Results from the Latest LMI Funding Index

March 30, 2016
By Kelly D. Edmiston, Senior Economist

Beginning in 2015, two existing publications: the LMI Survey report and the Tenth District LMI Labor Force Report, were consolidated into a new publication: Tenth District LMI Economic Conditions. The latest issue was published in March 2016. The change reflects a desire to provide information about economic conditions in the low- and moderate-income (LMI) community in a more useful, concise and complete publication. Since the consolidation, LMI Survey results from questions about the funding and capacity of respondents’ organizations and the outlook for respondents’ organizations are now summarized in Community Connections.

This article provides the most recent assessments of funding and capacity of organizations responding to the January 2016 LMI Survey and includes some historical perspective.

The LMI Organization Funding Index, which reflects the general assessment of respondents to the Kansas City Fed’s LMI Survey of their current funding situation, moved significantly higher in the January survey from 91.9 to 102.8. The index ranges from 0, which would indicate that all respondents reported that funding worsened, to 200, which would indicate that all respondents reported that funding had improved. A value of 100 is neutral, indicating that the same share of respondents reported improvement and deterioration. 

When an index from the LMI Survey is near neutral, it typically means that most respondents to the survey reported that there was no change in conditions. The index has a rolling benchmark, which means that funding conditions are measured against a previous time period, in this case one year ago. Therefore, a neutral number suggests that funding is getting no better or no worse, but it does not speak to the adequacy of funding. The index could lie well above the neutral value even if funding is a significant concern among respondents. Generally, even those who report that their funding is getting better also believe that current funding is inadequate.

From a historical perspective, the LMI Organization Funding Index was near neutral during the Great Recession and very early recovery, but the index then began a sharp descent, reaching a trough of 50.9 in the third quarter of 2011 (see chart below). 

A number of factors can explain the pattern. By the time the economy began its slow recovery, the American Recovery and Reinvestment Act of 2009 (ARRA, stimulus bill) was being implemented. By 2011, many of those responding to the LMI Survey lamented decreasing funds from that resource. In addition, some contacts reported that their more reliable donors had made an early effort to keep up their giving during the recession but then found these contributions increasingly difficult to make in light of other financial obligations facing them in a weak economy. State and local government also began to retrench, followed later by moderate cuts in federal spending on social services. From 2011, the LMI Organization Funding Index has gradually marched back towards neutral, likely a reflection of improving economic conditions.

In the January 2016 LMI Survey, some contacts reported that the funding standards of some donors had tightened, making qualification for funds more challenging. Other contacts indicated declines in state and federal funding reduced financial resources while also raising the demand for services. 

Funding assessment typically are higher in the end-of-year survey (administered in January), all else equal, which may reflect generally higher end-of-year giving by donors, even when the assessment is relative to one year ago.

Despite a consensus that funding had tightened modestly, respondents indicated their organizations had maintained their capacity to meet their clients’ needs. Organization capacity, the measure of an organization’s ability to provide services—including factors other than funding—changed little, remained near neutral at 94.8. The most critical factor in non-financial capacity for most of these organizations is volunteers. 

LMI Funding Index