Illinois budget crisis impacting non-profit organizations — Part 2

illinois budgetI ended last week with a post about the Illinois budget impasse and how it is impacting non-profit organizations. I promised to continue posting on this subject this week from a few different perspectives. Today’s post comes from a real non-profit organization who is challenged by the events in Springfield. However, I warn you upfront this story might not necessarily end the way you think it would. (Note: I’ve also withheld the names to protect the innocent)
After publishing the first post in this series, I decided to hit the road to get a better feel for the crisis. I got in my car and drove a few hours away to sit down for lunch with a non-profit CEO to get their perspective. This organization’s annual budget is slightly more than $1 million with multiple locations in their community and a fairly big staff.
Here is what I expected to (and indeed did) hear:

  • The state budget crisis has resulted in a drop of approximately $200,000
  • The shortfall in funding is large enough to be felt and hurt
  • There was a staff reduction
  • The initial cuts focused on administrative staff and systems, and the remaining cuts had to come from program staff and front line operations

starvation2Here is what I didn’t expect to hear:

  • Program staff re-invented how they work together (obviously out of necessity), and there is more cross-training and shared responsibilities & job functions in this organization’s workforce
  • Board members rallied and contributions from these individuals increased
  • Board members did more than just write a bigger check, some of them got more involved in the organization’s fundraising events and campaigns
  • The organization is raising more money from its fundraising events and campaigns today than it was prior to the state budget impasse
  • The impact on this organization’s clients doesn’t seem to have been as big as they feared with many of them still showing up and getting served
  • Without state mandated grant reporting requirements hanging over the organization, there is less outcomes measurement occurring (obviously this is one place staff had to look at reallocating hours to absorb the cuts)

Before I continue, let me clearly say this is simply one example. It may or may not be representative of the larger Illinois non-profit sector. I also recognize that organizations of different sizes are likely being impacts and responding differently and in proportion to their abilities/capacities. The reality is that we won’t have a handle on the bigger picture for many years when it is too late to make any adjustments.
As I contemplated my lunch conversation, I came to a number of conclusions (some of which are likely premature) including:

  • the non-profit sector is resilient
  • many non-profits are flexible enough to evolve-change-adapt in a very short period of time
  • non-profit professionals are incredibly talented (more so than what many people give them credit for)
  • while many people like to complain about their board’s lack of engagement, the reality is that the right people sitting around the boardroom table make a difference every time regardless of good times or bad times
  • there isn’t just one revenue model that works for all non-profit organizations, and those who are committed to evolving their business plan / revenue model can do so if they put their mind to it

Before you accuse me of putting too much lipstick on this pig, let me say I’m very worried about organizations like the one I’m writing about today. While they may have survived the initial earthquake, they are worse off today to survive the after-shocks.
Because many of their initial cuts came at the expense of organizational capacity (aka org muscle).  For example, even though the board initially surged to partially fill the funding gap, the organization is less capable of supporting these efforts on an ongoing basis as a result of their budget cuts.
starvation1Believe it or not, this phenomenon has a name. It is called the non-profit starvation cycle. If you have a little time today, I encourage you to click-through to read the scholarly article on this subject from the Stanford Social Innovation Review and do a little Googling around yourself. You will be surprised with what you find.
It is very possible this organization and countless others like this one in Illinois could be on a very long road that leads to outcomes such as:

  • increased collaboration
  • more strategic alliances (e.g. back office operations)
  • mergers
  • bankruptcy

Of course, only time will tell. In the meantime, please use the comment box to share your thoughts and experiences. Do you have other stories from the front line that might help us focus the picture and give all of us a better forecast picture? We can all learn from each other.
In my next post, I will focus more on revenue models and private sector fundraising as a response for Illinois’ non-profit sector.
Here’s to your health!
Erik Anderson
Founder & President, The Healthy Non-Profit LLC!/eanderson847


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