posted on: Thursday, March 18, 2010

By Kevin Laskowski

A new report details the disastrous effects of state budget crises on an already hard-hit nonprofit sector and, among other recommendations, encourages foundations to ramp up advocacy and organizing efforts.

Published this week by the National Council of Nonprofits, State Budget Crises: Ripping the Safety Net Held By Nonprofits explains how cash-strapped states are needlessly sacrificing civil society for solvency amid the economic downturn. Forty-eight states face an estimated $194 billion shortfall this year, and the situation is not likely to improve. The National Conference of State Legislatures (NCSL) reported that 35 states will face budget gaps totaling more than $55 billion for in 2011, and 23 states already project shortfalls totaling $69 billion for the 2012 fiscal year. In response, states are slashing funds for essential human services, shifting costs to nonprofits, withholding payments to nonprofit contractors, imposing new fees, and circumventing charities' tax-exempt status.

To maximize impact and protect the nonprofit sector and those it serves, the Council urges foundations to get in the game and "leverage [their] investments in nonprofits by supporting policy work."

Citing statistics from NCRP's Grantmaking for Community Impact Project (GCIP), the report notes, "Foundation giving that supports civic engagement and nonprofit advocacy yields tremendous returns, producing $88 to $157 in benefits for every dollar invested in advocacy."

(GCIP documents the impact of advocacy and organizing in sites around the country. There are four published reports in the series, including reports from New Mexico [source of the $157 figure], North Carolina [source of the $89 figure], Minnesota, and Los Angeles County.)

“Many foundations take at best a ‘hands‐off’ posture, and at times an actively negative one, toward policy involvement and civic engagement," the report continues with lessons learned from The Johns Hopkins University's Listening Post Project. "This puts an unnecessary damper on what should be a major function of the nation’s nonprofit institutions – giving voice to the voiceless and raising unaddressed issues to national policy attention."

"Foundations need to re‐think their hands‐off position toward nonprofit advocacy and increase their financial support for this important function," it said.

These comments echo the forceful claims of Gara LaMarche, President and CEO of The Atlantic Philanthropies, and Lewis M. Feldstein, President of the New Hampshire Charitable Foundation, at a recent panel discussion at the Bradley Center for Philanthropy and Civic Renewal, "Too Close for Comfort? Obama and the Foundations,"a transcript of which was published this week.

In his remarks, LaMarche contended that policy engagement was essential, that grantmakers could not afford to ignore policy and expect success.

"[Foundations] cannot, with their own funds alone, begin to feed [the] hungry, care for the sick, or educate for participation in contemporary society many millions of young people," he said. "By definition, their role must be – it is hoped – catalytic."

"Since the federal budget alone dwarfs the combined endowments of America’s foundations – to use just one measure, last year’s much-debated stimulus package was more than twenty times the annual spending of all foundations put together – no foundation concerned with the education, health, employment, or any other core human undertaking can afford to be unconcerned with government policy. Government is the only institution that is both democratically controlled and can deliver, to use a philanthropy buzzword, at 'scale.'” (emphasis added)

Feldstein challenged the panel's premise, arguing that foundations as a group have been too quiet.

"[T]he problem is not that philanthropy is too close to Obama or too close to government, it’s that as an institution, for the most part we’re silent," he said. "We’re non-players! We’re marginal. We could do a huge amount more to move the public sector than we do. That’s the real failure."

"[O]ut of the 100,000-plus foundations, there are a tiny, tiny few who do this [work to move government in philanthropy]. And that’s this country’s loss," he said. (emphasis added)

Feldstein contended that, amid recent trends and the Supreme Court's decision in Citizens United, advocacy had become more necessary.

"This country needs it desperately, now; it’s going to be even harder for many of the views that people represent to be heard," he warned.

Indeed, without well-capitalized advocates and organizers to protect and sustain what serves as a safety net, grantmakers will watch as the downturn swallows years of philanthropic investment. Without a robust civic sector holding business and government accountable, an already dire situation will continue to worsen for vulnerable communities around the country. Philanthropy cannot afford to sit on the sidelines. As the Council's report suggests, it's time for grantmakers to get into the policy game.

"Policymakers deserve and need feedback on their proposals to address their budget shortfalls," the Council's report concludes. "Providing that feedback is yet another way that nonprofits can serve their communities – and protect the social safety net."

"[I]n looking at our recent experience and adjusting for the years to come, foundations also need to look into themselves," LaMarche argued last month. "Most move far too slowly to capitalize on actual opportunities to achieve long-sought goals once they’re at hand. Many are too skittish about engagement in policy advocacy. Few have a strategic vision broad enough to fit the key issues together into a coherent narrative. Dominant funding practices imprison their grantees in silos, reinforcing interest group politics. And the lack of multi-year core support in most cases hobbles foundation beneficiaries in the effort to plan, prepare, and seize the moment for change when it arises. I doubt that foundations and the Obama administration are too close for comfort. But comfort is not the goal. Engaged and critical discomfort is more likely to produce the best results for society, foundations, and our political leaders."

Kevin Laskowski is Field Associate at the National Committee for Responsive Philanthropy.