Impact of Nonprofit Sector: More than Most People Think

Do you know the impact of your nonprofit organization?

Chances are, I probably got you thinking about the people your organization benefits, its core mission.

The public recognizes that reputable nonprofit organizations benefit the people they serve. However, people tend not to think beyond that impact. Even among nonprofit professionals, maybe even you, the focus tends to be on those served directly.

However, nonprofit organizations have a far broader impact. Yes, hospitals heal patients; universities educate students; symphony orchestras entertain audiences; museums expand our minds; disease research foundations seek cures. But, beyond their core missions, nonprofit organizations do much more for society.

Despite being tax exempt, nonprofit organizations generate tax revenue. They employ people, and those people pay income taxes and sales taxes. They help support local businesses such as furniture retailers, office supply stores, restaurants, hotels, and many others. Those businesses, in turn, pay taxes and employ staff.

Simply put, nonprofit organizations have a profound economic ripple effect. Their benefit to society goes far beyond those they serve.

Recently, the Greater Philadelphia Cultural Alliance sought to quantify the economic impact of the arts and cultural nonprofit organizations in the Philadelphia area. The result of GPCA’s effort is the report The Arts, Culture and Economic Prosperity in Greater Philadelphia. 

Generating 44,000 full-time equivalent jobs, Philadelphia’s arts and culture sector has a profound $3.3 billion impact on the region’s economy including $1 billion to local residents in the form of paychecks and household income and $169 million in tax revenues for state and local governments, according to the research report.

The report also compares Philadelphia against 181 other cities, regions and communities to show how Philadelphia and its cultural community stack up against the rest of the country. Among participating regions, Southeastern Pennsylvania’s cultural sector ranks first in job creation, accounting for 11 jobs per thousand residents, nearly double the national average.

GPCA says that key findings in the report are:

Southeastern Pennsylvania’s cultural organizations and their audiences have a combined impact of $3.3 billion on the region’s economy. It starts with $1.4 billion of direct expenditures by organizations and audiences. This first round of spending triggers subsequent rounds of spending and results in an additional $1.9 billion in indirect expenditures locally.

Arts and culture supports 44,000 full-time equivalent jobs throughout the region, supporting workers in nearly every industry and in every community.

Arts and culture returns $1.04 billion in household income to Southeastern Pennsylvania residents. Approximately half goes to people living in the City of Philadelphia, and $349.5 million is divided up among residents in Chester ($60.6 million), Bucks ($65.5 million), Delaware ($103.5 million) and Montgomery ($119.9 million) counties. The remainder ends up in other Pennsylvania counties and to out of state residents in New Jersey and Delaware.

Cultural tourism is a valuable asset for the region, injecting nearly $230 million in direct spending into the economy. Though visitors make up 29 percent of cultural attendees, they account for nearly 44 percent of total audience spending. On average, cultural visitors spend nearly twice as much as local residents per excursion ($45 vs. $24 per person).

Arts and culture are a boon to the restaurant and hospitality industries. Cultural audiences spend $237.8 million on meals before and after events, and another $84.3 million on hotels and overnight lodging.

The report breaks down economic impact by cultural discipline. The region’s Science and Nature organizations have the largest impact on the sector with a total economic impact of $658.1 million. This is closely followed by the History ($616 million) and Museums, Galleries and Visual Arts ($604 million). Performing arts disciplines have a combined economic impact of $675 million, with Music as the highest performer with an economic impact of $242.2 million. Theater and Dance generate $242.2 million and $61.5 million in economic impact respectively.

Staff at Philadelphia arts and cultural organizations can use a special calculator at the GPCA website to analyze their organization’s economic impact. It’s an amazing tool that can help organizations enhance their case for support.

To prepare the report, GPCA gathered data on spending, employment, attendance, and other relevant areas for 345 local arts and cultural organizations through the Pennsylvania Cultural Data Project. Additionally, the GPCA collected 2,039 audience spending surveys from patrons at 78 arts and cultural events held by 53 organizations throughout 2011.

The research project was part of GPCA’s participation in American’s for the Arts’ national “Arts and Economic Prosperity IV” study, which measured the impact of arts and culture in 182 different communities throughout the country. The economic modeling for this project was developed by economists at the Georgia Institute of Technology, and a consistent modeling process was used for all participating communities. Additional analysis was done by the GPCA in order to map and illustrate distribution of Household Income, track the impact on other industries, and to provide the economic impact of specific cultural disciplines.

While looking at one community and one nonprofit subsector, the GPCA report demonstrates that nonprofit organizations have a massive impact on society beyond core mission fulfillment. These are benefits that nonprofits do not talk about often enough. When making the case for support, particularly to corporate and government sources, it can be beneficial to talk about the broader impact of the organization.

While core mission should always be the center of any case for support, discussion of economic impact, particularly during these challenging times, can help funders better understand how their support will be leveraged to provide tremendous, broader economic benefit to society. That can possibly attract more funding.

It would be nice if other nonprofit subsectors engaged in similar studies. And, it would be remarkable if someone could do a study that examines the intangible, quality-of-life impact that nonprofits have on a community. But, while more information would certainly be useful, at least the GPCA report and the American’s for the Arts project help us to better understand the role and impact of arts and cultural organizations.

That’s what Michael Rosen says… What do you say?

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