Here it is, mid-May, the birds are singing, the flowers blooming, and nonprofit boards and executives are worried sick over the deliberations on Capitol Hill. A perverse set of contrasts if ever there were.
As I've reported in this column before, government funding of nonprofits have declined by tens of billions of dollars over the past 15 years. Now, Congress is debating cuts that would make those previous ones look like delicate pruning jobs.
Congressional leaders have made it known that everything is up for grabs in the race to cut government spending. If all federal support to nonprofits were to evaporate -- a very, very real threat according to policy experts -- it would mean a $105 billion hit in the pocketbook. That money now accounts for about 30 percent of the revenues taken in by nonprofits that provide critical social services. Up to now, governments and nonprofits have worked in partnership to deliver those social services. That $105 billion represents less than one-eighth of total government spending on social programs, now about $950 billion annually.
Nonprofit leaders of social service agencies with whom I have spoken are clearly worried. While many would like to believe that private giving will take up the slack of massive government cutbacks, few really believe that will be the case. In fact, a recent analysis of giving trends shows that while after-inflation giving by Americans increased 2.4 percent from 1963 through 1993, for the final five years of that period it rose only 1.2 percent. That is a cause of additional fear among fund-raisers. Up to now, Americans have tended to respond well to social service appeals. But, with so many families themselves struggling to keep up, one of the first home budget areas to get cut is charitable giving.
Fears about the economy have caused the average household contribution to charity to drop between 1989 and 1993. Even if a proposed tax incentive is passed by Congress, it would mean less than a 5 percent increase in charitable giving, according to some experts.
Can private foundations pick up the slack? Hardly. Foundations give an impressive $10 billion a year to charities, but still far short of even the most conservative estimates of what government cutbacks will look like. Besides, private foundations tend to fund only new programs and innovative approaches, not the operating capital that is the lifeblood of nonprofits.
How about raising fees for services? Right now, fees, dues and other charges make up about 40 percent of the typical social service agency's revenues. Many agencies have become more and more creative in applying fees for services. However, agency heads I talked with for this column believe they have maxxed out on ways they can tap their constituents. Few patrons, they believe, could afford a fee increase. At the same time, government cutbacks in social programs have actually increased the need for nonprofit services. This is the double whammy that many nonprofit leaders speak about when they make their rounds of legislative offices.
What can be done about this obvious conundrum? On the one hand most people would agree that controlling government spending is a priority. On the other hand, no one wants to see social problems increase.
Many leaders are urging constituents -- clients, donors and supporters -- to write letters to their congressional leaders urging a more considered approach to cutbacks, one that incorporates a cost-benefit analysis. If a dollar saved by cuts in a specific social program costs five dollars in social need, it is a poor call.
Other groups are working on encouraging private citizens to volunteer more, give more, and learn more about the nonprofit sector in the belief that an informed citizenry will find ways to "do the right thing."
This is not only a budget-cutting issue. We need to find real solutions to the many social problems that plague our society. But, we also have to face the fact that these solutions will take money -- our money, whether in the form of donations, taxes or both.
Les Picker is a philanthropy consultant. Write to him at The Brokerage, 34 Market Place, Suite 331, Baltimore, Md. 21202; (410) 783-5100.
