Program Officers Blog

Before even cracking a page, I was pretty sure I knew the answer to the question posed in the title of the new report, The Public Funding Crisis: Can Philanthropy Shoulder the Burden? Nevertheless, I thought it might contain some nuggets of wisdom. Turns out, it did – and since I know that most of us lack time to read all of the reports that cross our desks, I thought I’d share a few of the insights that caught my eye.

What is probably most useful is the practical advice it offers at the conclusion of the report about how nonprofits can adapt to the new economic reality and be better prepared in the future:

• Maximize efficiencies in your operations and collaborate with other organizations to find new ones.
• When fundraising, emphasize the impact and progress of your work instead of describing how your organization is hurting financially.
• Develop a strategy for measuring results if one does not already exist.
• Build financial expertise and capacity on the board and staff.
• Keep track of economic and business trends. The U.S. economy experiences a recession or similar severe economic problem every eight years.  So, tracking the business news will keep you on top of when the next set of economic problems are emerging, and allow your organization to get in front of it.
• Have systems in place that allow you to manage late payments by state contractors. Nonprofits with state contracts in severe and serious crisis states have experienced high rates of late payments–sometimes many months. Groups that weren’t prepared got into trouble quickly.
• Stay in touch with core donors and track your donor's views regularly about the economy, community, and your work. The more you understand what your supporters are thinking, the better positioned you will be to keep them engaged.
• Diversify funding and build a reserve because philanthropy will not be able to be mobilized sufficiently in crisis times to replace lost public funds.

The bulk of the report rehashes the recession, its impact on state budgets and whether philanthropy has been able to cover the gap created by shrinking state budgets. Most of what it describes about the recession and how bad it was has been covered far and wide in the media, but one thing it highlights that I didn’t know was that during the recession the start-up of new nonprofits continued at a rapid pace. You may already know that the number of nonprofits has been skyrocketing during the past two decades. The recession did not dampen this trend. On the contrary, in states hit hardest by the recession, more new nonprofits were formed than in places where it had less impact.

The authors then compares how different state budgets were affected by the recession. States were ranked as having no budget crisis, serious crisis or severe crisis. Unfortunately, a number of states, including Oregon, were not ranked. But to give you a context, Washington was ranked a serious crisis state and California was ranked severe. It's no surprise that the severe and serious crisis states saw big general fund cuts in health and human services, education, etc., while the need for services grew quickly.

Next the report digs into the question posed in the title: Is philanthropy (which includes both foundation grants and individual giving) able to provide the 'lift' needed to make up for lost state funding? Unfortunately and unsurprisingly, the answer is no. Instead, it found that philanthropy actually shrunk during the recession, and it shrunk most in severe and serious crisis states. The report goes on to say that in order to fill the state funding gap we are going to experience over the next couple of years (because recovery of state budgets lags behind the recovery of state economies), philanthropy in the hardest-hit states would have to increase by 30 to 50 percent every year – increases far beyond anything we’ve ever seen.

Taken together – rapidly increasing number of nonprofit organizations, growing community needs, shrinking state funding and philanthropy not coming close to filling the gap – we’ve got a big picture that just doesn’t make sense. This is particularly salient for the for the social safety net, which is publicly funded. What are we to do? I’m not sure, but it's going to take a big lift from all of us – taxpayers and governments – to begin sorting it out.

The report doesn’t attempt to tackle that big question, but it doesn't just leave us hanging out to dry, ending with the best practices listed at the beginning of this post that can help make nonprofits stronger and better prepared to weather the bigger crunch waiting in the future.

We would love to hear what strategies your organization has employed to adapt to the “new normal” and prepare for future economic tumult. Please also share your ideas about how we might make the “big lift” happen that will be needed to retool our broken systems and institutions so that our communities work better for everyone.

Commenting on this Blog entry is closed.