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.

I recently had the honor of giving a keynote address, at the annual meeting of the Donors Forum, about our report Convergence: How Five Trends Will Reshape the Social Sector. It was especially meaningful for me to return to the Donors Forum, because they first invited me to speak to their members over ten years ago,  about our monograph Beyond Collaboration, back when I founded La Piana Consulting in 1998.

As Valerie Lies, President and CEO of the Donors Forum, described in her powerful opening remarks to the 600 guests of last week’s event, Chicago is struggling with many of the same economic and political challenges as the rest of the country.

I described La Piana Consulting’s NonprofitNext research and the five key trends that are converging to reshape the social sector landscape.

Joining the discussion was Mae Hong, Director of Rockefeller Philanthropy Advisors, Nicole Robinson, Director of Kraft Foods Global Community Involvement division, and Ricardo Estrada, Chicago’s First Deputy Commissioner of the Department of Family and Support Services.

The panel itself represented the future, with young and diverse leaders, whose affiliations spanned a blurring of sectors across government, philanthropic, and corporate social action.

Where will you take nonprofits next? Join the conversation today!