The head of a large nonprofit that has been serving children and families since the 19th century and that gets most of its funding from state and local government recently told us: “We have never had the chance to sit down across the table from government and discuss line-by-line what it takes to do the work. They call the terms, they put the dollars on the table, they give the staffing patterns, and you can take it or leave it.”
This is a problem, and it’s only going to get worse. Indeed, for decades now, government has been outsourcing the delivery of human services to nonprofits. Helping homeless youth come in from the streets, bringing meals to the elderly, providing after-school programs for at-risk children—these are among the hundreds of essential services nonprofit organizations are providing every day. The Urban Institute reports that in 2009, US nonprofits received more than $100 billion from government agencies via contracts and grants for the delivery of human services. For these nonprofits, government funding represented 65 percent of their total revenue.1 Roughly two-thirds of this funding originates at the state and local level. And increasingly, government agencies not only are outsourcing the financing of these services, they are also reimbursing nonprofits considerably less than what it costs to deliver them. These organizations are left to cobble together their own resources from other funding sources to make up the difference.
The long-term outlook for human services funding is bleak. The federal government is facing record budget deficits and interest payments to service its rapidly accumulating debt, the rising cost of health care, and the demographic challenge of paying for entitlement benefits for retiring baby boomers. Given that roughly one quarter of state government funding and one third of local government funding come from Washington, D.C., the federal budget squeeze in turn will impinge on human services budgets at these levels. Moreover, state and local governments have their own demographic time bomb to address, in the form of an estimated $1 trillion to $3 trillion in unfunded pension and retirement liabilities for current employees and retirees. This brings us to the questions we take up in this article: How can nonprofits that rely on government funding navigate this increasingly powerful undertow? How can they stay afloat? And can they even hope to make progress? The hard truth is that only a different turn in the political debate over what we owe the most vulnerable members of our society along with a reversal of our nation’s fiscal fortunes can change this tide—and both appear unlikely in the foreseeable future. The sobering reality is that nonprofits will have to be even more entrepreneurial in their funding models, efficient in deploying their resources, and vigilant in serving their mission to make headway
....Faced with deteriorating conditions, why don’t nonprofit service providers simply walk away? The harsh truth is that they can’t. Nonprofits are prepared to accept poor contract prices and endure readjustments in prices and terms and even badly delayed payments—simply to keep their missions afloat. The CEO of a successful multistate nonprofit bluntly observed of his government counterparties: “They know we are fighting for scraps, so everyone will just jump in to try to get that contract.” Please continue reading at: http://www.developmentcrossing.com/profiles/blogs/five-ways-to-navigate-the-fiscal-crisis
