The nation's economy; local non-profits struggle
| Download
KPCC business analyst Mark Lacter talks about the state of the nation's economy; he also talks about how local non-profit organizations struggle in the economy.
Steve Julian: On Tuesdays we talk about the latest business stories with Mark Lacter. Mark, is the nation’s economy on the Road to Recovery?
Mark Lacter: Well, yes – maybe, it kind of looks that way.
Julian: Does your wife know about your commitment issues?
Lacter: It’s just not an easy call to make. The one-year anniversary of the Lehman collapse is coinciding with a number of new state and national forecasts that indicate the recession is either over or about to be over, and that we’re seeing the initial signs of economic growth.
But it’s complicated, especially in California. Yes, the housing market is turning around, and manufacturing is picking up, which is good news for an area like exports (a much under-appreciated part of the economy, by the way), and the massive amounts of private sector layoffs have just about run their course. Also don’t forget the ongoing impact of the federal stimulus – this is a massive funding pipeline and it could be a while before all the positive effects are realized.
Julian: Can the economy recover with unemployment in the 12 percent range?
Lacter: That’s the catch. When so many folks are out of work, there will continue to be a skittishness to spend money. And weak consumer spending is certain to put a damper on overall growth.
Here’s another complication: layoffs by state and local governments. Unlike in the private sector, where most of the big job cuts have run their course, government cuts might just be getting started (we’re hearing some ominous news coming out of the city of Los Angeles). So add everything up and the conventional wisdom has the economy not really back in gear until 2011 or even 2012.
Julian: And in case conventional wisdom does not play out?
Lacter: And it often doesn’t... there are two other scenarios gaining some traction. One actually has the recovery turning out to be a lot faster and stronger than expected – that’s a really minority opinion – and the other shows a brief recovery for the next year or so, but then bad stuff will reappear – related mostly to the housing market and commodity prices – and that will lead to another recession by 2011. It’s the double-dip scenario. So, just for sanity sake, I’ll stick with conventional wisdom.
Julian: How bad-off are non-profits?
Lacter: Everyone knew that the past year would be taking a huge toll – and now the Business Journal is reporting a 21 percent drop in assets among L.A. County charitable foundations – but that’s just for the period ended last December 31. You can be sure there were many additional losses during the first few months of 2009, when the financial markets really hit bottom (the markets have rallied since then, but not to anywhere near their earlier levels).
So now comes the hard part, when many of the foundations must pick and choose to see which programs get funded and which don’t. As an example, the Conrad Hilton Foundation says it will have to limit future funding for homelessness in Los Angeles (it lost about $400 million in assets last year).
Julian: What about the foundations led by billionaire philanthropist Eli Broad?
Lacter: They’ve have been able to handle previous commitments, but anything into the future has been put on hold. Then you have the Ahmanson Foundation, which now says it will play more of a supporting role in various programs.
There are a lot of examples. Now, it’s possible the situation will improve if these foundations can recoup more of their losses and return to the days before the recession. But the concern is that these groups will be as gun shy about spending money as consumers have become.
Julian: In the meantime, you have all these local organizations that have relied on foundation money and are now scrambling.
Lacter: That’s right. And some of the organizations provide food, shelter, and health care to people who are poor or sick. Already, we’ve seen Sacramento slash state-funded social service programs, so this represents kind of a perfect storm for folks in the most need. So this will be an important area to keep an eye on.
Julian: Mark Lacter is a contributing writer for Los Angeles Magazine and writes a business blog at LAObserved.com.
blog comments powered by Disqus
