I have had the pleasure of working in the nonprofit sector for over thirty years. Had you told me that the sector would experience a great recession, a global pandemic, distribution of stimulus money, and a big beautiful government budget bill, I would have laughed.
But here we are–and as you can imagine, organizations are concerned, and our clients are eager for some perspective. As a cagey old veteran of the sector, let me offer some.
To date, all the economic and health challenges have not resulted in a long-term decline in philanthropy. For example, if you look at data from Giving USA, post-recession giving rebounded, only decreasing in gross giving in 2009 before taking off again. And giving actually increased during the pandemic as many individuals donated their stimulus money. It is also important to note that the S&P 500 has been historically strong, an indication of the state of giving.
But today we have a new factor: The federal government is creating a challenge for nonprofit organizations.
For many, many years, organizations have been encouraged to diversify their revenue, particularly when federal or state grants are a substantial portion of their budget. Not to be overly critical, but failing to do so created a self-inflicted risk. Don’t misunderstand, I support state and federal grants that support the work in our sector. As I’ve said many times, if the government stops supporting our sector, philanthropy cannot fill the void. The federal annual support of nonprofits is currently nearly $2 trillion annually.
What should concern us, however, is something new: When this support is tempered or stopped completely, the benefits that individuals lose results in added pressure on our sector (think SNAP benefits or Medicaid eligibility).
I am optimistic, however, and am willing to make a few predictions on the future:
- Donor advised funds can offer some short-term relief for many organizations. It will be essential to have a compelling case. (To be clear, “We lost our funding” is not the case!)
- The term “collaboration” may soon become code for mergers and acquisitions. The long expressed concern of organization overlap has to self-correct at some point, and this may be the tipping point.
- The long predicted wave of retirements from the Boomer generation will allow a new set of leaders to take the mantle. There are some exceptionally smart and creative young leaders who can (and should!) rise to the occasion.
- We will begin to set a new tone that rejects “we need to do more with less” in favor of “the cost of doing nothing is simply too high.”
- Board members will finally show what it means to govern and lead. Sure, this will come because it is forced—but we may finally see that our board members understand the value of purpose-driven leadership.
- We will persevere. Our sector has a long history of setting aside politics in favor of service. Our sector will lead the way as it has always done.
Only time will tell if my crystal ball is correct. What say you?
