Analysis: 'Economic Life' missed nonprofits' impact

Editor's note: As part of our ongoing "Economic Life" coverage, we asked two observers to give their analysis of Bridge's in-depth look into the state's economic performance and job prospects.

We’ve all seen the lists that show the growing and shrinking sectors of Michigan’s economy. Policy-makers use these inventories to help them chart the direction of our state’s economic policies.

However, time and again, the nonprofit sector is overlooked as part of Michigan’s economic landscape. This is a problem because, as we have seen with the recent elimination of the charitable tax credit, for large sections of the nonprofit sector, policy-makers are creating barriers to growth for one of the few job-creating industries inMichigan.

The Council of Michigan Foundations and the Michigan Nonprofit Association looked into the impact ofMichigan’s “Great Recession” on the sector and found some good news. It shows why government -- at all levels -- and the nonprofit sector must work more effectively together.

During the time period of the report, we found the nonprofit industry was virtually recession-proof. When the vast majority of Michigan employers were cutting staff and salaries, nonprofit organizations added approximately 11,500 jobs to the state’s economy and employees saw their wages increase by 14.7 percent, compared to numerous sectors that saw wages freeze or decrease.

In 2009, the 374,537 nonprofit employees in Michigan earned nearly $14.5 billion in wages, which translates into an estimated $90 million of personal income tax revenues forMichigan’s state and local governments. And that does not take into account the sales tax revenue generated by nonprofit employees and their families. These are significant bright spots inMichigan’s economic outlook!

Nonprofits are providing jobs, educating the next generation, caring for the most vulnerable and ensuring our quality of life while effectively and efficiently helping government reduce its costs to the taxpayer.  Government provides only a portion of what it costs for nonprofits operate -- the rest comes from philanthropy or entrepreneurial fee for service activities.

How much does this save?  We don’t know because, unlike retail and manufacturing, government does not track the economic activities of the nonprofit sector. Still, the sector generates jobs that feed families and generates taxpayers.  Because policy-makers do not have this data as readily available to them as compared to the data for the other industries, including IT, they make job-killing decisions in the form of tax policy that discourages individual giving.

Bridge's “Economic Life in Michigan” project did the same as all other broad economy studies do -- overlooked the nonprofit industry.  Instead, the nonprofit data was likely lumped into numerous different categories such as “Health care and social assistance.”  There may be a large number of nonprofits in this category, but it does not capture the full economic contribution of Michigan’s nonprofits.  In turn, this does not give the data guidance needed by lawmakers.

Nonprofits occupy a unique place in Michigan. We provide human services; educate, promote the arts and culture; and ensure our social safety net for the common good.  But for nonprofit organizations to fulfill their missions, they also must be employers, contractors and customers contributing greatly to Michigan’s economy. The state and economic researchers must do a better job of showing the significant economic impact that nonprofits have on Michigan’s economy.

This will give legislators an idea of the potential to grow a sector that contributes so much to our state.