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Ch-ch-ch-ch-Changes Keep Coming to the Nonprofit World

A continuing avalanche of bad economic news confirms the upheaval in the nonprofit world that I’ve been blogging about for the last few months. To paraphrase David Bowie in “Changes:”

(Turn and face the strain)
Don’t want to be a richer [organization]
(Turn and face the strain)
Just gonna have to be a different [organization]
Time may change me
But I can’t trace time

Not to compete with Jake’s bimonthly links posts, but a few recent stories should scare the bejesus out of most nonprofit executive directors:

  • The New York Times, July 29, 2011, Debt Crisis? Bankruptcy Fears? See Jefferson County, AL. Everyone involved in human services should care about Jefferson County, AL. Jefferson County is an urban county centered on Birmingham, the largest city in the state. Since we recently completed an assignment for a Birmingham client, I know the city is about 3/4 African American and about 1/4 of residents live below the federal poverty level (FPL). When the county goes bankrupt, folks in the city are going to have a much harder time accessing a whole slew of services, from family court to disability services to job training. The lines will be longer at the TANF and WIB offices, and the staffers in even worse moods as they face furloughs and layoffs. But that’s not the real problem: nonprofits who provide a wide array of wraparound supportive services (free proposal phrase here) are going to lose their county contracts when the need for services is growing.
  • National Public Radio (NPR), July 26, 2011, Wealth Gap Widens. As reported by NPR, “The gap between rich and poor has widened. Wealth is more and more concentrated among a select few, and those few are mostly white. The median wealth of white households is now 20 times that of black households, and 18 times that of Hispanic households, according to the Pew Research Center.” The net worth of most Americans is falling, while the gap between white and minority citizens is turning into a gulf (see Tyler Cowen’s The Great Stagnation for more on this subject). Unemployment is rising and government services are being cut–-a perfect storm for nonprofits.
  • The Wall Street Journal, July 29, 2011, Slow Growth Stirs Fears of Recession. The official growth in GDP was 1.3% for the second quarter of 2011 and .4% for the first quarter: “The economic recovery is grinding to a halt, raising the risk that the U.S. could fall back into recession and tightening the screws on Washington to resolve a debt-ceiling debate that threatens to inflict further damage on a fragile economy.” In most of the communities where Seliger + Associates works, nobody is worried about a new recession since the last one never ended.

I get calls every week from organizations across America that face cutbacks in traditional funding streams. Public sector bankruptcies, like the hapless Jefferson County noted above, will exacerbate the crisis. As I’ve blogged about before, the only real choices nonprofits have are to shrink in size, seek more donations, go after additional foundation and government grants, and/or re-think their mission and programming.

Two current clients illustrate two wildly different approaches to confronting the changing realities for nonprofits. Both clients provide after school services for low-income African American youth in two almost adjacent fairly large cities in Northern California. In homage to Client # 9, Elliot Spitzer, I’ll refer to them as Client # 1 and # 2.

Client # 1 offers a fairly standard mix of after school enrichment, mentoring and fitness programs, and has been funded mostly through federal grants and donations from local large businesses. This organization has gotten interested in childhood obesity, as popularized by First Lady Micelle Obama’s Let’s Move campaign. Client # 1 has decided to seek funds for childhood obesity prevention, as well as specialized mentoring. Both are laudable and fundable project concepts but do not address critical issues facing their target population, since the parents/caregivers of the kids are unemployed, underemployed and/or underwater in their mortgages. They’re having trouble affording food of any kind for their kids, making the relative merits of arugula versus french fries unimportant. The youth probably don’t have time for mentors anyway, because they’re working to help support the family. In other words, Client # 1 is seeking funds for services that meet interesting but peripheral needs of their target population, instead of basic needs.

Client # 2 runs more or less the same programs as Client # 1 but is larger and has been operating longer. This organization has been primarily funded through county contracts, modest user fees, and lots of small donations. While trying to maintain its core services, Client # 2 has decided to seek funds for two new programs. The first will provide emergency food and meal services for the families of targeted youth. The second will help the 5,000 or so youth and young adult offenders about to be released into their county as a result of a recent Supreme Court decision that will return tens of thousands of state prison inmates to the streets in a few months. Regardless of the merits of the Supreme Court decision, the arrival of thousands of ex-offenders, all of whom need housing, jobs and everything else, at once is going to overwhelm the existing supportive services system for ex-offenders like a tsunami.

Put yourself in the position of a funder. Would you fund Client # 1, which has a strong track record and wants to operate innovative services that nibble at the edges of problems, or Client # 2, which has an equally strong track record and is trying to address basic and emerging challenges?

As always, we’re doing our best to help both Client # 1 and # 2 meet their funding objectives. Two similar clients are taking action to increase their funding streams in different ways, as they adjust to the changing economic environment of their communities. As Bowie put it, they’re both turning “to face the strain.” Make sure your organization understands that doing what you’ve been doing forever probably will not work. Be creative, be aggressive and go get some grants. As Coach Taylor said on the now-concluded show Friday Night Lights, Clear Eyes, Full Hearts, Can’t Lose!

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