Sunbelt Spotlight: In Arizona, a Growing Nonprofit Sector and a New Era of Giving

We only recently started covering funding news and philanthropic happenings in the Southwest, but this market is really exploding — especially in Arizona, and we've written about any number of interesting Arizona foundations in our Southwest Funding Guide

As a relatively young state compared to those on the East Coast, Arizona has never enjoyed the deep philanthropic traditions of more established areas of the country. However, the state is maturing, roles are changing, and now, its nonprofit sector is emerging as a driver of economic growth. One factor behind that growth is an increase in philanthropic giving in Arizona over the past decade as new funders have arrived on the scene and existing funders have stepped things up. 

We talk a lot at IP about the emergence of so many new funders and what it means. Often, we analyze this trend by looking at the new money available in different issue areas. But we've also looked at how dramatically this phenomenon is playing out in specific places like the Bay Area and Southern California. Right now, the Southwest is an important philanthropic frontier we're watching closely, so we were interested to see some new data on what this means for the local economy there. 

The Arizona Community Foundation funded a study that found that the state’s nonprofit sector brings in around $22.4 billion to Arizona’s economy each year. Furthermore, the report cited statistics of state nonprofits employing over 324,000 people and generating at least $2.1 billion in payroll, annual sales, and property taxes. The nonprofit sector in Arizona owes much of its revenue success to government contracts, sales of goods and services, and service fees. The report notes that charitable donations only account for 27 percent of revenues.

The report is called “Arizona Nonprofits: Economic Power, Positive Impact,” and it compared the nonprofit sector to fields like hospitals and healthcare organizations. It’s important to note that large hospitals account for the bulk of the sector’s assets and revenue. Meanwhile, small charities, like those working in the fields of arts & culture and the environment, have less impact from a strictly economic standpoint.

Yet all of this signifies that Arizona’s nonprofit sector has recovered quite a bit since the recession and is growing by the year. The next logical question to ask is what local funders are doing to keep up.

Well, it seems that nonprofits in Arizona have a lot more going on than just sitting around waiting for donations to roll  in. The sector is becoming more organized and entrepreneurial, and local nonprofit leaders are becoming more resourceful in supporting themselves. There are a lot of small nonprofits in Arizona, including animal rescue groups and grassroots charities, that are doing big things on the local level and figuring out new ways to raise money. The most difficult period may be behind them, but nonprofit leaders aren’t going to sit back and wait for another recession to take them down again.

"Gone are the days of viewing nonprofits as simple charities operating on shoestring budgets, heavily reliant on volunteers and donations to stay afloat," wrote Arizona Community Foundation President and CEO Steve Seleznow.

Seleznow also pointed out that nonprofits in the state are in a unique and influential position right now. Innovations reported in the recent study include a bio-science roadmap, efforts to raise public awareness about education needs, and efforts to motivate young entrepreneurs.

"In a lot of areas, nonprofits have insights that few others have, and they're working in places where most policymakers don't visit on a daily basis" said Seleznow. "Maybe we ought to have them at the table."

One relevant example is the newly formed StartupAZ Foundation, which is a component fund of the Arizona Community Foundation. It was started with $100,000 from co-founder and MRTNZ Ventures Managing Director Mario Martinez and $50,000 from the AZ Community Foundation. The purpose of this foundation is to connect talented individuals with the right people to build networks and find solutions for the most pressing societal issues.

For example, Martinez and his team plan to use education, mentorship, and blogging to share success stories and pay for conferences. Local entrepreneurs, investors, and attorneys reportedly developed the idea at some monthly Team AZ dinners. And the big idea is to provide funding to start-up companies that also serve a social purpose. All of this translates into creating more jobs, strengthening charitable purposes, and boosting the economy with the help of up-and-coming social entrepreneurs.

“We want to help Arizona companies get more capital help from other local industries, including real estate,” said StartupAZ co-founder Brandon Clarke, who’s a Phoenix native and also the co-founder of a new startup studio called the Collaborative Research and Development Lab. “We also will, and have sponsored Startup Weekends, Startup Week and other statewide initiatives. We can see chapters forming in the future.”

You can learn more about StartupAZ Foundation’s new Pledge 1% campaign on its website.

“These new entrepreneurs have as much fire and intensity as starting new companies and new jobs as they do with helping the community,” said Seleznow, who also serves on the board of the StartupAZ Foundation. “It’s very cool. We love it. It’s capitalism and charity in the same breath."