Many of our clients receive state funding. In California this is an increasingly dicey arrangement. Every year, beginning on July 1, the legislature and governor fail to pass a budget. Sometimes the delay is weeks, often it is months. The hiatus can lead to a failure to pay all obligations, ranging from electric bills for state buildings to invoices from nonprofits providing services under contract.

This past year produced a particularly ugly scene. The State delayed passing its budget for – as I recall – 78 days, causing havoc everywhere. The State contractors continued providing essential services without a contract in part out of a sense of duty to their clients and in part because every year the state eventually makes good on its funding.

To add insult to injury, the State is now telling some of its contractors that this year they will not be reimbursed. After all, the State’s reasoning goes, we didn’t have a contract with you, so why should we pay? This is not only a morally bankrupt position – since the contractors kept the State’s patients in their nursing home beds, day care centers, etc., on an implicit promise, fulfilled in years past, that payment was all just a timing issue – it may also produce a practical disaster.

Next summer, less than six months away, will these contractors be willing to front money for the State once again? To quote our soon-to-be-ex President George W. Bush: “Fool me once, shame on — shame on you. Fool me — I can’t get fooled again.”

Recently, The David and Lucile Packard Foundation convened about 30 capacity builders, from a dozen organizations, over parts of three days, to discuss the state of capacity building and how we might all work together better.

Needless to say, the economy was on everyone’s mind, with the less than cheering consensus being that the sector would not see the worst of it until 2010. Significantly, leadership development was still viewed as a key strategy, and with good reason.

All the usual modalities and strategies for nonprofit capacity building – fund raising, strategic planning, board development, etc., depend upon great leadership to accomplish their aims. So, if you have been worrying how to strengthen your organization for the gathering storm, think about the quality of your leadership, and look for ways to build upon what you have.

Join a learning community, enroll in a leadership development program, find a coach or mentor. When this storm passes it will be the well-led that survive and even thrive through bad times.