PhilanTopic

Foundations and the 'New Normal': A Q&A With Bradford K. Smith, President, Foundation Center

(The following Q&A with Foundation Center president Bradford Smith appears as part of a special feature on "Philanthropy in a changing world economy" in the June 2013 issue of Alliance magazine. It is reprinted here, with minor revisions, courtesy of Caroline and her team.)

Caroline Hartnell: To what extent are U.S. foundations changing in response to austerity?

Bradford K. Smith: I started this job two weeks after Lehman collapsed. On my first day in the office, we had a press call about what foundations were doing about the economic crisis. I put down the phone and walked down the hall to our research department and said, "Quick, I need a statistic," and they came up with a really good one. Foundation giving for the previous year, 2007, was around $45 billion -- about 6 per cent of the first stimulus package announced by the federal government. So one thing the crisis really showed up was the scale of foundation resources. When the economy gets into serious trouble, it takes government to try to keep it from collapsing. Foundation dollars alone aren't enough to solve problems. That made foundations think more about how they can leverage money from each other, how they can collaborate with other sectors rather than trying to do it themselves.

A second interesting thing is that foundation giving held up quite well during the recession. One reason is that U.S. foundations calculate their mandatory payout on a rolling three-year average of the value of their assets, which cushions them from big market swings. It also held up well because foundations actually went beyond the federally mandated payout rate of 5 percent.

CH: The recession has changed things for the foreseeable future. Do you think U.S. foundations see this as a "new normal" and are rethinking their role?

BKS: I think most of them are adjusting to the idea that long-term expectations for returns on investment need to be reduced. 2012 was a good year in the financial markets, but nobody really expects that it will go back to the boom years when, as one foundation investment manager put it, for a number of years "all we had to do was get out of bed in the morning and we could make a 20 percent return on our endowment."

CH: What will that mean for foundations? Spending down part of their assets? Trying to get the mandatory 5 per cent figure changed?

BKS: I don’t think foundations will try to get that changed. They've fought hard, during strong years in the stock market, to maintain the 5 percent level.

But with declining assets, going above 5 percent in the years following the crisis means that they've been spending their assets. In order to maintain the value of those assets, they'll have to give less or do better on their investments in the future. We did some research on whether or not more foundations have made the decision to spend down, and the answer is not really.

The decision to spend down or exist in perpetuity is less a strategic one than a question of donor attitude. Sixty percent of U.S. foundations are family foundations, so many decisions are about expectations of family involvement in the future. We found that the largest group was those who have left it open for future generations to make that decision. Does this mean that families in the "open" group are also open to the possibility that they might not exist forever? At the very darkest point of the recession, there was some soul searching among foundations about the fact that if their assets declined enough and they maintained their grantmaking at the same level, the result would be either to spend themselves out of existence or to resign themselves to being smaller foundations. But we haven't seen evidence of a conscious decision to adopt a spend-down approach because of the recession.

Some of these foundations have been around a long time: Rockefeller and Carnegie are celebrating a hundred years, Ford is celebrating seventy-five years, and they've seen a lot of bad markets. The Ford Foundation suffered such a decline in the value of its assets in the 1970s that it took until the mid-1990s to recover. But that didn’t change Ford's view of perpetuity. What it changed was the amount of resources it had available to achieve its mission.

CH: You mentioned that foundations have adjusted the way they work. Can you give an example?

BKS: Approaches to grantmaking have changed. There is more interest in providing general operating support. The Weingart Foundation, for instance, a large foundation that funds primarily in Southern California, responded to the recession by adopting the provision of general operating support as a strategy. When the crisis was at its worst, the best thing it could do to help nonprofits was to make sure they could pay the bills, pay their staff, and do the work they're supposed to do.

The other thing we saw was greater willingness by foundations to make program-related investments -- PRIs -- where they make subsidized loans to nonprofits for activities that produce income, which might in turn provide a monetary return for the foundation. During the recession, a number of foundations joked that their best returning assets were those PRIs. There was something like a 2 percent interest rate on some of those loans and the nonprofits were paying that back, whereas foundations were losing 17, 25, sometimes 30 percent on their stock market investments.

That was one reason why interest in PRIs increased. The other was that, in a situation where endowments were declining, it was a way to extend the use of foundation resources beyond their grantmaking, because PRIs come out of foundations' equity.

Related to that, the recession gave a push to mission-related investing, which some people call impact investing, which also uses the equity part of a foundation portfolio. This is different from socially conscious investing, which is basically trying to make sure there is nothing toxic in your portfolio. Omidyar Network provides a good example of this. As part of their work on mobile technology, they made an equity investment in a Mexican telecommunications services provider, Micel (formerly Finestrella), to enable access to smartphones and affordable mobile Internet for those without bank accounts or credit cards.  Mobile phones are increasingly seen as a means to deliver essential services and empower low-income consumers to make informed decisions. But if you don’t have mobile access, you can't have mobile delivery of anything, and you probably wouldn't fund a nonprofit to expand cellphone access. So, although it's still a minority, I think more foundations are looking seriously at how they can use their endowment to do this kind of thing.

CH: What about renegotiation of relationships with different sectors, for example between foundations and the state.

BKS: There is a lot more interest in public-private partnership at all levels, though it is tempered a bit by foundations' wariness about being stuck with the bill. In the U.S. and Europe, there has been a tendency among governments, local and national, as their revenues have declined, to say, "We'll stop funding, for example, the arts and we'll get foundations to do it." There was even a case in California where foundations were written into a state budget. They were cutting back their spending, and they put a plug on the revenue side called "foundations."

Still, there is more interest in partnership. In cities like Detroit and parts of Ohio and Pennsylvania, the old Rust Belt region where steel and automotive manufacturing used to dominate, you see foundations stepping in and trying to work with government. Again there is a certain reluctance, because foundations don't feel they could ever be a substitute for a viable public education system, for example.

But some foundations have taken the lead on re-envisioning certain cities. Detroit, for example, is never going to be the city it was -- the epicenter of automobile manufacturing and the birthplace of organized labor -- so the Kresge Foundation, the Skillman Foundation, and others in the region have tried to re-envision it. I think it's a good use of foundation resources because they can work without electoral or market pressure. It also brings into play another strength of foundations, which is their ability to convene. In Detroit, there is now public-private collaboration called Detroit Future City involving corporations, community groups, state officials, and foundations.

CH: Are foundations also collaborating more with each other and with the corporate sector?

BKS: There has always been some collaboration with companies, particularly on economic development and job issues. But you're also seeing more collaboration around technological innovation, especially with companies like Google that see themselves in some way as contributors to the public good. There's more of an appetite for foundations to collaborate with each other. It's not an easy thing to do: the costs are high, partly because of the individual nature of foundations, which means that each has a unique information system. They might not even see the possibility of collaboration, because it's difficult for them to see that they’re working for the same thing.

CH: Do you think these changes are a stopgap until the crisis passes, or are they being consciously adopted as a long-term strategy?

BKS: I think they are likely to continue because the economic crisis altered the resource base available to the private sector, the public sector, and philanthropy. But there are other factors. Technology is making it much easier to get information and collaborate. Impact investing is taking off because there are more vehicles for foundations that want to do it. The typical argument against impact investing used to be that there weren't enough investments for foundations to put money into. Now there are special investment funds, a whole body of literature, groups working on this. I think it's fair to say that although the recession induced some rethinking of the philanthropy industry, these changes are not just a result of the bottom falling out of the economy.

CH: So you don't agree with some of our editorial board members who have said that foundations have put their heads in the sand rather than rethink their strategy?

BKS: Obviously, the foundation world is varied, with a small number of richly endowed foundations and a sea of very small ones. What's more, there's a sort of demographic replacement as some wind up and new ones are founded. So there are new ideas coming in all the time, and I believe there is more thinking going on in philanthropy than people give it credit for.

CH: Do you see the rethinking and changes that have come out of the recession as by and large positive?

BKS: I think so. You're not going to see a radical transformation of philanthropy -- it's not the kind of field that radically transforms itself -- but we are seeing change that's important. Growing inequality is a phenomenon in the U.S. as well as everywhere else.

CH: What are foundations doing about that?

BKS: From the end of 2008 to 2010 we were able to track about $550 million worth of grants made by U.S. foundations to address the recession. A lot of it was service provision for emergency situations, like people losing their homes. What we didn't see much is grantmaking focused on the nature of the financial and economic system itself, looking at why the crisis happened and what we can do to try to make sure it doesn't happen again -- though there are one or two exceptions. The Sloan Foundation in New York has done work in this area and is now supporting a project to create a unique identifying system for all parties to financial transactions. When Lehman Brothers collapsed and the regulators had to liquidate it, it turned out to be seven thousand different corporations, all over the world. So this would create a fast way to uniquely identify all parties to financial transactions and then link them back say to Lehman or Goldman Sachs. I think the MacArthur Foundation and the Hewlett Foundation are interested in working on the challenges posed to democracy by inequality, but it's a relatively small amount of work.

Philanthropy of the kind we're talking about -- and that Alliance tends to write about -- comes from big money, from accumulated wealth. At some point, the person or family or company that owns that wealth decides to put it toward public benefit. So it would be surprising if philanthropy came up with a new economic system all on its own.

What is interesting is the growing support for social entrepreneurship, which in some ways is a challenge to the structure of the economy. There are social problems that all these years of foundation funding and aid programs have not been able to solve, and maybe we can solve them through social entrepreneurship. A lot of it is technology-driven and there is a lot of energy and creativity in that space. For instance, there are interesting things happening around payment systems that allow people in remote parts of the world to work and get paid through their mobile devices, so people who were outside the economy can become part of it. Whether this will fundamentally address inequality is another matter, and no amount of innovation will allow us to duck the big question of what kind of world we want to create.

I was talking earlier to the president of a foundation that funds universities, and the whole notion of residential education is being challenged, first because it's expensive to house students on a campus, and second, because more and more people want to take classes online. A lot of what we assume about institutions is being reinvented. This is happening partly because of the economic crisis but also because of changes in information and technology.

-- Caroline Hartnell

Partnering With State Governments to Strengthen Families: Early Lessons From the Work Support Strategies Initiative

(Luis A. Ubiñas is president of the Ford Foundation. This commentary is adapted from a forthcoming Urban Institute report, available online starting June 4, that includes an array of perspectives from leaders about practical lessons emerging from the Work Supports Strategies initiative.)

Over the past half-decade, as the country has suffered through a deep, persistent economic downturn, America's work support programs have served as an essential backstop for millions of working families struggling to keep a toehold in the labor market. For many families, supports such as child care subsidies, health insurance and unemployment assistance, and food stamps have been the difference between staying together and dissolution.

Yet in dozens of states, lean budgets and antiquated, underresourced work support systems are failing to meet the needs of America's working poor. Problems that were evident in better times have become more intractable, even as caseloads have expanded. How can states improve the health and well-being of low-income families, stabilize their work lives, and make it possible for family breadwinners to get and keep a job if they are unable to get basic work supports to those who are eligible?

Solving such a challenge goes to the heart of what all of us in the philanthropic community do on a daily basis: tackling major problems at a scale that results in real and enduring change -- in this case, creating opportunity for low-income populations and keeping low-income workers in the workforce.

That's why the Ford Foundation, along with the Annie E. Casey, Kresge, and Open Society foundations, is proud to support the Work Supports Strategies (WSS) initiative, a multiyear demonstration project directed by the Urban Institute, with technical assistance from the Center on Budget and Policy Priorities. WSS is partnering with nine states -- led by governors from across the political spectrum -- to design, test, and implement easy-to-navigate quick-to-deliver operating changes to public work support systems that keep employees in the work force and families together. Many of these changes have the further benefit of reducing the cost of running the programs.

More than a year after we launched the initiative, the progress in fixing what was described in one state as a "completely dysfunctional, broken system" has been greater than any of us could have imagined. In some cases, the changes spurred by WSS had an impact on pilot offices or counties; in others, statewide changes affected tens of thousands of families. For example, in Colorado, state and county staff trimmed their work support application from twenty-six pages to eight; in Rhode Island, the Providence office implemented same-day service to Supplemental Nutrition Assistance Program (SNAP) applicants, enabling clients to obtain work support after just one visit; and in South Carolina, the Express Lane Redetermination program preserved health coverage for tens of thousands of children -- and is projected to save the state $1 million a year in operating costs -- by using data in families' SNAP records to certify eligibility.

Taking advantage of new technologies, streamlined bureaucracies, and operating processes borrowed from the private sector, many states are strengthening the customer experience and reducing the burdens on state workers. Beyond our nine partners, these efforts are already serving as models for other states.

For those of us in the philanthropic community, the work of WSS offers three important lessons for future partnerships between foundations and state governments.

First, as any philanthropic funder will tell you, the idea of working directly with the public sector often meets with resistance. Foundations fear being placed in the middle of ideological disputes or paying for services that are the government's responsibility to deliver. But such trepidation, though hardly unjustified, shouldn't be an excuse for inaction; the opportunities are too great. After all, where else can funders meet their goals of supporting initiatives that scale, create impact, and are sustainable? Federal and state governments remain the largest source of resources targeted at the issues that drive our work. As the progress of the initiative so far demonstrates, when a project has clear goals and strategies, funders can successfully partner with public agencies.

Second, one of the by-products of the budget crisis has been the elimination of state resources for and attention to "research and development." Despite the fact that many agencies running work support programs have budgets of hundreds of millions or even billions of dollars at their disposal, the flexible funding to promote ongoing innovation, modernize operating processes, and use data to improve operational effectiveness has all but vanished. While it shouldn't be a surprise that state leaders increasingly are compelled to devote dwindling resources to direct benefits rather than innovation, the result often is greater inefficiency and poorer distribution of services. By providing the kind of technical assistance and peer learning that leaders and staff of public systems need as they embark on the task of modernizing large bureaucracies, that's exactly where foundations can be most helpful. Quite simply, without foundation engagement these work support systems would continue to underserve their recipients and burden taxpayers with unnecessary operating costs.

Finally, tough budget times are a reason to engage, not disengage. With work support offices stretched thin and the current squeeze on state budgets, one might imagine that helping those in need -- rather than making investments in improving the efficiency of state government -- would take priority. But if you look at the early response from twenty-seven states to the initial request for proposals and the dedicated work of the nine states chosen to participate in the first year of the WSS project, the desire for ideas and resources to modernize the safety net -- in both red states and blue -- is overwhelming. With states aspiring to do better, this is a great opportunity for foundations to step in and ensure that this current crisis becomes an opportunity to make lasting changes in how we deliver work support benefits across the country.

Philanthropy has a proud history of convening disparate groups and seeking common ground based on practical solutions. The result has been an impressive mix of programs that make a real difference in the lives of individual Americans -- and often bring people together. The WSS initiative aspires to that tradition, and we hope the lessons it is yielding inspires even more partnerships for the betterment of the most vulnerable in our society.

-- Luis Ubiñas

PNP Salary Survey Report: 'The Year of the Program'

(Robert F. Duvall, Ph.D., is director of special projects at Professionals for NonProfits (PNP), a full-service staffing firm exclusively serving the nonprofit sector.)

Professionals for NonProfits has just released its annual Salary Survey Report. With a focus on salary ranges, practices, and trends in the nonprofit sector in the Northeast and Mid-Atlantic regions, the survey has gained widespread credibility over the last three years and always generates considerable interest.

A look at the Survey Report for 2012 reveals some intriguing developments. While there is great variety among organizations -- in terms of budget size, area of service, location, and scope of activity -- one theme appears to stand out: More than 80 percent of the 6,500 nonprofits surveyed reported a new or renewed focus on the effective development of programs and services.

"In many ways, 2012 could be called 'The Year of Program'. Nonprofits of all sizes and types are taking a serious and fresh look at what they offer and how they serve the public through their programs," said Gayle A. Brandel, president and CEO of Professionals for NonProfits. Moreover, the renewed focus on programs and services is expressed in four inter-related areas: development, delivery, evaluation, and efficiency.

1. A growing number of nonprofits -- a third of the respondents to the 2012 survey -- are working deliberately to refresh their offerings, both in terms of new, innovative programming and by reinstating programs and services that had been cut back over the past few years. Accompanying, and often driving, these programmatic developments is a growing awareness of the need for good analyses of the market. Forward-looking nonprofits are acting on the realization that it is no longer enough to offer a program or service and expect an audience to respond positively -- regardless of how much it might merit it. Building a better mousetrap is no guarantee that people will rush to embrace your product. First, you have to determine whether they want to catch mice!

2. Increasingly, nonprofits are exploring and adopting new ways of delivering programs and services. The use of social media is a prime example. New channels of communication create new opportunities -- and challenges -- for the effective delivery of programs and services.

3. Integrated with these trends is a growing interest in evaluation and assessment. Nonprofits are asking: How do we know our program initiatives are working? And how do we measure their impact? In the face of reduced government funding, lower revenue, increased competition for visibility and support, and the need to engage volunteers, members, and boards, this is a critical issue. Identifying and using appropriate instruments for data gathering, analysis, and assessment will be an ongoing concern for nonprofit organizations in 2013 -- and beyond.

4. Correlated with improved program development, delivery, and evaluation is a growing concern for increased organizational efficiency. "Less can be more" is a mantra we hear often these days, and the 2012 Survey Report reflects that reality.

The effect of all these trends on staffing needs in the sector is significant. The report found that 33 percent of the nonprofits who responded said they added staff in 2012, while more than 37 percent said they plan to hire additional staff in 2013.

Indeed, with a stronger focus on improved delivery of core programs, heightened visibility for those programs, and new and improved ways to secure financial support, nonprofits are adding staff in three key, and inter-related, areas: Programs and Services (54 percent), Fundraising and Development (39 percent), and Marketing (35 percent).

And we project these trends will continue in 2013, making it even more definitively "The Year of Program Growth."

For a breakdown of Salary Survey responses by region/metro area (i.e., NYC, New Jersey, Philadelphia, Baltimore, Washington, D.C.), visit the PNP Web site (registration required).

-- Robert F. Duvall

Homeownership and the Racial Wealth Gap

I'm 29 and still hopeful I'll be a homeowner one day. Both my parents have owned their homes for years, and it has always been clear to me that the financial and social benefits of owning a home outweigh the benefits of paying less in rent and using the extra income for other things. Even though I know, as an African-American woman with some serious student debt living in one of the most expensive cities in the world, that the odds are stacked against me, I've started taking some steps to make homeownership a possibility in the not-too-distant future.

So you can understand my unease after reading the following in a new study from the Institute on Assets and Social Policy at Brandeis University about the growing wealth gap in the United States:

While homeownership has played a critical role in the development of wealth for communities of color in this country, the return on investment is far greater for white households, significantly contributing to the expanding racial wealth gap shown in [the figure below]. The paradox is that even as homeownership has been the main avenue to building wealth for African-Americans, it has also increased the wealth disparity between whites and blacks....

As the report, The Roots of the Widening Racial Wealth Gap: Explaining the Black-White Economic Divide (8 pages, PDF), notes, homes are the largest investment most American families make, and they are by far the biggest item in a family's "wealth portfolio." For African Americans, home equity represents 53 percent of household wealth, while for whites, who typically have a more diversified wealth portfolio, it accounts for just 39 percent. "Yet, for many years," the report's authors write, "redlining, discriminatory mortgage-lending practices, lack of access to credit, and lower incomes have blocked the homeownership path for African Americans while creating and reinforcing communities segregated by race. African Americans, therefore, are more recent homeowners and more likely to have high-risk mortgages, [making them] more vulnerable to foreclosure and volatile housing prices."

Home ownership is just one of five factors the report's authors identified as contributing to the racial wealth gap in the U.S. -- which, as the figure below shows, has tripled over the past twenty-five years, from $85,000 in 1984 to $236,500 in 2009. Other factors include family income, employment stability, education level, and family financial support and inheritance.

To help all Americans build wealth, the report's authors recommend that the public sector implement a number of broad policy and institutional changes, including:

• taking steps to ensure mortgage and lending policies and fair-housing policies are enforced and strengthened so that the legacy of residential segregation in the United States ceases to be a source of greater wealth opportunities for white homeowners than for African Americans;
• adopting proven policies at the national, state, and local levels to help all Americans access stable employment opportunities and retirement benefits;
• investing in affordable high-quality childcare and early childhood development programs to ensure that every child is healthy and prepared for school;
• supporting policies that help more students from low- and moderate-income families and families of color attend college and graduate;
• supporting policies that do not leave students drowning in debt or left with no option but to drop out of school because they can no longer afford the enormous price tag; and
• eliminating the preferential tax treatment for large estates.

After reading the report, I could't help but wonder what the philanthropic sector, which has grown in size as inequality in America has widened, is doing to address the growing racial wealth gap in the country? And what more can or should it be doing to expand wealth opportunities for all Americans?

What do you think? Share your thoughts in the comments section below.

-- Regina Mahone

Version 2.0: The Giving Pledge Globalizes

(Bradford K. Smith is the president of the Foundation Center. This post originally appeared on the center's Transparency Talk blog.)

They said that the Giving Pledge was "made in America," they said that Bill and Melinda Gates and Warren Buffett didn't understand other cultures, and that their brand of philanthropy was inappropriate for (substitute the country of your choice). They were wrong: on Tuesday, February 19, the ranks of the 93 American billionaires who have already signed the Giving Pledge -- a public commitment to dedicate more than half their fortunes to philanthropy -- were joined by a dozen more representing eight countries. In one fell swoop, the Giving Pledge has gone global.

How could the skeptics have gotten it so wrong? Since the Giving Pledge launched in 2010, wherever my travels have taken me, I have heard Brazilians, Mexicans, Europeans, and Chinese go to great lengths to explain why it would never catch on in their countries. On the eve of the Gates/Buffett visit to China, I was interviewed on CCTV2 (the English language channel of China's state-controlled media conglomerate) by a reporter who bombarded me with question after leading question to prove that theirs was a fool's errand. It was all I could do, in vain I suppose, to tell her that as hyper-developed as philanthropy may be in the America, it is alive and well and growing in China.

Here's what the skeptics fail to understand about the Giving Pledge:

Bill Gates is not (only) American -- While the world has struggled to come to agreement on standards for just about everything else that matters, Bill Gates created and proliferated a standard operating system -- Windows -- that came to be used in every corner of the globe where there was a desktop and a computer. He led a second revolution when he and his wife Melinda turned their personal wealth and vision to creating an internationally minded philanthropic institution. For both of these enormous achievements, Bill Gates represents a unique example of private success and public altruism on a global scale that many seek to emulate.

Billionaires are a culture unto themselves -- As much as they may be African, Asian, European, or Latin American, the wealthiest billionaires are also part of a growing, global culture of the ultra-rich. They are densely networked through business and investment ties and "hang" together in places like Davos, Aspen, and at the Clinton Global Initiative. In deciding to join something like the Giving Pledge they are more likely to look to the example of their fellow billionaires, wherever on the globe they may be from, than to pay credence to the skeptics in their own backyard.

Philanthropy is an aspiration -- Whether the Giving Pledge billionaires started out poor or were born into wealth, they see their fortune as a form of immense privilege. And, as their public pledges reflect, they recognize that they are in a position to do something about things in the world they feel could be better. As the ranks of the world's billionaires grow, we have the Giving Pledge to thank for elevating philanthropy to the level of a higher calling to which they can aspire.

The Giving Pledge is a social movement -- When the Giving Pledge was first announced, I blogged about it being akin to a billionaire social movement. Several years later it has become one. Its ranks have swollen to over a hundred, it has its own Web site, an independent resource in the Foundation Center's "Eye on the Giving Pledge," and periodic gatherings where pledgers share their experiences in philanthropy. As a movement, the Giving Pledge provides identity, recognition, and -- above all -- a network through which philanthropists can learn from one another. When you think about it, as wealthy as they are, the only place Giving Pledge members can turn for advice without being sold a service or pitched a project is probably to each other.

The most surprising thing about the globalization of the Giving Pledge is that anyone should be surprised that it is happening. Information is global, technology is global, many of the world's most pressing challenges are global, and ultra-wealth is global. Welcome to Giving Pledge 2.0, to be followed by future upgrades. I for one am eager to see where it will take philanthropy.

-- Brad Smith

Closing the Achievement Gap for African-American Males: An Economic Imperative

(Angela Glover Blackwell is the founder and CEO of PolicyLink, an Oakland-based national research and action institute working to advance economic and social equity. She currently serves on the President's Advisory Council on Faith-Based and Neighborhood Partnerships and is a co-author, with Stewart Kwoh and Manuel Pastor, of Uncommon Common Ground: Race and America's Future.)

In the United States, a black public school student is suspended every four seconds, while every 27 seconds a black high school student drops out of school. Black students are also 3.5 times more likely than white students to be suspended or expelled. Within this group, black male students fare the worst.

At PolicyLink, our mission is to achieve equity by "Lifting Up What Works." We find innovations and strategies that expand opportunity and, working with local partners, get what's working into policy so that effective innovations are more widely disseminated. We are particularly inspired by the strategies being employed by the Oakland Unified School District, where in 2008-09 only 49 percent of black males graduated, compared with 72 percent of white males and 61 percent district-wide, and where 18 percent of African-American males were expelled at least once, compared with 3 percent of white male students and 8 percent of students district-wide.

In response to those disturbing numbers, OUSD opened an Office of African American Male Achievement (AAMA) in 2010. With funding from Atlantic Philanthropies, the Mitchell Kapor Foundation, the Stuart Foundation, the California Endowment, and Kaiser Permanente, AAMA is working to change educational outcomes for young men of color -- and in the district as a whole -- in innovative ways. For instance, many Oakland high schools and middle schools now offer Manhood Development Classes, in which African-American men from the community teach skills designed to help students navigate the conflicting value systems they experience in different areas of their lives. Family and parent summits at each school include "data walks" where parents and kids are provided with charts detailing educational outcomes at the school as well as where the gaps in access and learning occur. And those efforts are bearing fruit: in 2012 the U.S. Department of Education announced a voluntary resolution of the compliance review initiated against OUSD regarding the disproportionate harshness and frequency of disciplinary measures meted out to African-American students. The district has even been cited as a model for other districts across the country due to its intense efforts to improve in this area.

Why is an initiative in one California city important? For starters, the country is undergoing a profound demographic transformation. In 2012, for the first time, more than half of all babies born in the United States were born to people of color. As that trend continues, the very racial and ethnic groups that traditionally have been left behind will account for an ever larger share of the population, so that by 2042 the U.S. will be a "majority minority" nation. On the way to that milestone, demographers expect a majority of U.S. youth to be of color by 2018, and a majority of the young workforce to be of color by 2030.

How will that changing workforce fare in the global economy? Forty-five percent of all U.S. jobs in 2018 are projected to require at least an associate's degree, yet among today's workers only 27 percent of African Americans have achieved that level of education. Closing the wide and persistent racial gap in educational attainment is not only the right thing to do; it is an economic imperative and the key to building the kind of workforce the American economy needs to thrive in the twenty-first century.

Turning today's youth into tomorrow's skilled workers and innovators is critical to restoring America's growth and competitiveness. Given the demographic trends, political, education, business, and community leaders, together with philanthropists, must address the gaping racial disparities in educational outcomes, income, health, and employment that serve as a drag on the economy and diminish its potential. Oakland is unique in that it has acknowledged and is addressing the systemic inequities in its school system, implementing programs that directly target students most at risk.

OUSD has focused on changing the culture of its schools, training teachers to be more aware of their biases and revamping a disciplinary system that in the past has responded to behavioral issues by removing students from the classroom -- and thus from the opportunity to learn. By improving educational outcomes for young men of color, we are better positioned to leverage everyone's talents and creativity to build a twenty-first century economy that works for all.

Oakland has the right idea. It takes a sustained and collaborative effort on the part of government, business, funders, parents, and other members of the community to provide young people with a clear path to a prosperous future. Yet we too often fail to target our resources to those who need them most. Young boys and men of color can and must be co-creators of our collective economic future. We at PolicyLink believe it is imperative that funders and leaders around the country come together now to support similar efforts to address systemic inequities and close the educational attainment gap. Nothing less than our future is at stake.

-- Angela Glover Blackwell

Let's Think Smarter About the Charitable Tax Deduction

Jan Masaoka is CEO of the California Association of Nonprofits (CalNonprofits), publisher of Blue Avocado, and author of The Best of the Board Café, Nonprofit Sustainability (with Jeanne Bell and Steve Zimmerman) and The Nonprofit's Guide to Human Resources.

On New Year's Day, lawmakers in Washington finally agreed to disagree and passed a bill to avert the so-called fiscal cliff. But with the federal government looking at another trillion-dollar deficit and record levels of debt, no idea for balancing federal expenditures and revenue will be off the table for long.

For many nonprofits, keeping the charitable tax deduction off the table is the issue. But while the issue itself may seem straightfoward, there are more nuances and choices to it than meet the eye. There are many ways, for example, to increase taxes that would not have a directly negative impact on nonprofits -- which, after all, are a huge part of the safety net for the poor, the elderly, the unemployed, and many others.

The deal made to avoid the fiscal cliff left the charitable tax deduction untouched for the most part -- and for the time being. To be clear: neither eliminating the deduction nor reducing the deductibility rate was discussed; the administration's proposal would have lowered the current cap on the deductibility of charitable gifts from 35 percent to 28 percent of one's income. The one tiny change passed was the reinstatement of the Clinton-era Pease Amendment, which will raise taxes on some of the wealthiest donors by perhaps $2,000 each.

However, the intensity of the debate served to highlight some thought-provoking issues for those of us in the nonprofit and philanthropic communities, especially as the potential for revisiting the charitable deduction (and other tax breaks) looms large.

Some nonprofits are conflicted about the charitable deduction: on the one hand, nonprofits benefit from donations that often are influenced by their tax-deductible status; on the other, many of these same nonprofits support higher taxes for the wealthiest in our society. Indeed, a reduction in the charitable deduction does two contradictory things for nonprofits: it reduces the financial incentive for people to give, and it also brings in more tax revenue -- revenue that could be used to fund nonprofit services.

Of note, the current deduction formula affords greater tax relief to higher-income individuals than to lower-income individuals, for three reasons:

• Higher-income individuals are more likely to itemize;
• Because it's applied to taxable income, the deduction helps higher-income individuals more since their marginal tax rates are higher; and
• The cap only affects individuals who donate a third or more of their taxable income. (Lower-income individuals are unlikely to be able to give away such a large percentage of their income.)

Other proposals, such as establishing a "floor" for the charitable deduction (a minimum percentage of adjusted gross income by which charitable contributions could qualify for deduction), could be more equitable and arguably could raise more tax revenue while having little or no impact on charitable giving. We should also look at ideas for extending the charitable tax deduction to non-itemizers, changing the formulas on deductions for donated stock, and making the estate tax more of an incentive for bequests. 

All of us at the California Association of Nonprofits encourage our colleagues in the nonprofit sector to advance the longer-term conversation about the charitable deduction as it relates to the balance between sector sustainability, equitable taxation, and fiscal responsibility.

But while we all must work to protect the deduction, we cannot allow the main message from the nonprofit sector to be only about tax breaks. We feel strongly that the Bush tax cuts of 2001 and 2003 have been harmful to our economy and our communities, while benefiting very few Americans. In the fiscal cliff deal, current marginal tax rates were extended indefinitely for individuals earning less than $400,000 and couples earning less than $450,000 -- approximately 98 percent of all U.S. taxpayers. While the revenue that will be realized by raising rates on the highest-earning 2 percent of taxpayers is less than what President Obama originally proposed, it's a step in the right direction for equitably increasing tax revenue as part of a longer process to bring the federal budget into balance.

We believe the responsible position is to support the charitable deduction and to support policies that result in increased revenue. In order to do that, we all will need to consider additional options as a new Congress begins to craft policy around these important issues.

-- Jan Masaoka

[Infographic] Nonprofits’ Impact on the Economy

Our infographic of the week, courtesy the Rebecca Gordon Group, delves into a topic that has been much-discussed this election season: nonprofits' impact on the economy.

 

According to the National Center for Charitable Statistics, the nonprofit sector contributes 5.5 percent of the nation's entire GDP, or $751 billion worth of output, and employed, as of 2009, 13.5 million individuals, or approximately 10 percent of the country's workforce.

(Independent Sector has a fact sheet on its Web site that lays out the sector's impact in much greater detail.)

Now, some would argue that statistics like these overstate the sector's impact, in that they fail to capture the extent to which the sector relies on tax-advantaged wealth transfers and the difference, in terms of the multiplier effect, between transfer payments and earned income. What's your take on that distinction? And, as we head into an election that could significantly reset the way the nonprofit sector is treated in the federal tax code, how would you characterize the sector's impact on the economy?

Share your thoughts in the comments section below...

Of Fire Trucks, Obama, Romney and Philanthropy

(Bradford K. Smith is president of the Foundation Center. In his last post, he announced the launch of the Reporting Commitment, an effort initiated by a group of the largest U.S. foundations to develop more timely, accurate, and precise reporting on the flow of philanthropic dollars.)

"I live in a rural community where the Tea Party dominates, no new taxes can be passed without a super majority, and government is cutting back on everything. The other day someone asked me how I can help the fire station find money to buy a new fire truck. What do I tell him?"

I was recently asked that question by a librarian at "Network Days," an annual live/virtual gathering of the librarians, nonprofit resource center administrators, and community foundation leaders that are the human face of the Foundation Center's Cooperating Collection Network. In all fifty states and fourteen countries around the world, CCs help struggling nonprofits, those who want to create nonprofits, and people who want to work in nonprofits connect with the resources they need. Except when there are no resources to be found.

Despite being president of the Foundation Center, the world's largest source of information on organized philanthropy, my response to that librarian's question was pretty feeble. All I could really muster is a few words to the effect that, around the country, there are small, local foundations which, on occasion, are willing to contribute to the purchase of a fire truck, an ambulance, emergency medical equipment, and the like. You can find some of them through the Foundation Directory Online or by searching 990-PF tax returns. Most of them don't have Web sites.

Another librarian asked me what she could say to the five hundred people who will lose their jobs next year when a factory in town closes. On that one I was able to muster a slightly less feeble answer, in that there are more foundations willing to fund job training, enterprise creation, and advocacy than there are foundations willing to contribute to the purchase of a fire truck.

Every day, these librarians ask people, "How can I help you?" And in return, they get questions like these. Of course, they listen, they empathize, and they struggle to come up with good answers. But good answers are increasingly difficult to come by. My job is all about philanthropy, not about business or government. I know foundations are concerned about government continuing to retreat from education, health care, and social services, and that legislators and many others expect philanthropy to pick up the tab. On the face of it, that's preposterous: the resources of even the largest American foundations are a rounding error in the federal budget. And channeling foundation dollars into basic service provision would kill off the independence, creativity, and risk taking that makes philanthropy so valuable to society.

But as much as I would love to see the fire truck question put to President Obama and Governor Romney in one of the next two debates, that ain't gonna happen. No matter which candidate wins in November, he will be faced with deciding what government will not fund, as an over-leveraged economy struggles through an anemic recovery. Meanwhile, the private sector will continue to shutter factories, locate them overseas, or create new ones at home that are heavy on technology but light on workers.

So that leaves philanthropy. The good news is that philanthropy, in the U.S. and around the globe, is a growth industry. The world economy is manufacturing billionaires at a record pace, and thanks to efforts like the Giving Pledge, more of them are embracing the notion of giving back. But those of us who work in philanthropy need to do more than just wring our hands over concerns that government may start telling foundations what to do with their money.

What, you ask?

First, foundations can fund more advocacy. Great Recession notwithstanding, there is still a lot of money sloshing around the public sector, and every year some of it goes to pork and some of it flows to organizations and causes championed by special interests. As Bill Clinton was fond of saying, politics is a contact sport, and advocates interested in public support for vital community services need resources to stay in the game.

Second, foundations can support and even lead efforts to foster broad public dialogue about how best to piece together a social safety net that works and is sustainable. Until the paralyzing rhetorical divide between the ideologies of "big government" and the "magic of the market" is bridged, families and communities will continue to crash through growing gaps in the frayed social safety net.

Third, foundations can support sustained social innovation. Now, innovation alone will not solve all the large-scale societal challenges we face, but it has the potential to create breakthroughs that lead to entirely new and less expensive ways of addressing those challenges.

Fourth, foundations can be more forthcoming with data and information about the good work they do. If nothing else, this will make it much easier for a rural librarian in Idaho or Arkansas or Wyoming to help the local volunteer fire department locate resources to buy that fire truck. And it will also make it easier for foundations to see what others are doing so that there can be a lot less duplication than exists today and a bit more impact.

Fifth, foundations can support local libraries. Libraries have been the information backbone of this country for more than a hundred years, and librarians, the original data scientists, take their responsibilities seriously. America is filled with people who still believe that hard work, optimism, and cooperation can save and improve their communities. When librarians have the courage to ask them, "How can I help you?" we need to be sure they have good answers at hand.

-- Brad Smith

Hunger in America: A Q&A With Julie Gehrki, Walmart Foundation

In 2010, Walmart and the Walmart Foundation launched a five-year, $2 billion effort to help end hunger in America. In partnership with Feeding America and five of the country’s largest food companies -- ConAgra Foods, General Mills, Kellogg Company, Kraft Foods, and Unilever -- Walmart has since launched a variety of initiatives to encourage its customers to join the fight against hunger. Earlier this fall, Philanthropy News Digest spoke with Walmart Foundation senior director Julie Gehrki about the company's Fighting Hunger Together campaign and what the foundation is doing to address hunger in America.

Philanthropy News Digest: What effect has the sluggish economic recovery and the drought in the Midwest had on hunger and food insecurity in the United States?

Julie Gehrki: In early September, the U.S. Department of Agriculture released the results of its most recent survey, which found that more than fifty million Americans are suffering from food insecurity. And a recent survey conducted by Feeding America found that 65 percent of its foodbank directors are very worried about food supply in the coming months. While we're hopeful the economy will continue to improve, we want to make sure that those who may not be benefiting from the improvement are taken care of. Feeding America foodbanks are on the frontlines of need in our communities, and Walmart wants to make sure they have the food they need to help those who need it -- particularly if food prices rise, as some are predicting, and as we head into the holiday season.

PND: What are some of the best ways for individuals to fight hunger in their communities?

JG: One of the things we're doing is called the Golden Spark campaign. Through Sunday, October 14, people can go to Walmart.com/hunger or our Facebook page and vote for a community to win $50,000 to start or expand a backpack program -- that's a program that provides meals to food-insecure children over the weekend, when they don't have access to free- or reduced-price school meals. A lot of people understand that kids get fed through school, lunches and sometimes breakfasts, during the week. But the backpack program forces people to think about what a kid does on the weekend. Studies have found that teachers have noticed that many kids are less attentive on Monday mornings, and that's because many of them have not eaten enough over the weekend. Backpack programs are largely run by volunteers. Individuals pack backpacks with food that's easy for kids to open and prepare on their own over the weekend. Walmart believes this is a local issue, something that communities and individuals in those communities have to rally around, because it's their neighbors who are feeling the pain.

PND: As a parent of two small children who have some eating issues, I know that a lot of food goes uneaten. What, if anything, are you doing to control for or take advantage of that?

JG: A lot of people are thinking about that. We're working hard with a number of nonprofits to make sure the food that's provided through the program is both healthy and appealing to kids. For example, some kids will not eat an apple unless it's in slices. We also address things like the school breakfast program by providing food in classrooms. Everyone eats together and we do everything we can to make sure there's no stigma attached to receiving food from a foodbank.

PND: Is Walmart using social media to engage its customers in the effort?

JG: The Golden Spark campaign relies on Facebook. Again, to vote for a community, visit our Facebook page or Walmart.com/hunger. You can also share the page with your friends on Facebook. The campaign is about broadening the number of people who are involved in hunger-alleviation efforts, and social media is a great way to do that. Our Facebook fans also can visit the "Live Better" section of our page to learn about our ongoing work fighting hunger across the United States and to view videos that highlight local stories of Americans making a difference in their communities.

PND: How many people do you hope to reach?

JG: This year, between the meals we donate, those donated by our suppliers, and those donated by Walmart customers, it'll be fifty-three million meals -- and that doesn't include the $2.5 million Walmart will give in cash to support hunger-alleviation efforts. When we started in 2007, we donated about nine million meals.

As you know, this is part of our $2 billion commitment to combat hunger in the United States. One of the things we know we can do as the nation's largest grocer is raise awareness of the issue. And so we're supporting our efforts through a multi-channel marketing campaign that kicked off in September, which was Hunger Action Month. It's really about using the combined resources of nonprofits, corporations, foundations, and individuals to say that this is a real issue, this is an important issue, and that together we can make a difference.

-- Matt Sinclair

What Winning Looks Like: Impact & Innovation Forum for Black Male Achievement

(Grace Sato is a research assistant at the Foundation Center. This is her first post for PhilanTopic.)

What do New York City mayor Michael Bloomberg, philanthropist George Soros, and Harlem Children's Zone founder Geoffrey Canada have in common? They're all passionate about black male achievement. And they all shared the stage at the inaugural Impact & Innovation Forum, hosted by the Open Society Foundations, earlier this week.

At the event, more than two hundred leaders from every sector -- philanthropy, government, finance, media, education, nonprofit, faith -- gathered to hear about efforts taking place across the nation to improve the lives of black men and boys. And while acknowledging the many challenges black men and boys face, forum participants focused on celebrating victories, spotlighting innovative strategies, and building on growing momentum in the field.

Here are some of my takeaways from the event:

Black men and boys are assets. The Knight Foundation's Trabian Shorters described the foundation's Black Male Engagement (BME) Challenge, which put out a call to black men in Detroit and Philadelphia to share stories of how they were helping their communities. The foundation received almost twenty-one hundred responses in just eight weeks from "regular" folks -- neighbors, uncles, coaches -- who are volunteering their time to make a difference in others' lives. With negative portrayals of African-American males dominating the media, these are stories that need to be shared.

The time is now. The field of black male achievement is "not a new idea. It's a now idea," said Shawn Dove, campaign manager for the Open Society Foundations' Campaign for Black Male Achievement. That sentiment -- what Dr. Robert Ross, president and CEO of the California Endowment, described as the "spiritual audacity of the moment" -- was echoed by numerous speakers and evident in the energy and enthusiasm of participants. Indeed, it was Angela Glover Blackwell, founder and CEO of PolicyLink, who expressed what most people in the room were thinking: "We have everyone we need to get this going. Help has arrived. It's arrived in the form of a movement."

The movement must be built on collaboration. Although the forum was hosted by the Open Society Foundations, the event was all about building the broader field of black male achievement and pooling resources to create real and lasting change. As speaker after speaker acknowledged, there's a role for everyone to play, from investors in social impact funds and African Americans serving on the boards of Fortune 500 companies to young entrepreneurs and volunteer mentors.

"The days of working in silos are gone. That time is dead," said Rev. Dr. Alfonso Wyatt, who emceed the afternoon sessions. Or, as Geoff Canada remarked, those who try to go it alone are bound to fail. The problems are large and complex, said Canada, and we are going to need to engage whole communities in developing a holistic response if we hope to solve them. "The only question," he added, "is, are we prepared to put the cause higher than our own egos or habits?"

Closing the belief gap. The opportunity and achievement gaps confronting black men and boys are well documented. Shawn Dove ended the day by asking, "Do we really believe we can win? For me, what winning looks like is that we've got to first close the belief gap."

I'll close with an anecdote shared by Dr. Ross. Before 1954, he told the audience, it was believed no human being could run a mile in under four minutes. Scientists said it was physically impossible. But in 1954, one man, Roger Bannister, did what everyone said couldn't be done. And within three years, fourteen other people had run a sub-four-minute mile. (Today, there are more than three hundred American sub-four-minute milers alone. I Googled it.) The Open Society Foundations launched its Campaign for Black Male Achievement four years ago. And today, there are sixteen foundations around the country making robust, targeted investments in the future of black men and boys. Not to mention thousands of individuals and organizations committed to their success.

Can the struggle for black male achievement be won? After attending this week's Impact & Innovation Forum, I, for one, am a believer.

-- Grace Sato

NPO Job Openings (July 2012)

It’s been three weeks since the Bureau of Labor Statistics released the July job numbers, and the muted optimism that greeted news of a modest uptick in nonfarm payrolls seems to have dissipated as the presidential campaign has turned relentlessly negative.

According to the BLS, total nonfarm employment rose by 163,000 in July -- an increase of 99,000 from the 64,000 jobs added in June and significantly better than the 96,000 jobs added in July 2011. While the unemployment rate remained stuck at 8.3 percent (12.8 million people) -- a fact Republicans are likely to beat like a drum at their convention -- the average number of jobs added on a monthly basis rose above 151,000 for the first time in 2012.

(Chart courtesy CNNMoney)

When we look at the number of jobs submitted to the PND job board -- something we do periodically here at PND -- tells a slightly different story, with job postings down on a month-over-month (12.4 percent) and year-over-year (15 percent) basis. Indeed, the 310 jobs posted to the board in July represent the lowest monthly total to date in 2012, while postings to the board overall have declined 3.7 percent compared to the same seven-month period in 2011 -- anecdotal evidence of a sluggish, if not slowing, economy.

One bright spot in the employment picture is Florida, which, as the Conference Board recently noted, led the nation in online job postings in July with an almost 13 percent month-over-month increase. Indeed, here at PND, Florida -- more so than any other Southern state -- has emerged as a bright spot in a rather drab employment picture, with plentiful nonprofit job openings in areas such as the arts, education, medical research, and human services.

Still, despite the good news from the Sunshine State and the better-than-expected jobs report, the economic outlook over the next six months is anything but clear. Will the technocrats in Brussels manage to hold the Eurozone together and keep the continent from sliding further into recession? Will the administration and the do-nothing 112th Congress address the so-called "fiscal cliff" before the election in November, or leave the tough decisions on spending and taxes to a new Congress and administration? Will the Federal Reserve introduce a third round of quantitative easing or sit tight as the economy chugs along at a 2 percent growth rate? Only time will tell.

For what it's worth, we're optimistic that, as it has been every year since 2009, August will again be a good month for postings to the PND job board, with  "bread and butter" areas like development/fundraising, technology, and human services leading the way. And, of course, we’ll be back in a few months with a followup report.

-- Lauren Brathwaite

Romney, Ryan, and Charity

(Mark Rosenman, a Washington-based scholar-activist and director of Caring to Change, a D.C.-based effort to promote foundation grantmaking for the common good, is a frequent contributor to PhilanTopic. In his last post, he argued that nonprofits are missing from critical policy debates.)

With the selection of Rep. Paul Ryan (R-WI) as his running mate, Mitt Romney has changed the stakes of the 2012 presidential race. Well beyond Republican versus Democrat, the question now before Americans is who we are as a nation and a people. Over the next four years, we must make decisions about public responsibility for the common good, about what we expect of government, and of what we expect of one another. The nonprofit and philanthropic sectors cannot afford to ignore this debate.

Developed by the presumptive Republican vice presidential nominee and already passed by the House of Representatives, the so-called "Ryan Plan" would have an immediate impact on many nonprofits, especially those serving low- and moderate-income people. Ultimately, however, it would affect each and every area of government support for charitable causes.

Indeed, after announcing Ryan as his running mate, candidate Romney issued a statement trying to distance himself from the plan, even though previously he had described it as "marvelous" and said he was "on the same page" as Ryan in terms of budget priorities. Charities are prohibited involvement in electoral politics, but helping to shape a public discussion about policy and our values as a nation is essential; nonprofit and foundation leaders must declare which page they are on.

Before we take a closer look at the unfolding debate, let me point out that Mitt Romney has himself already proposed similar policies. The nonpartisan Tax Policy Center concludes, for example, that Romney's detail-deprived proposal for tax reform would give the wealthiest Americans a significant tax cut while imposing tax increases on the remaining 95 percent of Americans.

This parallels Ryan's proposed budget, which would reduce tax revenues by $4 trillion over ten years -- and even more than that in the future. Those breaks, in turn, would save million-dollar-a-year earners an additional $265,000 annually on top of the $129,000 they'll get to keep if the Bush tax cuts are extended for everyone.

What's more, despite its draconian spending cuts and self-justifying rhetoric, the Ryan Plan will actually increase the deficit by $3.1 trillion between now and 2022, according to the House Budget Committee's own projections. The nonpartisan Congressional Budget Office (CBO) goes further and says the plan, if adopted, wouldn't balance the federal budget until 2040.

What kind of cuts am I talking about? Let's start with Medicare. The Ryan Plan calls for the program to eventually be turned into a voucher-style subsidy that would result in individuals having to buy more expensive medical insurance in the private market. The CBO analysis suggests that the typical Medicare beneficiary would face an additional $6,400 in annual costs by 2022, although Rep. Ryan has tried to tweak his plan since CBO's analysis was made public.

Furthermore, according to the same analysis, the Ryan Plan raises the eligibility age for Medicare from 65 to 67, creating a two-year gap when Americans wouldn't have access to either Medicare or the Affordable Care Act's health insurance exchanges. What would these changes portend for already over-stretched charities and foundations working to support and assist this growing population?

Although the cuts in the Ryan Plan go even further, the plan's most pernicious aspect involves its assault on programs serving low-income people at a time when poverty rate in America is estimated to have climbed to 15.7 percent -- or about 47 million Americans -- the highest level since 1965. Indeed, more than 60 percent of the budget cuts in the Ryan Plan -- at least $3.3 trillion -- comes from government and nonprofit programs serving the poor and those at risk of falling from the ranks of the middle class. Not counting the Medicare cuts, over $2.4 trillion of the total would be sliced from funding for health initiatives for low- and moderate-income people, while the food stamp program would be cut to the tune of $134 billion, denying assistance to between eight and ten million food-insecure people.

Moreover, cuts in low-income programs for education, training, employment, and social services are estimated to total more than $463 billion, while discretionary programs in the same areas are targeted for an additional $291 billion in cuts. Consider what it would mean, for instance, to gut the Pell Grant program and deny low- and moderate-income students desperately needed tuition at a time when higher education is increasingly promoted as the route to economic self-sufficiency.

Beyond Medicare and safety-net programs, the Ryan Plan wreaks havoc in most other areas of concern to charities and the larger public. Agriculture and food safety, the environment, highways and transportation, medical and scientific research -- all are on the chopping block, as are veterans' programs, water infrastructure, national parks, border patrol, law enforcement, and initiatives in every area of government except national security. In fact, according to the CBO, if the Ryan Plan is implemented, spending by the federal government would essentially be reduced to Social Security, health care, and defense by 2050.

In the aggregate, nonprofit organizations depend on government for about a third of their annual revenue. Foundations cannot and will not make up for these missing dollars. And individual giving, especially from individuals whose own economic circumstances increasingly are precarious, isn’t going to fill in for a government that withdraws from most of its long-recognized responsibilities.

That is exactly the possibility, however, that confronts charities and foundations today. Radical policy promoted by "Republican Social Darwinists," as Robert Reich has characterized Ryan and his supporters, cannot remain unchallenged by nonprofit organizations and those who support them.

But what can charities and foundations do? First, their leaders must speak forcefully about the essential role of government in their areas of programmatic concern. While they may be concerned about a backlash, especially from their wealthier supporters, there is a great deal of polling data to suggest that nonprofit leaders can expect to find a supportive audience on many of these tax and funding issues. A factual presentation on the Ryan Plan joined to an invocation of shared American values is likely to bring even more support for the policy positions supported by charities.

Second, charities and foundations, regardless of their mission, must invest in voter registration, voter education, and get-out-the-vote campaigns focused on their constituencies, volunteers, staff, and members of their larger communities. Such activities are permissible under law (see www.nonprofitvote.org), and they are critical to helping people understand the fundamental issues and what is at stake in this election.

In 2012, Americans will do more than elect a president, a vice president, a House of Representatives, and one third of the Senate. They will determine whether or not we believe in shared responsibility for ourselves and each other. Charities and foundations that choose to sit on the sidelines have nothing to gain and everything to lose.

-- Mark Rosenman

[Commentary] If Nonprofits Fail

Jennifer Talansky is vice president of knowledge and communications at the Nonprofit Finance Fund, a national nonprofit that provides a continuum of financing, consulting, and advocacy services to nonprofits and funders nationwide. Talansky held previous marketing positions at Credit Suisse Asset Management, Partnerships for Parks, Hearst Magazines Brand Development, and JP Morgan's Private Client Group.

Recently, the Nonprofit Finance Fund released the results of its 2012 State of the Nonprofit Sector Survey. The response to those results has varied widely based on who is interpreting the data. While many who are well-acquainted with the long history of the sector's financial woes saw the results as confirmation of their own experiences, some saw the results and told us, "That doesn't look so bad!" This divergence of perspective about what constitutes a healthy nonprofit sector begs the question: What is an acceptable level of instability -- or even failure -- within the sector?

Nonprofit financial health can be an abstract and technical subject. Let me start with a look at something more familiar. I live in New York City, where there's a pizza joint on almost every corner. Unless she has a favorite or is a friend of the owner, most New Yorkers don't blink if one of these pizza places goes out of business. Heartless as it may seem, it's the kind of economic Darwinism that one grows used to in a city with high commercial rents and an overabundance of almost everything.

Yet, there are repercussions to this kind of churn beyond a more limited pizza choice. The revenue once generated by the shuttered pizza joint supported the owner or group of owners, their families, other dependents, and employees. Its taxes contributed to the maintenance and expansion of the city's infrastructure, including teachers, police, and trash pickup. Perhaps the owners also donated to a local charity, or gave their time to a local business association. And because their basic needs were covered, the pizza shop owners and employees probably did not need to access some of the social safety-net services that a growing number of people in the city have come to rely on. With the failure of that one pizza place, the community lost all the economic and social good that was bound up in it.

Now let's take my example a step further and shift our thinking to the nonprofit sector. Like the pizza place, nonprofits contribute to their local economies in a variety of ways, including rent, the regular purchase of supplies, job creation, and more.

But imagine that the "business" at risk of failing is a domestic violence shelter. And that we're no longer in New York City but instead in a rural community in the Midwest. And that this particular shelter is the only safe haven for women and children within fifty miles. Is it acceptable from a community perspective if the shelter only has enough money to cover the next thirty days of its expenses, as is the case for one in four of the more than forty-six hundred organizations we surveyed? Or that it's like the 50 percent of survey respondents that don't expect to have the resources to keep up with demand for their services in 2012?

One of the more powerful aspects of the survey is its reflection of the collective voice of the organizations working to provide some of the most critical social services in our communities. But we mustn't succumb to statistical numbness: the survey numbers aggregate many individual stories, and each of those stories has local -- or wider -- meaning. For instance, it sounds great that "only" 20 percent of the organizations responding to the survey had to reduce or eliminate programs in the past year. Yet among these nine hundred organizations, 63 percent were unable to keep up with demand for their services. From Georgia to Texas to Montana, this simple fact has serious repercussions for the populations and communities that depend on those organizations and services.

Indeed, consider what a leader of one of those organizations told us: "We have seen a dramatic increase in the need for our services. As available resources decrease across the country, the demand for basic needs continues to grow....Domestic violence is the leading cause of homelessness among women and children in the nation. It takes more than a roof over [one's] head to break the cycle of homelessness, particularly when domestic violence is involved....Our greatest challenge is securing a steady stream of revenue and funding for services and programs."

So when we look at the numbers, it may seem like a small victory that "only" 31 percent of survey respondents finished 2011 with a deficit -- which means the other 69 percent either broke even or ended the year with a surplus. And yet, among the more than twelve hundred organizations that said they ran a deficit in 2011, 39 percent were human services organizations -- precisely the kind of organizations that provide the basic safety-net services that the most vulnerable in our communities rely on -- while another 15 percent work to educate our children.

And as if that's not sobering enough, when respondents filled out the survey in late January, 34 percent of those with a deficit in 2011 were already anticipating operating in the red in 2012. Are the rest of us willing to accept the possibility that, with two (or more) consecutive years of deficits on the books, many of these organizations may have to shut their doors? Do we, as a society, have a plan to replace the critical services they provide? The answers to those questions are unclear, the stakes are high, and, unfortunately, failure is a possibility.

NFF launched its annual sector survey in January 2009, during the darkest days of the recession. The nonprofit financial picture painted in the response to that first year's survey was pretty grim. Our hope, as the economy improved (albeit slowly) in the three-plus years since then, is that we would see a similar positive shift in the nonprofit sector's finances. That has not been the case and any improvements along the way have been modest.

Let's be honest: Business as usual is not working. The business models, revenue sources, and practices that have long been mainstays of the nonprofit sector are no longer adequate to see us through the challenging times that lie ahead. We must consider other approaches that tap new sources of money, generate new cross-sectoral partnerships and ideas, and help identify new solutions to persistent social problems. Because without fundamental change -- change that involves both innovation and more risk taking -- we will see the same disappointing results year after year. And that's a prospect that none of us should be willing to tolerate.

To see the results from the most recent NFF survey and from past annual surveys, please visit http://nonprofitfinancefund.org/survey. For individual stories behind the numbers, the "In their Words" section is likely to be of special interest. And for a more localized look at a particular sub-sector or state, we encourage you to check out our new NFF Survey Analyzer, which lets you easily filter the data in multiple ways.

-- Jennifer Talansky

Nonprofits Missing From Big Battles

(Mark Rosenman, a Washington-based scholar-activist and director of Caring to Change, a D.C.-based effort to promote foundation grantmaking for the common good, is a frequent contributor to PhilanTopic. In his last post, Rosenman and co-author Gary D. Bass, executive director of the Bauman Foundation, wrote about efforts by Congress to curtail the advocacy rights of nonprofits.)

We are seven months from what some are calling "taxmageddon" and others describe as a "fiscal cliff." And while leaders in the nonprofit sector are narrowly focused on proposed changes to the charitable tax deduction that could reduce charitable donations by about $2 billion a year, the Republican-controlled House of Representatives has already approved cutting trillions of dollars from programs critical to low- and moderate-income people and the charities that serve them.

Charities and foundations should be gearing up to confront immediate and near-term policy battles of extraordinary consequence to them. Instead, they seem to be wearing blinders -- or simply fear controversy, no matter the stakes.

Congressional Republicans seem to want a repeat of last summer's divisive struggle over raising the debt limit and are committed to pursuing new budget cuts. This comes after the House recently approved changes to last year's deficit-cutting sequestration agreement and shifted what was a shared annual burden of $109 billion entirely to domestic programs.

House Republicans also are trying to preserve Bush-era income tax cuts for wealthy Americans, an action that if successful will cost an estimated $1 trillion in revenue over ten years -- and doesn't include the loss of billions in revenue from estate tax reductions for millionaires. They have already passed the budget put together by Rep. Paul Ryan (R-WI), a plan that goes well beyond a renewal of the Bush cuts and give millionaires an additional tax break averaging $265,000 a year while cutting over $3 trillion from programs that serve low-income people or fund the charitable programs that help them.

This is not chump change. To give you a sense of the magnitude of the proposed cuts, the shift in sequestration alone is more than the total annual giving of all U.S. foundations combined. And the so-called Ryan plan calls for cuts in domestic program over ten years that are about seven times the equivalent projected total of foundation giving -- a shortfall that would result in some two million people losing their access to food stamps and another forty-four million having them reduced. The Ryan plan also would eliminate the social service block grant through which nonprofits now provide services to some twenty-three million people, over half of them children, as well as invalids dependent on Meals on Wheels programs, those in foster care, and those who rely on nonprofit childcare.

And that's just a start. Democrats and Republicans in Congress agree that the interest rate on federal student loans shouldn't be raised, although the former want to pay for keeping the current rates by getting rid of some business tax cuts, while the latter are focused on defunding nonprofit preventive care programs related to obesity, cancer, and HIV/AIDS.

I've heard it said that nonprofits used to talk about problems and now the conversation is about branding. And everyone knows that foundations are becoming more technocratic in their approach and are focusing on metrics and the promotion of social investment schemes. What's going on here? Have charitable and philanthropic institutions been seduced by our thirty-year love affair with markets and forgotten about the public good? Why do they just accord with politicians' actions that benefit private interests?

These days, it seems to be easier for nonprofits and foundations to acquiesce to externally determined realities, to figure out how to do as well as they can in an environment that glorifies all things private instead of trying to figure out how to change things. Too many seem to go along to get along.

While that might be in the interests of some organizations and institutions, it does not serve society well. And it certainly works against the interests of the increasing numbers of Americans who are struggling to keep a roof over their heads and food on the table. The profoundly disturbing increase in economic inequality threatens all of us, even those who view themselves as one-percent winners.

There is much that charities and foundations can do to challenge policy decisions that are destroying the social safety net in the United States, not to mention the social contract that has been in place since the 1930s.

Everyone knows that Congress is at an all-time low in its approval ratings, but charity and foundation leaders appear to be unwilling to take public positions with respect to its more destructive actions. The nation desperately needs leaders who will speak to the public interest, who will step up and help Americans understand the direction in which we are being led and what it means for ordinary citizens and the organizations that serve them.

Foundations and nonprofit organizations can fund and direct resources to assertive and ambitious voter registration and education efforts. They can help people better understand the critical issues and solutions being debated -- and in some cases avoided -- by elected officials. Charities can propose and advocate for their preferred policy options and can urge individuals to promote action on those solutions by communicating with their legislators and administration officials.

The stakes are huge -- for individuals, communities, charities, and foundations. The ways in which Congress and the next president address the fiscal issues confronting us will determine our collective future for years to come. Policy choices made now and in the not-too-distant future could dramatically worsen the quality of life for tens of millions of Americans. And we may soon find both government and the nonprofit sector without the resources to moderate the deteriorating circumstances we face as individuals and as a society.

Most Americans agree that we need comprehensive tax reform which results in the wealthiest among us paying a fairer share of the revenues collected by the federal government, as was the case in and before the Clinton era. We need reforms in entitlement programs that find real long-term savings while protecting those dependent on them. We need infrastructure investments that will stimulate the economy and create jobs. And we need to be sure that the defense budget bears its share of the deficit-reducing burden, especially as the long conflict in Afghanistan winds down.

A disastrous future is not inevitable, and the passivity of most charities and foundations is not immutable. Our nation faces very real choices with profound implications. But we do have choices. The question is who will help make them.

We are rapidly approaching a moment of truth and are in need of leaders who are committed to the public good. Nonprofit organizations and philanthropies can maintain their silence and fail America, or they can help lead us in that direction by promoting popular action on behalf of our shared interests. The time to act is growing short....

-- Mark Rosenman