Healthy and vital: State's largest nonprofits growing fast

  • Article by: PATRICK KENNEDY and JOHN J. OSLUND , Star Tribune
  • Updated: November 8, 1998 - 10:00 PM

Minnesota's biggest nonprofit organizations grew faster than their private-sector counterparts in 1997, evidence that the not-for-profit sector is sharing in the state's booming economy.

Revenues at the largest nonprofit groups grew 14.7 percent in 1997, according to the third annual survey of the Star Tribune Nonprofit 100. That compares with the 8.1 percent revenue growth for the Star Tribune 100, a ranking of the state's 100 largest public companies.

"It looks like a very healthy and vital sector to me," said Jon Pratt, executive director of the Minnesota Council of Nonprofits.

The findings are consistent with the council's October report showing employment in the nonprofit sector rose 6.5 percent in 1997, outpacing the state's overall job growth rate of 2.5 percent.

This research list and the councils report rely on forms filed at the state attorney general's office, many of which are not available until September or October.

Two primary factors are driving nonprofit growth, said Pratt:

  •   Actual growth: aggressive nonprofit managers attracting more income in the form of fees, grants and charitable donations.

  •   Transfer growth: the movement of public-sector operations into the nonprofit arena.

    Last year's merger of the University of Minnesota Hospitals with Fairview is an example. Fairview's revenues rose more than 84 percent, and 4,500 former public sector employees at University Hospitals now work in the nonprofit sector.

    "There is political pressure not to increase the number of government employees," noted Pratt, and that likely will continue the migration of jobs now in the public sector toward the not-for-profit sector.

    In addition, Pratt said, nonprofit management has simply "come of age." The St. Paul Chamber Orchestra is an example. Financially moribund five years ago, the chamber -- under the direction of President and Managing Director Brent Assink -- employed familiar private-sector tools to orchestrate a turnaround.

    By comparing itself with successful peers across country, the orchestra learned it needed to bolster development staff and special-events fund-raising. Board governance also was revisited. "We needed to establish a sense of administrative capabilities in order for the money to flow," Assink said.

    As a result, the orchestra doubled its development staff, to eight people, and brought in executives with national experience. "The last couple of years have been a wild ride. It has been great," Assink said. "We eliminated an accumulated deficit that had been $1.6 million."

    The 4,775 financially active nonprofit organizations in Minnesota account for 8.3 percent of the state's work force, or one of every 12 jobs.

    The comparable national figure is 6.8 percent, Pratt said. The higher Minnesota figure is explained, in part, by the relatively large number of nonprofit health care providers here.

    To arrive at its list of the Top 100 nonprofit organizations, the Star Tribune surveyed 131 of the state's largest nonprofit groups and ranked each by annual revenues. The nonprofit organizations then were broken down into five categories -- health care, education, social services, arts and culture, and "other."

    The arts and culture category led the pack in revenue growth with an average 28.7 percent increase, followed by the health care group with 15 percent, social services with 10.79 percent, and education with 10.7 percent.

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