurses and doctors,” Holmen said.

“People can get busy for any number of reasons. This kind of busyness was associated with a mental and physical fatigue that really stretches the human capacity.”

Colleges, universities must work to get new students on campus

More students than usual elected to defer their first year of college due to the coronavirus pandemic as uncertainty swirled over the summer about what campus life would look like during the coronavirus pandemic.

Yet in the final numbers for Minnesota colleges, this year’s deferrals were a low percentage, officials said.

“One of the really fascinating things that we saw, and I’m speaking in general for the private colleges as well,” said Rebecca Bergman, president of Gustavus Adolphus College in St. Peter and chairwoman of the Minnesota Private College Council, which represents 17 private liberal arts colleges and universities in Minnesota.

“Our students wanted to be on campus this year. We offered students the opportunity to go completely online, and a few did … but most of our students wanted to be on campus.”

Still, colleges and universities entered the pandemic with worries about enrollment declines because of demographics. U.S. fertility rates continue to fall, and state demographers have predicted the Minnesota population will grow more slowly in the 2020s.

Bethel University in Arden Hills announced a year ago — before coronavirus hit the U.S. — it needed to cut 10% from its budget through employment cuts and an evaluation of low-performing academic programs.

Augsburg University in Minneapolis in the years before that had already made tough decisions, already changing some programs and changing strategy to attract more immigrants and people of color.

In another sign of uncertainty, according to U.S. Department of Education data, fewer Minnesotan high school seniors filed in the fall for federal financial aid, a worrisome sign for next school year’s enrollment.

For this school year compared to fall 2019, undergraduate enrollment across the Minnesota Private College Council’s 17 schools was down 2.4%, roughly half because of deferrals, said Paul Cerkvenik, president of the council.

The financial effect has been significant. The collective impact of the additional costs because of COVID-19 and the lost revenue across the council’s schools from March 2020 to June 2021 will be about $160 million, Cerkvenik said.

Yet the effects are “at a level that we are weathering it,” said Gustavus’ Bergman. Gustavus (No. 30 on the Star Tribune list) saw a $6 million hit from spring and summer 2020.

Gustavus and the other schools made investments in technology, additional safety and COVID-19 protocols, mental and physical health services and other physical accommodations. Faculty, after quickly changing to online teaching in the spring, converted classes for fall into courses meant to be taught online.

“One of the things that I think we’ve seen collectively, and certainly here at Gustavus, is the level of innovation from a disruptive event like a pandemic,” Bergman said. “People have been creative and innovative in how we deliver education.”

The colleges and universities do have endowments, some more than others. But they are not a cure-all for all financial shortfalls.

“What I don’t think people understand is that much of our endowed funds is restricted to particular areas,” Bergman said. “The unrestricted portion of an endowment is … smaller than you might expect.”

Bergman hopes that campus life will be more normal this fall, but ties her optimism to a vaccine rollout. It’s her hope that students are vaccinated on campus before they go home for the summer.

She also credits the students for adhering to the protocols put in place and setting the standard for things like masking on campus.

“Our students have been really wonderful in terms of compliance with the guidelines for how to effectively live and work and study on campus while the pandemic is going on,” Bergman said.

Social service agencies must find new lines of revenue

Julie Manworren’s first day at the office was March 2. Within two weeks, as the nation came under the grip of the coronavirus, the new chief executive of Volunteers of America Minnesota and Wisconsin was figuring out how to deploy 800 employees and 1,400 volunteers under emergency-lockdown orders.

“I’ve probably learned five years’ worth of things as a result of being stress-tested,” Manworren said.

Volunteers of America is one of the largest health and human services nonprofits in Minnesota and Wisconsin, and ranks No. 92 on this year’s list. With a 2020 budget of $46 million, the faith-based organization serves more than 25,000 people in Minnesota and Wisconsin, including vulnerable children, older adults, people with disabilities and ex-offenders.

No service or program has been left untouched by the pandemic, whether trying to find technology so homeless high school students could continue learning remotely or mobilizing to deliver 200,000 boxed meals to older adults in one of the organization’s long-term care settings.

Additionally, some of the organization’s buildings were damaged and services disrupted during the riots and unrest after police action in the death of George Floyd in Minneapolis and the shooting of Jacob Blake in Kenosha, Wis.

Volunteers of America secured a federal Paycheck Protection Program grant in Wisconsin and raised $200,000 to help buy personal protective equipment for workers. Some of the funds went toward a hazard-pay raise for any employee working in a facility with a positive COVID-19 case.

During the year, the organization sold one of its buildings to Hennepin County, which provided more financial cushion. But other programs were consolidated or terminated, including a Minneapolis day center for Hmong elders.

“When something shakes your world, whether that’s a global pandemic or seeing someone killed on the streets, it’s a hard pill to swallow,” Manworren said. “But there are gifts that come from that.”

One of them, she said, is a renewed focus on diversity and racial justice within the organization. Another forming partnerships, including a recent one with Beacon Interfaith on two supportive housing projects: Prairie Pointe in Shakopee and Vista 44 in downtown Hopkins.

“I think radical collaboration is going to be one of the net results of both of these stressors,” she said.

The Greater Twin Cities United Way has a similarly broad view of how job and wage losses during the pandemic have led to widespread food and housing insecurity. The United Way, which ranks No. 68 on the list, ended up organizing two major fundraising drives this year about specific issues, something it doesn’t often do.

The first raised $5.1 million in COVID-19 disaster relief. The second, a partnership known as the Twin Cities Rebuild for the Future Fund, provided more than $3.4 million to minority-owned businesses damaged in civil unrest sparked by Floyd’s death.

The efforts raised more money than expected, said John Wilgers, who became chief executive of the $61 million enterprise in May.

The Greater Twin Cities United Way funds 157 charities across nine counties. Since spring, the organization’s 2-1-1 resource helpline has experienced a 300% increase in calls for what Wilgers called “new needs” around housing, food and child care on top of COVID-related questions. Working with the Minnesota Housing Finance Agency, the organization also became a hub for people to tap into $100 million in federal housing assistance.

Social-service agencies will continue to experience financial strain in the year ahead, Wilgers said. Revenue streams have been crimped and expensive technology remains a significant hurdle.

But he is also motivated by the creativity he’s seen.

“Organizations have pivoted to do what they’ve always done in new and safe ways,” he said, “to provide services they’ve never provided before, like health screenings or door-to-door service.”

Arts agencies plan for when public spaces open back up

Organizations that rely on big social gatherings have been among those hit hardest by the restrictions of the pandemic. Arts groups, with no audiences, have seen schedules disrupted or canceled. Large conservation groups that rely on social events to raise money and plan projects also were handcuffed.

While the Paycheck Protection Program helped organizations stay open during the pandemic, all had to make tough decisions. The Guthrie Theater in the spring canceled the rest of its season, laid off 79% of its staff and cut it budget 60%.

The Minnesota Orchestra

(No. 87 on the list) had a $8.8 million deficit in 2019 and officials expect a larger one for 2020.

The Science Museum of Minnesota (No. 86 on the list) estimates that revenue was down 10% for the fiscal year ended June 30, 2020, with an operating loss of $4 million. Officials predict 2021’s revenue will be down another $7 million. Employees went from 499 at the beginning of 2020 to 204.

Pheasants Forever, the largest conservation group headquartered in Minnesota and No. 57 on this year’s list, depends on chapter events for fundraising and membership drives.

It has seen 20,000 memberships lapse since the pandemic.

“At the end of the day we will have lost one full year of banquet fundraising for sure, which is about 600 to 700 events,” said Howard Vincent, Pheasants Forever’s president. “Whatever the new normal looks like, it will probably be in July 2021.”

While government grants make up the bulk of the group’s revenue, the organization also needs the fundraising and membership revenue. The majority of banquets, for Pheasants Forever and other wildlife conservation groups, are in late winter and early spring, so will be lost this year as well. And while the group had a good year achieving goals and interest in hunting and the outdoors has increased during the pandemic, it needs these events — and the money they bring in — to fund future efforts and enthusiasm for outdoors activities.

The pandemic has severely affected arts organizations that rely on ticket sales, during a time when many corporate-giving strategies and changed federal tax laws were stressing groups’ fundraising efforts.

But the closing of public spaces has hurt just as much or more the ecosystem of small independent artists and gig workers in the Twin Cities. Besides concerts and plays, a whole season of arts festivals and summer shows were lost.

“When the bottom fell out of the cultural sector in March, it really revealed the gaps in the systems for artists that have really existed for a very long time,” said Laura Zabel, executive director of St. Paul-based Springboard for the Arts, a small nonprofit that works with artists and cultural entrepreneurs, whose Personal Emergency Relief Fund gave out $1.5 million in grants last year, compared to $10,000 in a typical year.

The gaps include safety-net holes in health care and unemployment coverage, she said.

Zabel also worries how the changes in society will affect people’s habits once large events can be held again. “We don’t know the ways that our culture has shifted and changed in terms of what people will be comfortable with and when they will be comfortable,” she said.

At the same time, she said, artists have found new and creative ways to reach out and connect to the community, which has helped people heal after multiple tragedies.

The Science Museum, for example, revamped its website into more digital programming than ticket portal.

And when people come back, neighboring businesses will benefit as well, said Alison Brown, CEO of the museum.

“The wonderful things about museums is that we can reopen our doors and get things going again because we are a multiplier effect, people go to museums and then they go out to restaurants they come and spend the day in the city,” she said.

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