As the editor of my high school newspaper—the Cooper High School Hawk’s Quill—and a short-lived college journalism major, I take great delight in scooping the Wall Street Journal. Shelly Banjo wrote Donations Slip Amid Anxiety on June 9, which said:
For the second year in a row, philanthropy has seen the deepest decline ever recorded by the Giving USA Foundation, which has tracked annual giving since 1956. Donations fell 3.6% to $303.75 billion last year, down from $315 billion in 2008, according to the latest Giving USA study, released Wednesday. In 2008, they were down 2%.
Faithful readers will note that I made more or less the same point in my May 29 blog post, Tough Times for Folks Means More Grant Writing for Nonprofits, although with more humor and helpful advice. If one read Ms. Banjo’s article and knew little about nonprofits, one would get the impression that the end is nigh. This is because her article, like most stories about nonprofits, perpetuates the conventional wisdom that all nonprofits depend exclusively on donations, which is simply not true.
As I pointed out in my post, while donations are important, particularly for certain kinds of nonprofits, most human services providers support their service through grants, fee-for-service contracts, third-party payers and/or quasi-business enterprises, in addition to donations.* These alternative revenue streams, which can be ramped-up when donations are down, are not mentioned by Ms. Banjo and the cast of nonprofit “experts” she quotes and data she cites.
Although new contributions to foundations may be down, foundations still must give away 5% or so of their endowment every year, and the feds, through the Stimulus Bill and lots of other appropriations, have keep the grant spigot wide open. Cagey nonprofit executive directors are busy writing grant proposals and dreaming up other revenue strategies, not wringing their hands and gnashing their teeth over declines in donations. But not in the conventional wisdom world of newspaper writers.
A second Wall Street Journal article by Jennifer Levitz and Stephanie Simon on June 12, “A School Prays for Help”, confirms the importance of getting creative during tough times. While this article mostly discusses public schools, police departments and other public agencies seeking alternative funding sources, the same concepts apply to nonprofits.
In this article, the writers describe how some schools are getting local churches to “adopt” them and other strategies for what amounts to advertising in order to supplement limited tax dollars. Nonprofits can do the same sorts of things instead of just waiting around for donations to pickup.
One of the several odd aspects of a church providing donations to a public school, however, is that the church itself is a nonprofit that depends almost exclusively on donations from its members. Why would they do this? One reason could be that the church expects to get new members from school parents and staff, and they will eventually try to extract donations from the new members. In other words, the church and the school are probably competing for donor dollars and the church may be taking the longer view that investing a small amount of its money now, derived from its members, will result in more members and more money later.
While most nonprofits and public agencies like to present themselves as collaborating, in reality they compete with one another for donations, grants, and all kinds of resources. I pointed this out in What Exactly Is the Point of Collaboration in Grant Proposals? The Department of Labor Community-Based Job Training (CBJT) Program is a Case in Point, a post that generated quite a comment thread.
Some readers understood my point, while other denounced me as a hopeless cynic. Of course, I am a hopeless cynic, but nonprofits and public agencies are largely in competition, and the ongoing economic mess just makes this competition rise to surface, like the somewhat baleful giant crocodile in the best “big animal” movie of recent years, Lake Placid.
* Jake also wrote about funding sources in Bratwurst and Grant Project Sustainability: A Beautiful Dream Wrapped in a Bun.