2010 has seen somewhat of an easing of the Great Recession, at least on Wall Street. But things are not yet looking up for the nation’s nonprofits. And 2011 is going to be especially dicey. Here are 5 reasons why:

1.    Home foreclosures are still going gangbusters. Until this trend eases there will be no incentive to buy a house that is not in distress and with 10 houses on the market for every buyer prices will continue to drop. States where the housing market is an important part of the economy, and the tax base, will continue to suffer.

2.    Employment is stagnant and what new jobs we are seeing are largely temporary, with no benefits or security. The continuation of the perfect poverty storm – more people needing more services just when there are fewer tax and donor dollars to pay for them – is assured for the next year.

3.    The federal government just passed the largest package of tax breaks in recent history yet is “firmly committed” to deficit reduction. How does that work? By cutting discretionary spending. Since they can’t cut Social Security and Medicare, and they won’t cut the military, that leaves relatively small pockets of social program spending – pockets which nonprofits depend upon – to take deep cuts.

4.    The states are in real trouble. Many are nearing insolvency. Unlike the feds they can’t just print more money, and most have a constitutional requirement for a balanced budget. The quickest way to electoral defeat is to mention the possibility of raising taxes, and states too have entitlements that must be met. That means those few dollars spent on discretionary social programs are going to be squeezed even more tightly, and  even required programs like health care for the poor are going to be pared down to the bone. In California, where counties deliver the bulk of human services, we have already seen health and social services authorities both “lengthen the line and thin the soup.”  The pot will soon be empty.

5.    No one cares. In times of economic difficulty it is normal for people to look to their own needs first. And with jobs dicey, homes under water, and the general gloomy economic environment, “compassion fatigue” is in full swing.

Lest I leave you with no hope – let’s remember that this whole period of deep misery is temporary. The economy will improve, employers will begin adding jobs again, and we’ll return to the normal moderate level of misery. We just need to keep being smart, doing what we can, and finding creative solutions – to get us through 2011.

Recently I was invited to discuss social policy implications of our NonprofitNext research initiative and Convergence report findings with a group of arts organization leaders, arts funders, and policymakers in the Twin Cities. Despite the frigid weather my colleague Brent Copen and I received a warm Minnesota welcome throughout our two-day trip.

At one point I raised the possibility of networked activity replacing the function of some nonprofits. This is the dreaded disintermediation we all wince when hearing about.

If an artist can sell his or her work through an easily-constructed web site, why do we need art centers and galleries? If a volunteer can surf the net for places to give time, what role do volunteer centers play?

There are certainly value added activities associated with each of these entities so I don’t mean to imply that they can be readily replaced tomorrow.

On the other hand we should not delude ourselves that there is something sacrosanct about our current line-up of nonprofits. If major cities and small towns alike can lose their newspapers they can also lose their once-cherished nonprofits.

As I made this point a young woman commented that she was not sure there was reason to mourn the loss of these groups if they were made irrelevant by advances in technology, changing community needs or generational preferences.

My initial reaction was that people who had worked or volunteered on behalf of these organizations for major portions of their lives might feel differently. But I immediately realized that was a defensive reaction.

There is a classic case of nonprofit law involving cy pres, a legal doctrine which asserts that if a donor’s intent can no longer be met his or her gift should be devoted to another cause “as close as possible” to the original cause.

The case I’m thinking of involved a lighthouse in Boston Harbor. A trust had been established to bring the local newspapers to the lighthouse keeper from Boston each week by boat. Eventually the lighthouse was automated and the keeper retired. Through this technological advance there was no way for the trust’s original intent to continue to be pursued. The court determined that delivering newspapers to an old sailors’ home was close enough and the trust’s purpose was shifted. Here is a hundred-year-old case of technology impacting a nonprofit’s purpose and fundamentally altering it.

I assume no one cried over the loss, but then again, the lighthouse no longer had any employees to shed those tears.