This is the second article in a series exploring San Antonio’s nonprofit sector. Read the first part here.
There are roughly 2,600 nonprofits in Bexar County and 12 surrounding counties that tackle a wide range of issues — from art to education to homelessness.
Without the services they provide, many San Antonians living on the margins would be far worse off, but most nonprofits operate on tight budgets amid growing community need and competition among the nonprofits themselves for funding.
Both public and private funders are routinely overwhelmed with requests — and the pie is shrinking even further this year as coronavirus pandemic relief dollars dwindle.
Though a recent report showed a growing nonprofit sector in 2023, netting $1.7 billion with $15.3 billion in revenues, not all of them are thriving.
Overall, the expenses of small nonprofits — those with revenues below $300,000 — exceed their revenue by about 35%. Forty-seven percent of all nonprofits in the region fall in this category, meaning much of the nonprofit sector is struggling.
Meanwhile, large nonprofits reported operating at an overall surplus of 13%.
“Smaller nonprofits are increasingly burdened while larger nonprofits continue to thrive, highlighting the widening gap between those with access to resources and those with less access,” according to the 2024 State of the Nonprofit Sector report, which was the result of a partnership between The Nonprofit Council, Greater San Antonio Chamber of Commerce and Community Information Now (CI:Now).
The report gives an overview of the health of the sector, which hasn’t been thoroughly checked in the same way since 2017, and helps nonprofits of all sizes identify trends in funding and challenges.
Of the well-established nonprofits that are thriving, they typically share a key similarity: Multiple reliable sources of funding.
“Diversity of funding is critical for nonprofits,” said Scott McAninch, CEO of The Nonprofit Council, itself a local nonprofit. “There’s always funding shifts with foundations, corporate [donors], people and organizations that fund nonprofits.”
If a funder disappears from a nonprofit’s budget that year, it needs to get replaced with another or services or personnel may get cut, McAninch said.
Another funding shift coming in 2025 is the end of federal coronavirus relief dollars, McAninch said. Both Bexar County and the City of San Antonio have already allocated their American Rescue Plan Act (ARPA) funds, which are required to be spent by the end of this year, but the community’s need for social safety net services has not subsided.
While many organizations reported they will be able to transition away from emergency relief to other funding streams, small nonprofits are operating on such razor-thin margins that some may not survive.
A survey of local nonprofits in the report showed that “15% of [88] respondents said they expect to face ‘serious shortfalls’” due to the cessation of emergency relief funding, “which will likely impair their ability to fulfill their mission — and perhaps even to continue operating at all.”
How to get city funding
CI:Now and partners circulated the anonymous survey to nonprofits in the South Texas region last year to ask more in-depth questions about their financial outlooks, operations and challenges.
While the survey was voluntary, not all questions were answered by each respondent and answers didn’t come from a scientifically representative sample, the report acknowledges, the data in the responses “offers valuable insight into key trends providing a starting point for further analysis.”
Forty-five percent of the roughly 130 nonprofits that responded to the Council’s question regarding funding sources reported an increase in government funding over the last three fiscal years. Meanwhile, more than a quarter reported a decrease in donations or gifts and foundation or corporate grants.
The City of San Antonio typically receives funding requests for twice as much money than it has available through its consolidated funding process, which is about $40 million for a two-year cycle, said Melody Woosley, director of the city’s Department of Human Services.
ARPA funding roughly doubled that amount for the 2024-2025 fiscal year cycle, but “there won’t be ARPA as part of this process” in 2026, Woosley said. “So we are anticipating that there’ll be way more requests for funding than funding available.”
Over the years, the city has tried to simplify and streamline applications and compliance requirements, but “it’s not an easy process sometimes, especially for smaller nonprofits or newer nonprofits,” she said. The minimum award amount is $50,000, and the paperwork and compliance procedures both before and after the award can be cumbersome.
“Any contracting with the city can be difficult because there are more hurdles” when dealing with public agencies that are ultimately accountable to the public, she added.
Still, she said, the city offers training for its request for proposal processes and is constantly collecting feedback from applicants on how to improve.
While DHS makes recommendations based on internal and public input, City Council ultimately decides who gets the money. Currently, the city’s nonprofit grant funding is divided into four main subject categories: Children and youth success, senior independence, family strengthening and ending homelessness.
“If council wanted to change those four categories, of course they could,” Woosley said.
Philanthropy is unpredictable
In addition to politics, nonprofits can be affected by changing priorities of corporate or foundation donors. Those can change from year to year, depending on the philanthropic goals of the individual funder as well as where they’ve already invested, explained Barbara Gentry, a former president of the USAA Foundation and the USAA Educational Foundation.
When setting the philanthropic agenda for the foundations, “we looked at the areas that made the most sense to us to support,” said Barbara Gentry, a former president of the foundations. “So it was education, it was medical research, health and human services [and] a very small amount to the arts, because we just felt like as a member-owned organization, that wasn’t where our big dollars needed to go.”
In 2016, the insurance and banking giant that serves active and retired military members and their families narrowed its focus on military family resiliency, but still maintains some funding for local, community-wide issues.
Gentry now chairs the board for Haven for Hope, the city’s largest homeless shelter and resources hub. Haven also may see a decrease in funding in the millions in the coming years due to the ownership change of NuStar Energy LP, which helped establish Haven in 2010.
The nonprofit’s leadership is confident that the loss can be replaced by broadening its donor base and leveraging state and federal funds to close the gap, Gentry said.
The same shifts also can happen in major individual donors, she said.
“Benefactors die,” she said, and their families may have other ideas for how to spend their money. “We should never depend so heavily on any one or two or three donors. We have to understand: Every day we have to build our donor base.”
With more nonprofits entering the marketplace — 109 new ones have cropped up since 2016, per the report — competition for those donors only increases and the money is spread thin, Gentry said.
This was a common theme that emerged in interviews over several weeks with nonprofit leaders: An underlying sense that there may be too many nonprofits in South Texas to enact the kind of meaningful change they set out to accomplish on issues like homelessness and food insecurity.
“There are … nonprofits that could consolidate” in the interest of having a bigger impact, Gentry — and others — suggested.
“Some nonprofit leaders don’t like that idea, but you know, we’re duplicating [administrative costs],” she said. “And when there’s not enough dollars to go around, that doesn’t seem to me like a smart thing to do.”
The third story in this series, publishing Jan. 16, will explore nonprofit consolidation. Stay tuned for part three of the series.
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