All Nonprofits Are Exposed When Federal Funds are Reduced

Money works in mysterious ways.

The cause and effect that often comes with spending money is not always linear.

It is easy to overlook what happens when an organization does not receive its annual job training grant. Or when a hospital’s Medicaid or Medicare reimbursement rate is reduced. Or when the subsidy for housing vouchers or child care are reduced or eliminated. Or when affordable student loans are restricted.

These organizations typically have facilities and fixed costs that have to be supported, regardless of funding disruption. The result of lost funding can be devastating and, in some cases, truly life threatening to constituents. It is an existential threat for nonprofits.

So what is an organization to do?

They ramp up fundraising efforts!

It’s what libraries did 15 years ago when federal, state and municipal funding began to tighten. Now many libraries have foundations, when once upon a time there were none.

It’s not that simple, though.

 

Competition for Philanthropic Dollars

When many organizations that have historically used (relied upon) government funding to fulfill their mission step up their philanthropy fundraising, those organizations that are independent of government funding will be faced with much more competition for the discretionary philanthropic dollar.

Coupled with the reality that the viable donor pool is shrinking and general reductions in government spending historically lead to recession, all organizations that depend on fundraising and earned revenue must be concerned.

 

Our Voices Must Be Heard

We must be vocal with our stakeholders when the looming budget battle begins on Capitol Hill.

Remember, there is NO historical evidence where reductions in government spending, driven by the desire to cut taxes, has led to economic prosperity.

Let’s not forget that the stakeholder nonprofit sector employs more than 7% of the nation’s workforce. Reductions in federal spending leads to reductions in state and local spending. Let’s stop the spiral before it begins.

 

Your takes:

1. It is time to speak up and act.

2. Conduct deep analysis and develop a plan of action to address how the proposed federal budget priorities will affect your constituents, stakeholders and organization.

3. Design and execute an education and stewardship initiative for your stakeholders to explain the budget consequences.