During the first few months of this year The ArtsCenter's classes and shows continued to draw healthy attendance, and individual donations were steady. Executive Director Jon Wilner thought that, considering everything, the organization would be able to earn its way through the economic doldrums until things turned around.

Then the bottom dropped out.

"We were sailing right along," Wilner said. "And then it was like the ship went off the edge of the earth. In one day, everything stopped. Registrations stopped. Ticket sales stopped. Donations stopped. Now we're in a bind.

"And what worries me significantly is that we're not alone."

Survival of the fittest

The ArtsCenter's difficulties are mirrored throughout the nonprofit sector -- locally, statewide and nationally.

"It's a very hard time for nonprofits right now," said Trish Lester, vice president of the North Carolina Center for Nonprofits. "They're really struggling. Foundation assets are down by 15 to 35 percent. Corporations and businesses are giving less too. There's a real ripple effect."

Living primarily on grants and donations from governments, foundations, corporations, businesses and individuals, many nonprofits dwell close to the edge financially even when times are good. When times get tough, donations from all those quarters dwindle. Moreover, many of the measures put in place to help individuals and for-profit businesses don't do much for nonprofits. Tax breaks, for example, aren't much use for tax-exempt nonprofits.

As a result, they cut back on services, reduce costs, postpone projects -- and in an increasing number of cases, cease to exist altogether. Lester said a number of nonprofits in the state have already dissolved, and some estimates are that up to 100,000 nonprofit organizations nationwide may not survive the downturn.

"We're in a survival-of-the-fittest situation -- and the fittest doesn't necessarily mean the organization that has the biggest impact in the community," she said. "It might be the one with the most well-oiled fundraising machine. It might be the one that has the healthiest reserve. There's some Darwinian evolution going on here."

Local services at risk

In and around Orange County, if very many local nonprofits go extinct, Wilner said, they will take valuable services with them.

"The nonprofits in this community make it a much better place to live, and they provide many of the services local government would otherwise have to provide," he said. "Can you imagine this community without -- and I'm just picking these at random -- the Inter-Faith Council for Social Service? Without El Centro Latino? Without Club Nova? Without The ArtsCenter? I could go on and on.

"I think we'll make it through. But I can't imagine that some organizations won't fall by the wayside. If the community doesn't step in and help its nonprofits, this community will suffer mightily."

The Orange County Partnership for Young Children, which receives 95 percent of its funding from the state, runs the local Smart Start preschool and More at Four school readiness programs, among others. Its Smart Start funding from the state was cut by 9.1 percent in the current fiscal year and is expected to be cut by at least another 8 percent in the coming year, executive director Margaret Samuels said. The state Senate's proposed budget calls for the More at Four program, which now serves about 300 children in Orange County, to be eliminated altogether.

"That would be devastating," Samuels said. "A national study just came out that ranked the states on their school readiness programs, and North Carolina was one of only two states that met the highest criteria, because of More at Four. We got that news one week, and the next week the Senate budget came out proposing to do away with it."

The Partnership distributes funds to 16 other area nonprofits for programs that provide services such as children's dental screening, mental health, health and nutrition, and child care subsidies for working families. All those programs face cutbacks due to decreased funding, Samuels said.

"We've had to ask for money back from some of our partners," she said. "For next year we've asked them to submit budgets with 10 percent cuts. It's very, very tough. We're not sticking our heads in the sand. The reality is that we're talking about eliminating vital programs."

At The ArtsCenter, which serves thousands of children and adults every year through its classes, concerts and other programs, Wilner said he has avoided layoffs, although he said the staff has volunteered to absorb some cost-saving measures. His immediate concern is over enrollment in The ArtsCenter's youth camps, Performing Arts Conservatory and other summer programs. Those sessions are critical in paying for operating and programming, and in helping the local artists who teach the classes pay their bills, as well.

Wilner said The ArtsCenter has two advantages many nonprofits don't have: It owns its own building, with approximately $1.5 million in equity; and it earns a greater percentage of its income -- through class fees, ticket sales and so on -- than most nonprofits, which rely more heavily on grants and gifts. The organization is trying to find a bank to refinance its mortgage, and it is reaching out to parents and others to keep classes and concerts full.

"I never feel like I'm asking for a handout," Wilner said. "I've been here six years, and I've seen a lot of kids grow up here. I can say without any hesitation that they are better kids, better students, better able to get along with others, because of their association with The ArtsCenter. We have a very positive impact. So do most of the other nonprofits in the community."

Rising demand, falling resources

Every nonprofit is different, and while many arts organizations such as The ArtsCenter suffer from decreased demand when money is tight, organizations that provide basic needs, such as housing and emergency food, are seeing a sharp spike in demand.

"We've had a dramatic increase in applications," said Susan Levy, executive director of Habitat for Humanity of Orange County, which provides low-cost home ownership opportunities. "We just did an orientation, and 250 people attended, which is a lot more than normal. We have about 100 applications for homes right now, which is at least twice as many as usual. We have many more qualified applicants than we have houses available."

Among existing homeowners, Habitat is seeing more of them struggling to make their mortgage payments.

"We haven't had any foreclosures, but there has been an increase in delinquencies," Levy said. "People have lost jobs, or had their hours cut. It's a hard time. We handle that like we always have, by working with them to come up with a payment plan they can handle. As long as they're making a good faith effort to pay, we'll work with them as long as we can."

At the same time, Habitat, like everybody else, is dealing with decreased giving by foundations and individuals -- although the organization likely won't be able to gauge the real impact until 2010, Levy said, because most donations come late in the year.

"We're being as conservative as we can with our spending without compromising our mission," Levy said. "We were going to move into a bigger office, and we've postponed that. But we haven't had to suspend any housing construction. This year we're on track to build 13, and we're going to build 13. Beyond that, I'm not sure, but we hope to build at least 12 or 13 in the next cycle as well."

Riding it out

Like The ArtsCenter and Habitat, most nonprofits are working to keep their spending down, focus on their core missions and their core constituencies, and hope to hang in there long enough to come out the other side of the recession in one piece. And if an economic recovery starts to make headway, they hope the ripple effect that has hurt them on the way down will help on the way back up.

"Most of our potential sources of funding are going to get some help from the stimulus package and recovery," Wilner said. "When they start to feel more secure, things should improve. In the meantime, we're doing everything we can to reach out to parents and individuals and encourage them to take advantage of the programs we offer."

Lester said that in lean times, nonprofits do best to focus on keeping the donors they already have, rather than spend a lot of effort on finding new ones.

Levy said that's exactly what Habitat is doing.

"We're just telling our donors, 'What we do is important,'" she said. "I know all nonprofits think that. We just try to keep telling our donors that and hope they stick with us."

dave.hart@nando.com or 932-8744