[Editor’s note: With this article, we conclude our three-part series on the economic downturn and its effect on bar associations and foundations. There’s an expression that says, “The cobbler’s children go barefoot”—meaning that those who provide for others often find themselves having to make do. The first article in this series looked at how bars were helping attorneys and the justice system in this difficult time. Now we bring the series full circle and consider how associations and foundations themselves are coping with tighter budgets and limited resources. Where are the holes? And how are the “cobblers” patching them?]
In his 30 years at the North Carolina Bar Association, through boom times and lean years, Allan Head had never seen a staff member get a pink slip—until this past year.
As the NCBA Finance Committee pored through the association’s books last year, it came to a conclusion: Three full-time positions and one part-time slot had to be eliminated to tighten an unsteady budget. While two full-time positions and the one part-time post were lost through attrition, Head had to lay off a full-time staffer.
“It was a pretty significant event for the North Carolina Bar Association,” Head says. “It was a wake-up call for everyone on our staff how fortunate we were to have a job, and to have salary increases and the benefit packages we have. There was a greater appreciation for the job.”
Although the NCBA managed to salvage the lost position months later, the job losses and the thorough financial review that precipitated the changes were examples of how a soft economy has affected bar operations. Associations large and small, mandatory and voluntary, have struggled to keep their costs under control while offering programs for their members—themselves struggling with their own economic woes. Low interest rates, an uneven stock market, and a drop in charitable contributions have combined to put an economic pinch on bar foundations as well.
Through a combination of measures ranging from dues increases to outsourcing, most bar associations have managed to avoid large-scale layoffs and decreases in services, says Tom Pyrz, executive director of the Indiana State Bar Association and president of the National Association of Bar Executives.
While most associations pride themselves on running lean operations, Pyrz says, the most recent economic downturn has forced many to take an even closer look at their operations and services, putting a greater emphasis on the value they can deliver for members. For bar foundations, it’s meant a closer look at the organizations and programs they fund.
The overall economic picture is perhaps not as bleak as it was just a few months ago, and some in the association and foundation world expect an upswing soon. The U.S. gross domestic product, one indicator of the nation’s financial health, grew at a 7.2 percent annual rate in the third quarter of 2003, compared with 3.3 percent in the second quarter. Experts noted that this was the biggest quarterly rise since the first quarter of 1984. While some warned that this growth could not be sustained unless the unemployment rate goes down, others noted that the third-quarter rise could make businesses confident enough to increase their hiring—which could eventually bring welcome relief to all economic sectors, including the nonprofit world.
The down times have prompted different approaches to economic survival, with partnerships with corporations, other types of nonprofit organizations, and other bar associations all getting a closer look. Association and foundation leaders say they’re looking wherever they can to find more economical ways to deliver the services and programs their members are looking for now more than ever. And whatever happens in the months ahead, some say they’ll continue to benefit from the lessons they’ve learned during these lean times.
Running a nonprofit in lean economic times—whether it be a bar association or any organization—can be just as challenging as running a for-profit venture. A study released earlier this year by the American Society of Association Executives found that the economy has negatively impacted many associations and has prompted them to take a variety of approaches to survive and thrive. Among the members who responded to the survey:
--44 percent have reduced operating expenses.
--22 percent have been forced to use reserve funds.
--22 percent have reduced or eliminated programs and services because of declining revenues.
--19 percent have instituted a hiring freeze.
--17 percent have initiated a salary freeze.
While the economy was already weakening before September 11, 2001, the tragedy accelerated the decline and has made a difficult financial situation that much more challenging, says Chris Vest, an ASAE spokesman. Many associations soon found that their corporate members were cutting costs—and employees—while individual members were either out of a job or getting by on meager pay increases.
That helps explain one of the most significant findings of the ASAE study: Sixty-nine percent of trade and professional associations said they made at least one organizational change as a direct result of the faltering economy since September 11. Bar associations were no exception.
“We’re inching forward,” says Breck Arrington, executive vice president of the 5,500-member Virginia Bar Association. “Any voluntary bar under the current economic climate has had to work harder to keep membership ahead or steady.”
The State Bar of California narrowly avoided a $4.6 million budget deficit it saw coming in fiscal 2004 by laying off 17 employees, shifting funds, and making a greater push for nondues revenue. Meanwhile, the Illinois State Bar Association reduced some staffing and programs, saving a total of $300,000 to help balance the budget.
In New York, the city arguably hardest hit by September 11, the New York County Lawyers’ Association has been faced with two straight years of declining revenue and CLE attendance, says Marilyn Flood, executive director. Although the NYCLA has avoided layoffs, “It’s always a juggle trying to allocate financial resources and scarce human resources,” says Flood, who in January will become counsel to NYCLA and executive director of the New York County Lawyers Association Foundation.
Smaller bars have also felt the pinch. The 800-member Northern Kentucky Bar Association, faced with a 20 percent plunge in membership in 2002 and a $50,000 budget cut, eliminated the two support staff positions that remained after an earlier downsizing, outsourced its accounting functions, and cut the size of its monthly magazine by nearly a quarter, says Sharmaine McLaren-Fink, former executive director of the bar.
In Indiana, Pryz has seen an increase in the number of members who are paying their dues late, a story he also hears from other bars. “We’ve probably had more people ask us for payment plans than ever before,” says Susan Lengal, executive director of the 1,600-member Akron (Ohio) Bar Association.
The 1,800-member State Bar Association of North Dakota, already grappling with an aging and declining lawyer population, has seen the interest it earns on investments drop from $35,000 in 2000 to less than $12,000 in 2003, says Executive Director Christine Hogan. The bar is deferring major purchases and has lost two staff positions by attrition. A proposal to raise dues by $25 a year over the next three years was rejected by the membership.
“We’re trying to make do, and I think I’m stretched and my staff is stretched as far as we can go,” Hogan says. “Our morale is good, though. We’re in this together.”
Worries for the foundations
Perhaps most affected by declining interest rates have been bar foundations, particularly those that rely on IOLTA revenue to help fund their grants. Declining IOLTA revenue forced the North Dakota Bar Foundation to cut funding for programs that previously relied solely on the foundation’s IOLTA funds.
In Mississippi, annual grants by the Mississippi Bar Foundation have plummeted from nearly $500,000 a few years ago to about $125,000 in 2003, says Larry Houchins, secretary/treasurer of the foundation and executive director of the Mississippi Bar. Funding to many programs was cut back or eliminated, as was the case for a mock trial competition sponsored by the bar’s Young Lawyers Division.
“If rates don’t go back up soon, it’s going to be just as bad next year,” Houchins predicts.
And it’s not just IOLTA woes that are troubling foundation directors. A survey of nonprofit fundraisers last April by the Center on Philanthropy at Indiana University found that more than 85 percent of those questioned said the economy was having a negative or very negative impact on charitable giving. The center’s Philanthropic Giving Index was at a five-year low.
“Challenging times continue for nonprofit fundraisers in large part because of the poor economic circumstances affecting the country,” Eugene R. Tempel, executive director of the Center on Philanthropy, said when the report was released. “Fundraisers are being hard pressed to diversify funding sources to support important initiatives and to be ever more efficient in the work they do.”
A constant work in progress
For association and foundation leaders, the effort to tackle the economic problems while keeping operations and services at high levels is often an intensive, ongoing one.
One of Allan Head’s first tasks after getting the directive to “streamline personnel” from his board was to establish a three-member committee of top association leaders. The committee then extensively interviewed all department heads to review staffing and service levels. “This was not just a look at reduction in the workforce, but it was also to see how strategically we were positioning people,” Head says.
At the NKBA, McLaren-Fink and her only other full-time staffer must submit detailed budgets to the board of directors for virtually any significant spending proposal. “That is a new step that we have instituted because of the economy,” she says. “There’s no more speculation, ‘I think it’s going to cost about X dollars to mail this.’ Everything is bid out now. If we want to print something, we send it out to four or five bidders and take the lowest bidder, period.”
McLaren-Fink is a big believer in outsourcing, for reasons that include and also go beyond economics. “When I came on board the bar was paying someone $12.60 per hour, approximately 30 hours per week, with partial benefits, to perform this function,” she explains. “This position represented nearly $23,000 of our annual payroll expense.
“I now outsource this function for $650 each month—no benefits costs—which reduced this function to $7,800 annually, a savings of over $15,000 in the first year.
“And because we outsource with an accounting firm, who specializes in this type of service, our bookkeeping is more accurate and timely.”
Akron’s Lengal—who prides herself on running on a tight budget—meets twice a month with internal directors to make sure there are no financial surprises. The bar’s Finance Committee, meanwhile, “is always monitoring things and planning ahead,” she says. “We don’t want to wait for the economy to be bad to make a tough decision.”
Ways to work together
Most bar executives, says Indiana’s Pyrz, are like Lengal: They work to keep expenses lean during good times and bad. And many, like Lengal, are taking innovative approaches to filling the financial gaps while delivering services that members need.
For Lengal and others, partnering with other bars and organizations on a variety of programs is becoming more of a cost-saving way of life, one that leads to rich rewards that go beyond finances. The Akron bar and Ohio’s six other large metropolitan bars have formed the Ohio Metropolitan Bar Association Consortium, sharing in programs such as Armchair CLE, a self-study Internet-based program launched three years ago. Leaders from the seven bars recently went on a two-day retreat, developing plans for other possible joint ventures.
“We have seven strong and healthy metro bars, and we can become stronger by working together,” Lengal says. “It’s not done out of dire circumstances. It just makes good business sense to utilize your resources. And if it means you can spread your resources by cooperating with somebody else, it should be done.”
Historians had to go back more than a half-century to find the only other time that the Virginia Bar Association and the West Virginia Bar Association held a joint semiannual meeting. The summer meeting at a West Virginia resort featured CLE sessions for members and an opportunity to network and share ideas. “I think there was a constructive synergy in doing this,” says the VBA’s Arrington. “We’ll certainly look at doing this again.”
In New York, the NYCLA and the Bar Association of the City of New York have made their law libraries open to each other’s members since September 11 and have worked together on a variety of community advocacy programs, Flood says. The bars are also exploring a possible joint book publishing arrangement. “Every time we work together, it deepens the commitment to do it again,” Flood says.
And it’s not just bar associations that are working with each other. The South Carolina Bar Foundation worked with the Community Foundation Serving Coastal South Carolina to secure funding from the national Ford Foundation for the Heirs’ Property Preservation Project—a program designed to provide educational, legal, and advocacy services for Low Country South Carolinians in danger of losing their land.
“We’re looking to outside resources more and more to expand our reach,” says Faith Rivers, executive director of the South Carolina Bar Foundation.
Working with corporations has helped provide for the day-to-day operations of the NKBA, as well as providing member benefits, McLaren-Fink says. After losing 200 of its 900 members from 2001 to 2002 (some because old records hadn’t been cleaned up in a while), the association conducted a survey. “Our members told us that we raised their dues but didn’t provide any additional value,” she says.
That information led to the establishment of the bar’s Preferred Partner Program. Working with businesses such as LexisNexis and Cincinnati Bell, the NKBA provides its mailing list to companies in exchange for member discounts, sponsorship of events, and rebates to the association itself for goods and services. In one instance, the bar arranged for development of its Web site by a preferred business.
“Selling your membership works. We’re the upper echelon for the target audience,” says McLaren-Fink. “I don’t believe many memberships look at themselves as being as marketable as they really are. Just hearing that [the Preferred Partners] could mail to 900 attorneys ... their eyes lit up.” The discounts help members perceive the program as a real benefit to them; since starting the Preferred Partner Program and enhancing member services offerings, the NKBA has gained back nearly half of the members it lost, McLaren-Fink adds. Key to this effort, she notes, is that by eliminating support staff, she was able to hire then-recent college grad Brandie Ingalls as the bar’s first director of membership services.
Prove your worth
One recurring thought for many bar leaders as they pore through their ledgers, analyze their personnel, and review programs and services during these economically challenging times is the theme of relevance. In an era of multiple service organizations, shrinking time commitments, and often-scarce financial resources, careful self-review is a necessity, many leaders say.
“Making membership worthwhile is probably at the top of our agendas,” Lengal says of her bar and the other Ohio metro bars. “I think we all worry about it.”
The 8,000-member Hennepin County (Minn.) Bar Association lost the equivalent of one full-time position and cut some programming after a careful review by staff and members, says Larry Buxbaum, the executive director.
“Our president has emphasized that all of our programs have to be looked at with an eye toward, ‘How does this benefit our members?’ ” Buxbaum says.
For the North Carolina bar, it was important to provide additional services even during lean times, Head says. That’s why the NCBA accelerated its drive to put more CLE offerings on the Internet (it now has more than 200 online) and joined the coalition of bars participating in Casemaker.
“We are committed to providing the services that members need,” Head notes.
The self-analysis, change—and in some cases, job-cutting—that have become more prevalent over the last few years are not really a bad thing, says Breck Arrington of the Virginia Bar Association.
“Bar leaders have to become more involved in communicating the value of the organization, both internally and in programs that are helpful to lawyers,” he says. “We’ve always had to have pretty austere operations. This leaves you with a more nimble bar that can react to the environment more quickly.”
And for many of today’s bar associations and foundations, nimble is not a bad place to be.
Good news and bad news for Delaware
Delaware is small, but the difference between the First State’s bar association and bar foundation is large.
While the Delaware State Bar Association appears to be weathering the economic storm by keeping membership strong and adding programs, the Delaware Bar Foundation has virtually exhausted its reserves and is granting less than half the money it provided just a few years ago.
“What we offer are good things for bad times,” says Rina Marks, executive director of the 2,600-member voluntary association. “We’ve doubled our CLE income in the last year.”
Although spending is decidedly tight, according to Marks, Delaware’s large corporate base has meant that few lawyers have lost jobs in the economy. The economic downturn of the early 1990s had a bigger negative impact on attorneys in her state, she adds.
The DSBA enjoys a membership rate of 95 to 97 percent among the state’s lawyers, a lofty number for a voluntary bar. The association’s relatively low cost of $25 to $35 per hour of CLE is not only attractive to Delaware lawyers looking to keep CLE costs low in tight times, but also those from neighboring New Jersey, Pennsylvania, and Maryland, Marks says.
Like many homeowners, the association has also benefited from low interest rates. A $1.2 million mortgage taken out on the DSBA’s new headquarters three years ago was refinanced at a lower interest rate, allowing the mortgage to be paid off early, Marks says.
But the low interest rates that have helped the DSBA have hit the Delaware Bar Foundation hard, says Susan Cobin, the foundation’s executive director. “We’ve seen interest rates [on investments and IOLTA] drop from 4.5 percent to 1 percent,” she says. “We’re dipping into reserves to fully fund our grantees.”
Despite a slight bump up in contributions from DSBA members (thanks to additional solicitations) and renegotiated lower banking fees, the foundation continues to face a soft charitable giving environment and meager investment earnings. And it comes at a time when demands for services—such as a campaign to help poor immigrants get legal help—are increasing.
Along with continued efforts to raise funds, Cobin and the foundation are working “more intensively” to help their grantees find other potential sources of revenue to replace the money that the foundation will not likely be able to provide in the coming year.
“We’ve let organizations know that things will be drastically different next year,” she says.