Tracing the effect of the paycheck protection program on nonprofit capacity to sustain payroll and services during COVID-19

Abstract

This study explores the effect of government fiscal stimulus on nonprofit performance during the COVID-19 pandemic. More specifically, it investigates whether access to the Paycheck Protection Program (PPP) increased the ability of nonprofit organizations operating in the crisis context conditions to continue supplying funds for payroll and maintain effective delivery of services and programs after the initial revenue shock. The study findings are derived from the analysis of survey data collected from 160 Wisconsin nonprofit organizations in July and August 2020 linked to publicly available Internal Revenue Service tax filings. Regression analysis reveals a strong positive connection between the PPP loans and the nonprofit capacity to continue funding payroll and providing services within the next months of the pandemic. The empirical results suggest that the government stimulus policies offering direct economic assistance can indeed contribute to the continuity of nonprofit services and payroll in times of fiscal uncertainty, albeit the policy may not yield equally significant results across all types of organizations. This study increases the understanding of nonprofit performance during an extended revenue crisis, offering answers to policymakers, researchers, and practitioners interested in learning more about the efficacy of federal stimulus funding in enabling private organizations to mitigate the financial consequences of the COVID-19 crisis.