Every day the news carries another story about the work in Washington, DC to negotiate a deal on the debt limit and serious debt reduction activities. The issues are familiar – potential spending reductions and potential tax increases. One side will not budge from its position of no new taxes – and the other will not budge on its position of achieving results with new taxes and limited spending reductions. We know they need to collaborate to solve this – yet they are providing a good example of what collaboration is not. Over the next few weeks we will discover if they do learn the meaning of the word.
In the meantime, in our own communities, we have the ability to collaborate every day – and yet in the not-for-profit world I tend to see more competition than collaboration. How can we set an example to work with other not-for-profit organizations that have similar missions, values, and services? Is there a chance to provide improved services to the community utilizing fewer resources and thus improving efficiencies? Do organizations ever attempt to discover the answer to these questions?
Two weeks ago everything seemed bright on the economic horizon with the stock market moving well and unemployment numbers from April looking better and better all the time. What a difference a fortnight makes.
The news this past week from Wednesday on was not cheerful, and was not bright. Only 58,000 jobs were created over the month of May, well short of the number required to have impact on the unemployment rate. It would take gains of 350,000 per month to truly impact the numbers and lower the unemployment rate, which rose to 9.1% nationally due to more people entering the work force and actively looking for work. There are 7 million fewer people working in our country now, than 2006. That is a sobering thought.
No wonder there is such a lull in economic activity and no wonder there is such caution in spending on the part of those who are working.
In 1992 I took a position with the Sisters of Providence Health System in Springfield, MA and the unemployment rate in Massachusetts at the time was 11%. As we planned our fund raising activities, board members (and others) questioned our strategies; I repeatedly mentioned that we were going to focus on the 89% of the people who were working. During my three years there we increased the number of donors from 600 annually to more than 3,500 annually.
Even now throughout our country, more than 90% of the people are working and being very productive. They are not spending and they are concerned that they may be laid-off or lose their jobs. Debt is being reduced (short term debt continues to shrink) and savings is increasing. Thus the savings rate in America is at an all time high having exceeded the 5% level for 10 consecutive quarters. Currently there is $2.7 trillion (yes…trillion) in money funds in America earning less than .3% annually. This does not count savings accounts, checking accounts or short term certificates of deposit (less than 6 months). There is a tremendous amount of money still sitting on the side lines as people are cautious with their spending. At the current savings rate, the economy will make a fundamental shift at some time – there will come a moment when we shift from being a nation of consumers to a nation of investors. But when is the question.
So in this lull, what should you do to support your organization?
- Stay focused on the needs in the community that your organization is serving
- Continue to ask for gifts that will change people’s lives
- Be bold and confident
- Have a vision for the next 3 to 5 years
- Demonstrate results and success
- Seek community endorsements for the good work you are doing
- Stay close to your donors keeping them informed in a variety of ways
- And continue to seek philanthropic support – last week 3 donors gave our clients significant 7 figure gifts!
These are difficult times still, but over time the difficulties will pass. They always have, and they always will.
All the best,
I was in Connecticut last week listening to the radio news while driving between appointments. It was announced that the state legislature had reached an agreement on the state budget for the next year. This was accomplished with a few tax increases and plenty of budget reductions. Choices had to be made and I am sure some of those choices were not easy. The news reported this morning on the Washington State legislature and the challenges they are facing to close a $5 billion budget gap. Tomorrow they begin a special session only focused on budget issues. The mood is such that increased taxes will be out of the question. (As an aside, last November, voters in Washington State approved a tax rollback of 2 cents per bottle on soft drinks and water that had been approved by the legislature last year. It seems that voters wanted to pay 2 cents less for their liquid refreshments rather than pay for state services.) The Washington State legislature, along with many other states, will be making some key choices over the next thirty days, $5 billion worth of choices.
The impact on not-for-profit organizations will be tremendous. Social services and healthcare will be impacted by all this, causing further reduction to services that have probably already been reduced over the past several years. Even arts and culture institutions, some of which are closely aligned with state and local governments, will be feeling the budget tightness due to cuts in the funds they receive from government sources.
As a society we are facing choices like never before, and those choices will test what we truly value in life. Some think Washington State failed the test when they voted to reduce a 2-cents-per-bottle tax rather than pay for needed social services provided by the state. Others might suggest that this is a time when reductions force these very choices and we learn to make do with what we have and live within our means.
Once these reductions play out in not-for-profit organizations, and they face the same challenges state planners and legislatures are confronting, more choices will have to be made. If not-for-profits have fewer resources, and they will have fewer resources, how will they spend them to serve their constituents while maintaining excellent services?
Last week on my Connecticut trip I visited with one major not-for-profit facing these choices. They chose to reduce staff including their fundraising operations. At a time when financial resources are at a premium, it was surprising to me that reductions were made in fundraising rather than increasing the amount allocated to gathering more resources. Capital formation is important right now, and one of the least expensive ways to increase capital is to raise it philanthropically.
We all face choices in our lives. Over the next six months, you may face choices that you haven’t in the past. How will you respond?
All the best,