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Illinois budget crisis impacting non-profit organizations — Part 1


illinois budgetLast week I had the privilege of attending a Fox West Philanthropy Network meeting where Jack Kaplan, Director of Public Policy & Advocacy for United Way of Illinois (UWI), reported on survey findings about the impact of the state’s budget impasse on the non-profit community. It should come as no surprise to anyone the longer this budget crisis drags on the worse it becomes for the state’s non-profit sector.

If you have time to read the white paper summarizing UWI’s survey, then click here. If you’re on the run today, here are a few of the highlights (or should we say “low-lights“):

  • The number of organizations that have made cuts to clients served as a result of the state’s budget impasses has more than doubled since July 2015
  • Nearly half of respondents reported making cuts to services, programs or operations as a result of the budget impasse
  • The number of respondent that reported making cuts to services increased dramatically from the survey conducted in July 2015 to the one conducted in January 2016
  • Of those agencies responding, 49% said they’ve tapped into their cash reserves
  • Of those agencies responding, 26% said they’ve had to access their line of credit
  • Of those agencies responding, 27% said they’ve laid off staff
  • Of those agencies responding, 5% have “skipped” a payroll

As I soaked in all of this survey data, I came to the following conclusions:

  • The longer this budget impasse lasts, the more programs are likely to be cut
  • The longer this budget impasse lasts, the more staff are likely to be laid off
  • The longer this budget impasse lasts, the more likely it is that agencies will cannibalize themselves — undercutting their organizational capacity — and do long term damage to their infrastructure and ability to come back from this crisis (read more about the Nonprofit Starvation Cycle in the Stanford Social Innovation Review)
  • The longer this budget impasse lasts, the more likely organizations will lose their most valuable and talented staff, who I suspect are currently looking for alternative employment
  • The more programs that are cut, the more clients will go without necessary services, which will have a long term effect on our communities (e.g. increased homelessness, increased crime, decreased student test scores, etc), which ultimately always leads to increased public expenditures down the road (e.g. increased taxes for policing, increased taxes for prisons, increased taxes re-open state institutions that were closed for cost savings when those services were shifted to the non-profit sector decades ago, etc)

I admit all of these conclusions are “my opinion” and none of us will know the real truth until the damage is done and smarter people that I are doing research years from now on the impact of the Illinois budget impasse. However, my intuition tells me I’m not too far off with these thoughts.

In addition to these thoughts, I’m also left with a number of questions such as:

  • When did so many Illinois non-profit organizations get so reliant on state government funding? And how can we avoid this from happening again in the future?
  • As is the case with most crises, there are really bad things that happen but there are usually unexpected good thing that come from the experience. I wonder what may rise from the ashes?
  • When will the budget impasse finally get resolved? (Note: I’ve heard some people predict Illinois won’t have its next budget until November 2016 or possibly even the beginning of 2017. Just for the sake of perspective, the last budget expired on June 30, 2015.)
  • What will happen to FY 2016 state contracts that were issued to non-profits “in lieu of appropriation” if the state never passes a FY 2016 budget and simply skips to passing a FY 2017 budget?

Lots of opinions and many more questions. I suspect many of you are in the same boat. Please use the comment box to share your thoughts and experiences.

If you want to learn more about the Illinois budget impasse and its potential impact on non-profit organizations, then I suggest the following:

  • If you are interested in diving into the survey data, I encourage you to click the link I provided earlier in this post to the United Way of Illinois survey summary.
  • If you want to review the PowerPoint slides that Jack Kaplan used for his presentation to the Fox West Philanthropy Network (FWPN), I uploaded them to one of my cloud drives and you can see them by clicking here.
  • Carol Gieske, who is the President of the Elgin Area Chamber of Commerce, shared an easy to understand infographic she secured from Illinois Comptroller Leslie Geissler Munger that illustrates the severity of the Illinois budget crisis. The infographic explains the budget issues as if your home finances were in the same position as the State of Illinois. I also uploaded this document to one of my cloud drives and you can see it by clicking here.

Next week I plan on publishing two more blog posts on this subject. While they are still coming together, one of the posts will summarize a discussion I had with an organization who has been significantly impacted by this crisis (of course, names will be changed to protect the innocent). The other post will likely focus on what organizations might consider doing to weather the storm. Who knows … there may even be a fourth post if things get too long. Stay tuned!   😉

Here’s to your health!

Erik Anderson
Founder & President, The Healthy Non-Profit LLC
www.thehealthynonprofit.com 
erik@thehealthynonprofit.com
http://twitter.com/#!/eanderson847
http://www.facebook.com/eanderson847
http://www.linkedin.com/in/erikanderson847

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More on the government shutdown and the non-profit sector


shutdown5In yesterday’s post titled “Did fundraising cause the recent government shutdown,” we talked about whether or not fundraising strategies are one of the leading factors contributing to our current situation. Today, I want to stay with this topic and look at how the shutdown is impacting non-profits and what you should do in the long-term to mitigate some of these issues.

Those you serve

Last night, I was watching the news and an executive director of a veterans agency was being interviewed about how the government shutdown was impacting veterans. Throughout the interview, he eloquently talked about the impact on:

  • military support staff
  • vendors
  • contractors
  • VA Hospitals (except for emergency room services)
  • students waiting for G.I. Bill payments for school costs
  • disbursement of death benefits to families

While I found all of this interesting, the thing most interesting to me was how his agency was being impacted. Obviously, informational hotlines are not being staffed in government offices. So, this organization is trying to fill that void and trying to answer their questions or get them the information they require.

All of this got me thinking. How many other non-profit organizations have clients who rely on the government for something? And by “things” I mean benefits, services, etc.

I suspect there are many non-profits whose phone lines and case workers are now working overtime to fill the void normally filled by government agencies.

Funding concerns

shutdown4From what I’ve heard and read, many non-profit organizations are concerned about how the government shutdown will impact their funding. Consider the following:

  • organizations fund their operations with federal contracts
  • states receive federal pass-through money which eventually can put state funding to non-profits in question
  • vendors, who do lots of business with the government, might not be able to continue providing your agency with the services you require
  • donors who work for the government or receive benefits from the government might not be in a position to pay their pledges or continue their support in the short-term

The longer a shutdown drags on, the more pressure will be placed on many non-profit organization’s revenue models.

Human capital

Just the other day, I was speaking with an agency who runs many of their programs with work-study students from the local college. The question they were pondering was obviously, “What impact might the government shutdown have on their situation?

There are government programs like work-study and Americorps that fuel countless agencies’ human resources needs.

Unanticipated consequences

Our system of government is large and complicated. There are countless numbers of programs that non-profit organizations rely upon, and there are millions of individuals who are impacted. Some of these challenges are immediately obvious, but many others will only make themselves visible down the road.

When businesses — regardless of whether they are for-profit or non-profit — operate in an environment of uncertainty, crazy things start to happen. Uncertainty and the human experience mix together about as well as oil and water.

While finance professionals brace for instability in financial markets, so too should non-profit organizations prepare for the obvious impacts and attempt to anticipate unexpected challenges.

What should you do?

While you might feel helpless at a time like this, there are some things you should consider:

  • Pull together an ad hoc committee to assess your agency’s vulnerabilities
  • Revisit your strategic plan and invest some time in contingency planning
  • Engage fundraising volunteers in a discussion about how to shift your agency’s dependence on government funding to other more stable sources like private sector fundraising efforts and specifically individual giving

Has your agency been impacted by the government shutdown? If so, how? What are you doing about all of this right now? Please use the comment box below to share your thoughts and experiences. We can all learn from each other.

Here’s to your health!

Erik Anderson
Founder & President, The Healthy Non-Profit LLC
www.thehealthynonprofit.com 
erik@thehealthynonprofit.com
http://twitter.com/#!/eanderson847
http://www.facebook.com/eanderson847
http://www.linkedin.com/in/erikanderson847

Did fundraising cause the recent government shutdown?


shutdown1In the weeks leading up to the government shutdown, I heard some rumblings via the news media that Senator Ted Cruz and those aligned with him were dragging things out in Congress to maximize their online and direct mail fundraising efforts. To be honest, I didn’t give much thought to those accusations. They sounded like sour grapes and something partisan opponents would say in the heat of the moment. And then . . . when the government actually shut down, I started receiving a flood of email from the Democratic Congressional Campaign Committee (DCCC). This is when my fundraising spidey-sense started to tingle, and I started paying attention because there must be lessons to be learned for non-profit organizations somewhere in this mess.

Here is what the most recent DCCC fundraising email said:

Dear Erik —

Boehner’s Tea Party majority is teetering on the edge:

A new poll shows that Democrats are leading SEVENTEEN Republican Congressmen after the Tea Party-inspired shutdown. Guess how many seats we need to win back a Democratic Majority? 17.

Voters are done putting up with the extreme Tea Party antics that have paralyzed the government. We have to act quickly to press our advantage in these crucial races. Will you help us raise $500,000 immediately to take on vulnerable House Republicans?

Donate $3 IMMEDIATELY to the Democratic Majority Rapid Response Fund.

This shutdown could spell the end of the Tea Party controlled Republican Majority.

But if we want that to happen, we have to act now.

Thanks,
DCCC Rapid Reponse

I purposely omitted the hyperlinks and website addresses because my intention is to evaluate language and strategy and not raise money for the DCCC.

So, let’s strip out the partisanship and set aside our personal political feelings. Let’s avoid the temptation to point fingers. Let’s just look at the circumstances, strategies and verbiage in the letter from a “Just the facts, ma’am” perspective.

What do you see? What do you sense?

shutdown3Here is what I’m seeing:

  • I see a misspelling in the signature block.
  • I see a case for support spelled out in five simple sentences.
  • I see emotionally charged words intended to poke and prod me into action (e.g. teetering, extreme, paralyzed, etc).
  • I see a fundraising goal clearly articulated (e.g. $500,000).
  • I see a specific ask (e.g. Donate $3.00 immediately).
  • I sense the strategy here is to set a very low barrier to entry to entice first time donors. In other words, they poke me, I get upset, and the solution is as simple as just giving $3.00 to make things right again.
  • I see an email with a small handful of carefully worded sentences fitting neatly on my computer screen. I don’t need to scroll down to continue reading.
  • I see short easy to read sentences. The longest sentence was 16 words long.

There is so much that you can learn if you just keep your eyes, ears and mind open. Professional fundraisers cram your mailbox and email inbox full of examples every day. Are you paying attention? Because with a little discipline you can teach yourself a lot in a short period of time.

Let’s circle back to the question I pose in the headline of this blog post:

Did fundraising cause the recent government shutdown?

I think a case can be made for the answer to this question being “YES”.

There is so much noise being made in our political arena on a daily basis that many people tune things out. I know that I am as guilty as others in this regard. So, when you have fundraising goals to hit, then your case for support needs to be very big and noisy in order to get people’s attention.

I believe the lesson to be learned here for non-profit organizations is that your case for support is powerful. It is the engine at the center of your resource development plan. It is the jet fuel for all of your fundraising appeals regardless of whether it is a direct mail appeal, email, social media, telephone solicitation, face-to-face pledge drive or special event.

shutdown2When crafting your case for support, this is what our friends in the political fundraising world seem to be telling their non-profit cousins:

  • Make it emotional
  • Focus on an issue that people care about
  • Choose an issue that donors and the media will talk about and magnify
  • Wrap marketing efforts around your fundraising efforts
  • Where possible, infuse advocacy into the appeal

For those of you who are skeptical and find yourself thinking at the end of this blog post that non-profit organizations can’t “manufacture” a crisis and weave it into a case for support like politicians, then let me suggest that you open your mind a little more.

I cannot tell you how many agencies I’ve seen neglect their buildings by minimally investing in maintenance and upkeep. In the final analysis, aren’t those agencies just slowly creating a powerful capital campaign case for support for down the road? Maybe it is purposeful and maybe it isn’t, but the fact that it is a manufactured crisis cannot be denied.

There are plenty of needs and gaps in our communities around which non-profit organizations can build a powerful case for support. We don’t need to manufacture crisis to raise money like our political counterparts, but it does happen more often than you think.

So, what are you waiting for?

It is the fourth quarter and year-end fundraising is one of the biggest shows on Earth. Start writing your case for support document today so you can transform it into an eloquent and powerful fundraising appeal in the next few weeks.

But whatever you do, please don’t “shutdown” your agency to make a buck or two. I suspect donors can only handle this strategy in small doses.  😉

And I am making a mental note to myself . . . perhaps, I need to stop tuning out politicians on a daily basis so they stop doing drastic things to get my attention.  😉   (Sorry, I just couldn’t help myself.)

Here’s to your health!

Erik Anderson
Founder & President, The Healthy Non-Profit LLC
www.thehealthynonprofit.com 
erik@thehealthynonprofit.com
http://twitter.com/#!/eanderson847
http://www.facebook.com/eanderson847
http://www.linkedin.com/in/erikanderson847

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