They're on a roll

  • Article by: JOHN J. OSLUND and PATRICK KENNEDY • , Star Tribune staff writers
  • Updated: December 22, 2007 - 4:56 PM

Revenue grew more than 9% at the state's largest nonprofits. But so did expenses.


Gene Holden, left, and Dick Ashland, right, are retired Unisys programmers who now volunteer their time to repair wheelchairs and walkers at Goodwill-Easter Seals in St. Paul.

Photo: Glen Stubbe, Star Tribune

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Overall revenue for the 100 largest organizations grew 9.2 percent in 2006, up from 7.6 percent from the year before. However, expenses rose at a slightly faster pace, as they did in 2005. They climbed 9.5 percent in 2006, compared with 7.9 percent in 2005.

Minnesota's 100 largest organizations posted $34.7 billion in revenue and $33.4 billion in expenses in 2006, the most recent year for which comparable figures are available. In 2005, they had revenue of $31.8 billion and expenses of $30.5 billion.

The health care sector dominates the Nonprofit 100. Because of state law and regulatory policies, HMOs and most hospitals in Minnesota are incorporated as nonprofits. As a result, health care nonprofits account for 53 of the top 100 organizations in our survey and 90.5 percent of the revenue.

Altogether, there are more than 3,600 nonprofit employers in the state, according to the Minnesota Council of Nonprofits. They employed nearly 270,000 workers in 2006, one in every 10 in the state. The national average is about 7 percent. Nonprofits' jobs -- which include many health care-related occupations -- have been growing at about 3 percent annually since 1997, the council said. That compares with a 1 percent overall job growth rate for the Minnesota economy.

While private-sector hiring has slowed, especially in the manufacturing, housing and construction sectors, "hiring remains very active in the nonprofit sector,'' said Jon Pratt, executive director of the nonprofits council. "The nonprofit economy doesn't feel a recession until a year after the general economy'' because of the year-ahead funding cycle at most nonprofits.

Health care

As private-sector and government employers struggle to contain health care costs, revenue growth has slowed at hospitals, clinics and health insurance providers. In 2006, the average revenue increase for a health care nonprofit was 8.4 percent. Although that's up from the 7.6 percent growth rate in 2005, it's moderate by recent standards. For example, revenue grew 8.7 percent for this group in 2004 and 11.2 percent in 2003.

Expenses, which rose 9.2 percent in 2006, once again outpaced revenue growth in the sector.

At health insurance provider Blue Cross and Blue Shield of Minnesota, the largest nonprofit on the list, revenue grew 10.5 percent to $7.9 billion. Although Blue Cross had an operating loss of $45.4 million, the company's net income, including investment gains, was $4.9 million.

At the Mayo Foundation, which operates the largest health care services provider on our list, revenue jumped 9.7 percent to $6.7 billion.

Nine health care nonprofits spent more in 2006 than they generated in revenue, including Blue Cross and Medica; in 2005 the figure was 10.

Just two of the health care organizations surveyed had revenue declines in 2006, compared with seven the year before.

At Medica, revenue dropped 16.4 percent to $1 billion. HMOs such as Medica have struggled in recent years as employers trying to curb health care costs turn away from HMOs and toward less-expensive insurance.

Social services

Minnesota's social services organizations got some relief in 2006 after a tough 2005 that saw revenue drop more than 3 percent. Revenue in 2006 rose an average 4.5 percent among the 29 social services nonprofits surveyed while expenses rose an average 2.9 percent.

Jay Kiedrowski, a senior fellow with the Public and Nonprofit Leadership Center at the University of Minnesota's Humphrey Institute of Public Affairs, said that with the "Katrina effect'' behind them, and a strong 2006 economy, "those two factors set the nonprofits up pretty well for the year.'' Overwhelming public response to the victims of Hurricane Katrina in 2005 influenced giving patterns at some nonprofits in 2005.

Revenue fell year-over-year at 10 organizations in 2006 compared with 12 in 2005. Meanwhile, 10 social services nonprofits spent more than they generated in revenue last year, compared with 11 in 2005.

At the Greater Twin Cities United Way, the largest social services nonprofit on the list and a key provider of grants to smaller nonprofits, revenue dropped 1.4 percent to $88.6 million. The decline came after a record fund drive in 2005. The 2006 fund drive fell slightly short. CEO Lauren Segal said last week that the United Way is on track to meet its 2007 goal of $87.8 million.

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