Opinions of the Editorial Sort
AVOW (Advancing the Voices of Women) recently asked me to write an op-ed piece for today's Journal Gazette. My topic: philanthropy. Now, that's a pretty broad category and while I had six weeks' lead time on the piece, it took be about five of those weeks to narrow down what I wanted to say. I wrote this for the general, newspaper-reading public. If I were writing directly for you social profit heroes, I remind us all that WE have to be responsible for starting some of these conversations and asking our donors what their concerns might be. Anyway, here's what I ended up with:
Tough talk awaits nonprofits, donors
With tax law discouraging gifts, benefactors must be upfront with organizations they help
At a nonprofit board meeting, I watched as trustees and leadership struggled with the budget. Contributions had decreased and a downward trend was emerging. So they sliced a bit more out of infrastructure costs. Postponed an updated computer for the director. Cut the cleaning service to once a month. Eliminated training expenses. Shifted more of the health care premium to employees. They whittled away to bring things into balance and allow for further decline without cutting services.
They are conscientious, compassionate, committed servants, those board and staff members, trying to serve the community well.
On my notepad, I scribbled, “What slow starvation looks like.” As a consultant, I see this scenario too often.
A Guidestar study in January 2018 reported that 50 percent of the 1.8 million U.S. nonprofits have less than a one-month operating reserve. Thirty percent have operated in the red for at least the last three years.
While our community hosts robust nonprofit organizations with positive budgets, rainy day funds and healthy endowments, many more are operating on a frighteningly lean margin. They live hungry, every day, every month, every year, while providing valuable services.
Now, changes in the tax code are adding a new challenge to their financial stability. While it may take a year or two to fully realize, raising the standard deduction to $12,000 for singles and $24,000 for joint filers will have an effect.
The Tax Policy Center predicts that households claiming charitable deductions will drop from 37 million to 16 million. The Council on Foundations expects giving to decrease by $20 billion annually, give or take a few billion, primarily from middle-income donors. These donors generally give to human service organizations, many already operating on the edge, rather than arts, health care and higher education (supported disproportionately by higher-income donors).
I'm firmly in the camp that most people don't give because they get a tax deduction, but I do believe that deductions enable people to give more than they otherwise would. As the benefit gets more difficult to claim, many will rethink their charitable giving.
So what should we do, as concerned citizens, board members, and, especially, donors trying to make each dollar count for our community? From my experience in working with dozens of nonprofit organizations, I make these beginning suggestions.
Open a conversation with nonprofits in which you invest. Those hungry organizations feel every shift you make. If your advisors are suggesting giving less, bundling your contributions (giving significantly one year and forgoing contributions in the next couple years), or giving through a donor-advised fund to maximize tax benefits, tell your organizations. Knowing what to expect makes a difference.
Consider which organizations are doing work that you value most. Thinly spreading your dollars over a large number of organizations lessens the effect. Giving larger donations to a smaller number of causes increases the practical impact of your contributions.
Make unrestricted gifts. Designated support has a place, but gifts with no strings give organizations flexibility and resiliency. Individuals, corporations and foundations that fully buy into the mission and management of a nonprofit should be comfortable providing unrestricted investments.
Embrace the hard truth that not every nonprofit will survive. It is incredibly easy to form a nonprofit organization and astoundingly difficult to keep one functional and healthy. Slow starvation is painful and unproductive. New financial challenges can shine a light on old sustainability issues.
Responsible trustees and donors will encourage chronically struggling agencies to consider alternatives such as mergers, consolidations or bringing the work to a close. I see no shame in conceding that an organization has run its course. It's a bold, brave move that frees donors to invest elsewhere with higher return and trustees to take their expertise to other arenas.
In light of changing tax laws, we need to continue to exercise critical judgment in managing our personal giving as well as that of our businesses and foundations. We need transparent communication, courageous, realistic governance, and a continued commitment to working effectively if our nonprofit work is to thrive through such changes.
Joan Baumgartner Brown is principal for Baumgartner Brown Consulting.