With the local unemployment rate estimated between 25% and 30%, out-of-work residents are increasingly relying on nonprofit community services. But those same organizations are seeing double-digit declines in revenue.
Consumer spending is way down because of COVID-19. As a result, many businesses in Hawaii are struggling with falling demand for their services and plummeting revenue.
Nonprofits providing essential services in the community are facing a different problem: a surge in demand for their services, but big reductions in the amount of money coming in.
Most businesses generate revenue in a pretty straightforward way. They provide a service or product and consumers pay them for it.
But the picture is a little more complicated for nonprofit organizations. Private donations, service fees, and government grants are just a few of the ways in which nonprofits raise money needed to keep the lights on and provide services to their communities.
As the COVID-19 lockdown enters its second full month, personal incomes and tax revenue have declined precipitously. Retail-based social enterprises that generate funds for nonprofits have been ordered shut. The result is that many operations have seen their revenue streams dry up in recent weeks.
“It’s kind of a perfect storm for them,” said Lisa Maruyama, president and CEO of the Hawaii Alliance of Nonprofit Organizations. “Anyone who requires people to actually be together in the same room is suffering.”
She notes the case of Goodwill Hawaii, which has been forced to close its network of second hand goods stores. “That’s a huge source of income for them,” Maruyama notes.
In fact, revenue from its retail stores typically accounts for 40% to 45% of Goodwill Hawaii’s $30 million annual budget, according to Katy Chen, co-president and chief operating officer.
“We had to lay off more than 60% of our total workforce,” Chen said in an interview. The company is still paying health benefits for its furloughed retail staff.
Revenue from retail sales helps pay for free community services like job placement, a tax filing clinic, and youth programs. With local unemployment as high as 30%, Chen says demand for Goodwill’s services is higher than ever.
“Our programs are seeing a surge in demand. Our Kapolei office, for example, the number of clients coming in to seek our help tripled in one week.”
Goodwill Hawaii was able to secure a loan from the federal Paycheck Protection Program, which Chen says is allowing the organization to maintain financial stability. Its community services are considered essential and still operating. Salaries for those staff members are funded in part through grants from the state government, and thus far are continuing uninterrupted.
Chen is optimistic that Goodwill stores will be able to reopen with social distancing measures once state and county officials begin to relax the lockdown.
Other nonprofits have been able to continue their operations with less of a disruption. Healthcare provider Waikiki Health operates a network of medical clinics around urban Honolulu, with discounted services for low-income patients.
Chief Executive Officer Phyllis Dendle says patient volume is down by about 30%, which means less money coming in. But she’s committed to not laying off or furloughing any staff.
“While it means we have to tighten our belt, it is possible for us to stay open,” she said in an interview.
Waikiki Health received a community health grant from the federal government to offset unexpected costs related to COVID-19, like an outdoor triage tent for screening patients for virus symptoms. Dendle says she has also applied for the second round of the Paycheck Protection Program.
When the pandemic began, she set two goals for weathering the crisis.
“One was to assure that our staff stay healthy, that no one get sick from working at Waikiki Health. The other was to keep everyone on payroll for as long as we possibly could,” she recalls.
So far, she and Chief Medical Officer Dr. Elliot Kalauawa have accomplished both. There have been no positive cases of the coronavirus among the staff and all of the company’s employees are still going to work, providing healthcare for vulnerable members of the community.
However, there have been substantial changes to clinic operations. Administrative and medical support personnel now operate the COVID-19 triage tent located outside the main clinic. Dr. Kalauawa says that initially, he made the decision not to perform COVID-19 tests due to the possibility of an out-of-control spike in cases and the ongoing shortage of personal protective equipment, or PPE, for providers.
“If we did the nasal swab screenings, we would run through our PPE so fast that, in the next few weeks, if the numbers go up and we actually needed it, we would be short,” Kalauawa explained.
As PPE stocks have increased and social distancing measures have begun flattening the infection curve in Hawaii, Kalauawa says Waikiki Health is now preparing to start testing.
“We’re working out the issues now, but we finally have enough PPE that we feel it's safe for our staff to do testing now,” Dendle said.