Without a doubt our nation, and the nonprofit sector that serves it, have both gone through a very tough time over the past couple of years. The crisis brought a barely averted financial collapse, from which Wall Street has recovered quite nicely. Profits are way up, and our biggest bankers seem to have learned – well, nothing actually. The head of Goldman Sachs described the whole near-catastrophe as practically an act of God that mere mortals could neither have foreseen nor prevented.  Regardless, Wall Street is back in the money, big time.

I wish I could say the same for the rest of us. Unemployment is stuck at record levels, which means, among other things, that nonprofit human service providers are stretched to the limit in many parts of the country, with less revenue and many more demands on their services. The nonprofit economy has continued to languish while the financial markets have begun to recover.  Where nonprofits are concerned, unfortunately, there is little hope for a rapid turnaround.

The largest source of income for many nonprofits is state and local government. The recession, while technically over, is still in full swing in most state legislatures. Higher unemployment means both lower tax revenues coming in and more benefits paid out. In places like California, where “dysfunctional” doesn’t begin to describe our pre-recession political system, each budget brings even more draconian cuts.

What can organized philanthropy do about all of this? Foundation funding has in the past been a highly strategic part of the sector’s sustainability.  It needs to play that role again today. Foundations are loathe to “play God,” deciding which nonprofits will live and which will die, but the time has come to place some bets.

As the sector continues to witness the financial collapse of not just marginal performers but important nonprofits, funders can ask “Which groups are too important for us to lose?”  Foundations should identify their top picks, the organizations their communities and fields cannot live without, and invest in strengthening those groups. This does not necessarily mean picking up the tab for government funding cutbacks, but helping these essential groups to rethink their business model, restructure their management and service delivery, and perhaps even join forces with others to withstand the storm.

A few foundations have launched initiatives to help key grantees rethink their models. It is time for the foundation community at large to jump in.

Tags: economy, foundations, innovation, nonprofit, Nonprofit Sector, Trends

This entry was posted on Tuesday, March 2nd, 2010 at 2:40 pm and is filed under Assorted Musings, Foundation effectiveness, Nonprofit Sector, Trends. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.