Like for-profits, Minnesota's nonprofit economy is booming

  • Article by: PATRICK KENNEDY and JOHN J. OSLUND , Star Tribune
  • Updated: November 27, 1999 - 10:00 PM

Call it Minnesota's other booming economy.

The state's biggest nonprofit organizations grew 8 percent in 1998 -- not quite as fast as their private-sector counterparts, but still strongly enough to show that the not-for-profit sector remains a vital, growing economic force.

The revenue gain for the organizations surveyed in the fourth annual Star Tribune Nonprofit 100 compares with an 8.8 percent revenue growth for the Star Tribune 100, a ranking of the state's 100 largest public companies.

"There is a new worldwide view that a mature market economy will have a healthy [nonprofit] sector," said Jon Pratt, executive director of the Minnesota Council of Nonprofits. That's certainly the case in Minnesota, where nonprofits provide one in 12 jobs -- the highest percentage in the nation.

The nonprofit growth findings are consistent with the council's October report showing employment in the nonprofit sector rose 4.2 percent in 1998, outpacing the state's overall job growth rate of 2.79 percent and the national rate of 1.5 percent.

The 4,410 financially active nonprofit organizations in Minnesota account for 8.4 percent of the state's work force, or 209,664 employees. The most comparable national figure is 6.9 percent, Pratt said. The higher Minnesota figure is explained, in part, by the relatively large number of nonprofit health care providers here. About two-thirds of the state's nonprofit jobs are in hospitals, nursing homes and other nonprofit health care organizations.

And like their for-profit counterparts, nonprofits are consolidating -- a trend that is expected to continue. Joseph Galaskiewicz, a University of Minnesota sociology professor, found increasing concentration in the nonprofit sector in a recent study. In 1980, Galaskiewicz found that nonprofits with annual expenses exceeding $10 million accounted for 63 percent of all nonprofit expenses. By 1992, the figure was 76.8 percent.

"On average, the numbers are going up," he said. One of the obvious reasons is that charitable giving is rising, he said. Minnesota foundations and corporate givers increased grants to nonprofits by 57 percent between 1994 and 1997, according to the Minnesota Council on Foundations.

The Star Tribune list and the council's report rely on forms filed at the Minnesota attorney general's office.

To arrive at the list, the Star Tribune surveyed more than 130 of the state's largest nonprofit groups and ranked each by annual revenues. Then they were placed into five categories -- health care, education, social services, arts and culture and "other."

The social services category led the pack in revenue growth with an average 10 percent increase, followed by the arts and culture group (6.9 percent), health care (5.9) and education (4.8).

Health care  

Health care nonprofits occupied the top 11 spots on the Star Tribune list. The Mayo Foundation remained No. 1 on the strength of its 12.6 percent revenue gain, edging out Allina Health System.

Larger health care nonprofits tended to have higher expenses relative to revenues than the group as a whole. The expense ratio (costs as a percentage of revenues) was 96.8 percent for the Top 10, meaning they spent 96.8 cents for each dollar of revenue. The category includes health insurers, HMOs, hospitals and long-term care providers.

Ten health care nonprofits spent more than 99 cents for each dollar of revenue. At seven of those, expenses exceeded revenue. Last year, 14 spent more than 99 cents for each revenue dollar, and six had expenses exceeding revenue.


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