Nonprofit capacity needs more investment

Rick Cohen
Rick Cohen

Rick Cohen

Will nonprofit issues be high on President Obama’s policy agenda?

Look at what he faces — a plummeting economy that could wipe out a slew of small nonprofits with thin fund balances and thinner operating reserves.

If you don’t think that could happen, just imagine how the numbers of bank failures, job layoffs and the automakers’ troubles will inevitably reverberate down to the nonprofit sector with devastating results.

Turning around this nation’s sinking economy would be the best thing President Obama might do for the nonprofit sector, but that won’t happen fast.

The problems are too deep, and there are limits as to how much influence even the White House can exercise over a global economic crisis.

So what should President Obama do specific to the nonprofit sector in these circumstances?

First, infuse the nonprofit sector with operating and investment capital.

The government has to recognize that the advocacy and service-delivery capacity of the nonprofit sector is in as much risk in this economy as General Motors, Ford, and the nation’s banks.

Despite the happy talk from some nonprofit leaders, the reality is that charitable giving, foundation grantmaking and federal revenues are falling.

Smaller nonprofits in particular face shaky financial futures.

It’s not just the sector’s ability to deliver needed advocacy and services that is in jeopardy; it is the nonprofit sector’s employment of 8 percent of the U.S. workforce.

Keeping nonprofit people employed, functioning and contributing to our society is as critical in this service-and-information-based economy as any other sector.

Capital for nonprofits to maintain capacity and weather this deep and prolonged recession is undeniably important.

If unemployment creeps over 10 percent, we’re headed for a 21st century version of a depression, with the role of the nonprofit sector more crucial than ever.

Second, expand nonprofit human-capital resources.

The nonprofit jewel in the Obama campaign platform was his call for expanding community service slots in AmeriCorps and other Corporation for National and Community Service programs from 75,000 to 250,000.

That should happen right away.

This would infuse the nonprofit sector with people and energy at just the right time.

One might even think of this like a modern-day Works Progress Administration, focused on linking people to employment and hopefully long-term careers in the array of
organizations comprising the nonprofit sector that barely existed when FDR created the WPA in 1935.

Third, mobilize tax-exempt capital for social progress.

It is a travesty to find the majority of endowed foundations cutting back on their grantmaking at exactly the time when more grant dollars are needed.

The rare examples of foundations pledging to increase their grantmaking in 2009, like the John D. and Catherine T. MacArthur Foundation in Chicago and the James Irvine Foundation in California, deserve plaudits in contrast to their retrenchment-focused peers.

Foundations always say the reason they sit on rather than spend the bulk of their endowed wealth is that they’re keeping it ready for bad times, for the proverbial rainy

Well, this economy is a torrential rainstorm demanding that foundations unlock their vaults and increase their 2009 — and 2010 — grantmaking levels, even if it means dipping into their sacrosanct corpus. Society demands it.

President Obama and his congressional allies like Xavier Becerra, Charlie Rangel, John Lewis and others, ought to be using their bully pulpits not just to push for more charitable and philanthropic giving, but also to see that it reaches people in need.

It’s all too clear, as Becerra has said repeatedly, that much if not most of tax-exempt expenditures don’t benefit lower-income people.

With the burgeoning unemployment and foreclosure rates already evident, there will be a lot more poor people needing services and advocacy, not less, after President
Obama’s inauguration.

The last president with Obama’s youth and vitality was John F. Kennedy.  JFK and the nation were moved by Michael Harrington’s The Other America: Poverty in the United States in 1962, describing conditions that most Americans could barely imagine coming out of the prosperity of the 1950s.

Unlike that time, President Obama inherits the leadership of a nation on a downward spiral away from prosperity, families losing their homes, workers losing their jobs,
baby boomers and others watching their retirement funds evaporate.

Were JFK and Harrington here to monitor this economy and devise solutions, it is doubtful they would quibble over payout rates and untouchable endowments.

They would call on America to strengthen the nonprofit sector and on foundations to mobilize their dollars to help fight the recession.

Hopefully, the Barack Obama who once sat on the boards of progressive foundations in Chicago will bring that message to the White House and promote the nonprofit policies this nation needs so desperately right now.

Rick Cohen is national correspondent for The Nonprofit Quarterly.

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