Who should we blame?

In yesterday’s blog, I talked about philanthropy in other countries and it generated a comment from a reader that got me thinking. She said that other more “socialist” countries reduce the need for philanthropy because they tax their people heavily and provide those services. As I chewed on this comment, it got me thinking about the role that government funding has played in the USA for countless numbers of non-profit organizations, and I started worrying about the future.

I cannot think of many non-profit organizations (except for churches and maybe the Boy Scouts of America) who didn’t jump on the government funding bandwagon back in the 1990s. Government tax roles were healthy and there was talk of surpluses. It became easy for non-profit leaders to cozy up to their local politicians and secure a bushel basket full of government funding, which made it easier to expand services and dial-back the breakneck fundraising pace some organizations had set for themselves.

When the human body stops using certain muscles, those muscles atrophy and turn into saggy fat. I am left wondering how many non-profit organizations got used to government revenue streams and lost their edge with regards to resource development and fundraising.

As you know, I just returned from a European vacation and they are in the exact same boat as the USA with regards to debt, deficits and economic pressures. I believe we can look at what is happening in Europe as a preview of what is about to happen in the USA with regards to government spending. I can sum it up in one word . . . “AUSTERITY” . . . which means cuts to government services.

I read a front page newspaper article while in London about how a neighboring city was eliminating curbside garbage service for their residents. Our Canadian dinner couple on the cruise ship also shared with us that their hometown of Toronto was looking at similar proposals around garbage pick-up, closing parks and museums, and increasing student-teacher ratios.

I really don’t think that it is a jump in logic to assume that there will be many non-profit organizations here in the USA who will see their government funding eliminated or substantially reduced in the upcoming few years.

Since you can’t just turn on and off the fundraising spigot (remember that fundraising all about relationships which often take time to develop), I recently have heard a number of my non-profit friends talking about service cuts and downsizing . . . and downsizing means people losing their jobs and clients losing services they depend upon.

So, who is to blame for this situation?

  • Should we blame the government and our politicians for creating an unsustainable situation that created an environment of entitlement throughout the non-profit community?
  • Should we blame non-profit CEOs and resource development professionals for securing government funding without realistic sustainability plans to replace those revenue streams?
  • Should we blame non-profit board volunteers for allowing their staff to “do whatever it takes” to secure funding without asking the tough questions pertaining to sustainability? Or for possibly shirking their fundraising responsibilities because government funding made it easy to do so?

Maybe I am just grasping at straws here, but perhaps the creators of the television cartoon show, “South Park,” got it right when they suggested we should all just “Blame Canada“. Click on the link to enjoy Robin Williams’ performance.  LOL

All kidding aside, I know that the blame game is typically a dumb activity, but I seriously wonder what you think? Who do you think played a bigger role in digging many non-profit organizations into this hole? And the better question is: What do you think those “overly-dependent-government-funding” organizations need to start doing today to avoid hitting the iceberg that is in front of us all? Please weigh-in and share your opinion because we can learn from each other!

Here is to your health!

Erik Anderson
Owner, The Healthy Non-Profit LLC

NIMBY meets Ant and Grasshopper

Since yesterday’s post I have “cooled off” just a little bit about the charitable tax deduction debate going on in Congress and at the White House. One of my dearest friends — Fred — emailed me last night suggesting the tone in yesterday’s post might have been a little over the top (and I thank Fred for watching my back). Nevertheless, I am not done blogging about this subject, but I will try to do better with my tone today.

As someone who received his formal education in “urban planning,” I learned at a very early age the meaning of the word “NIMBY“. Of course, it is an acronym that stands for “Not In My BackYard and has been stretched to also include people who advocate a policy position but oppose implementation of it in a manner that would affect them or their cause.

Looking at our nation’s fiscal and budgetary situations, I think almost everyone sees that something needs to be done (e.g. spending cuts, tax increases, closing loopholes, etc). Unfortunately, it seems like everyone wants this done in a way where others will be asked to sacrifice while their budget allocations or special tax breaks or loopholes are preserved.

Isn’t this exactly what fundraising professionals are saying to Congress when they lobby to save the charitable tax deduction?

Additionally, as I said yesterday, we (the resource development community) need to keep this issue in perspective. President Obama and the Congress are not proposing the elimination of the deduction. As I understand it, the proposal is simply to cap the deduction at 28%, which means that only those Americans in the 33% and 35% tax brackets will be affected.

While I see both sides of this debate very clearly (and AFP does make some good points which I agree with regarding wealthier donors and tax implications), I think my biggest objections are three-fold:

  1. there is far too much rhetoric and very few facts in this debate,
  2. “Shared” sacrifice is the only our nation will find its way out of this current situation and the non-profit community has more credibility than stooping to NIMBY-like arguments, and
  3. Shouldn’t AFP focus more time helping non-profits prepare for the inevitable day where government grants and preferential tax loopholes dry up?

I also find myself torn on the issue of “subsidizing” other people’s charitable contributions to their churches and social service non-profits. After all, isn’t that really what is happening when Uncle Sam” offered “Joe Q. Public” a tax deduction on anything?

Regardless of whether the end is near or not, there are things I believe non-profit organizations should start doing today in preparation for what I see as an inevitable decision our politicians will need to make one day. Here are just a few of my ideas:

  • Invest time, energy and money in getting better prospect identification and cultivation
  • Invest time, energy and money in development and use of an awesome case for support
  • Invest time, energy and money in donor stewardship
  • Invest time, energy and money in development of outcomes measurement and an impact assessment model
  • Double down on board development efforts to recruit new board volunteers with dynamic social networks who are enthusiastic fundraisers
  • Invest time, energy and money in marketing efforts (e.g. building a marketing committee, creating online social networks, improving transparency via your website, etc)

Let me leave you with this thought … challenges like this one are NOT new. In fact, they are as old as Aesop’s Fable about “The Ant and the Grasshopper”. Take a few minutes to watch this YouTube video and refresh your memory. After you do so, please take a moment to reflect on these questions: “What should you do to prepare?” and “What can I start doing today to begin preparing?”

I encourage you to share some of your thoughts using the comment box for this blog. We can all learn from each other!

Here is to your health!

Erik Anderson
Owner, The Healthy Non-Profit LLC

Romper Room time for fundraisers

“Romper bomper stomper boo! Tell me, tell me, tell me do. Magic mirror tell me today …”

Ah, now that brings back childhood memories of watching “Romper Room“. Sadly, I was always afraid of that last bit to end the show where the host recites those magic words and allegedly turn our TV set into a two-way window where she could see things that in reality really weren’t there. It was kind of like a magic crystal ball.

After reading an article on PNNOnline this morning about the future of the charitable tax deduction as part of the debt ceiling and budget debates, I’ve come to the conclusion that it is “Romper Room” time for the philanthropy community. Why? Quite simply, I believe everyone is pulling out their magic mirrors, trying to predict what “might happen” and how that “might impact” charitable giving, and weighing in with an opinion wrapped in rhetoric. Here is just one example from the PNNOnline article:

“The White House and Congress must understand that limiting the value of itemized deductions for charitable contributions will dramatically affect the charitable sector and those it serves,” said Andrew Watt, FInstF, president and CEO of AFP.

OMG … it is Godzilla! Run!

Additionally, AFP asked its members what they thought using a “web poll,” and more than half said they thought a reduction in the charitable deduction would result in a 10-percent drop in charitable contributions to their charities.

Seriously?!? There is no way that anyone including the President & CEO of the Association of Fundraising Professionals (AFP) can make statements with that much certainty. I need everyone to take a deep breath and consider the following:

  • It is a web poll … how scientific can that be?
  • Do we need to talk about the shortcomings of survey data? If so, there are two great reading assignments for you — assignment #1 and assignment #2. A piece of advice … this is bedtime reading. Zzzzzzzzz! Please trust me when I say the results are garbage.
  • Very few people make charitable contributions because of the tax code. They give because it makes them happy, they want to change the world around them, the right person just so happened to ask them, and the list goes on and on. Sandra Sims at Step By Step Fundraising did a nice job make this point in her blog on what motivates people to give.
  • While it is impossible to say with certainty, a large number of Americans don’t itemize their taxes and receive no tax benefit for making their charitable contributions.
  • There have been many “scientific studies” done on the effects of tax policy on philanthropic giving. Needless to say, their conclusions are all wishy-washy because there are too many factors to consider including: the state of the economy, income, perceived personal wealth, state of mind (e.g. consumer confidence), quality and degree of training of the non-profit volunteer solicitor, etc etc etc. Click here to read an academic paper by Lise Vesterlund based on the scientific method and psychology. Go ahead and try to read all 70-pages objectively. If you were being honest and fair, you’d agree that the conclusions should best be summed up by saying “I dunno!”

The fact of the matter is that the tax rates bounced all over the place in the 1980s and there didn’t seem to be much of a noticeable change in charitable giving.

So, if you are one of my fellow resource development colleagues running around like Chicken Little, I beg you to please sit down, take a pill and put down your Romper Room magic mirrors. There is no need for hysteria, and let’s stop trying to use science to bolster opinions because the reality is that human behavior is too difficult to explain by using “web polls” and rhetoric.

Tomorrow, I will continue this discussion and even try to play devil’s advocate. In the meantime, please use the comment box and weigh-in with you thoughts on this subject. Am I being too dismissive? Have you seen more convincing evidence? Do you have a strong opinion on how your non-profit might be affected? If so, what do you base it on?

Here is to your health!

Erik Anderson
Owner, The Healthy Non-Profit LLC