Can Philanthropy Really Fill the Federal Funding Void?

A lot of new research has been published, and there is a great deal of prognostication pertaining to how the independent sector will weather the volatile funding changes coming from the federal government. Additionally, the sector is seeing increased dependence on services because of the closure of U.S. federal agencies, like United States Agency for International Development (USAID), as well as cuts in Medicare-funded health services.

One common sentiment I’ve been hearing is that philanthropy — giving from individuals, corporations and private foundations — will have to pick up the slack for retracted federal support worth billions of dollars.

I talked about this recently with Susie Bowie, president and CEO of The William G. and Marie Selby Foundation. Commonly known as The Selby Foundation, the foundation invests in people through academic scholarships and by supporting capital projects. The Selby Foundation lives by the principles of humanity, humility, social responsibility and innovation. In addition to her work at The Selby Foundation, Bowie, known as a community connector and coalition builder, also participates on the board of directors for the Florida Nonprofit Alliance. 

I asked Bowie to share her thoughts on what impact the federal funding cuts will have and whether philanthropy is the answer to everything. Here are the insights she shared.

Vanderneck: What type of impact do you believe the decrease in federal funding and limited tax incentives will have on nonprofits? 

Bowie: There is no question that nonprofit organizations already doing some of the most challenging and important work will be hit hard by these changes — including those that do not rely on federal funds. 

Many nonprofit leaders and their boards will be faced with difficult choices, regardless of their organizations’ revenue models. 

They will continue to engage in advocacy, reimaging what is possible through partnerships inside and outside of the sector, and focus on the work making the greatest gains for people — all while prioritizing strategies in philanthropy and earned revenue. 

Opportunities will exist for nonprofits to continue to be subject matter experts and communicate honestly about what is being observed in the communities they serve. 

With all these things in mind, taking care of nonprofit staff and minimizing burnout and compassion fatigue is a concern for leaders and boards who want to retain their workforce and talent.

Vanderneck: Some expect philanthropy to take the place of lost federal funding. Do you see that happening?

Bowie: Philanthropy cannot replace lost federal funding. A quick look at the numbers makes this an easy answer. One of the most fundamental questions in our country is the role of government in taking care of its people. This is not new, but how we define and provide for public good deserves fresh energy and discussion at the highest levels. 

Philanthropy is an incredible act that transfers wealth to causes and people who access it for greater opportunity and change. The interconnectedness of access to food, healthcare and education for one group of people is linked to the well-being of all of us. The social sector has long known this. But philanthropy is driven by what individuals care about deeply, by their ability to give and, in some cases, by the tax incentives to give. Because philanthropy is both deeply personal and a choice, we cannot depend on it to achieve the public good our society requires to advance and thrive.

Vanderneck: That makes sense — just because there is need connected to the overall public good, that doesn’t mean that is what individual philanthropists will be passionate about or that those areas are where they will choose to give. That does present a potential disconnect between need and resources.

What changes do you believe will or should take place in the nonprofit sector to allow for vital services to continue to be delivered with less funding?

Bowie: The very basic answer is this: Nonprofits are already tackling demanding systemic work without all the resources they truly need. While most nonprofit organizations could teach master classes in leveraging their resources for the greatest impact, less funding and more need cannot continue to produce the same results. 

• Organizations will need to focus on the parts of their work in which they are specialists, in which they are having the greatest returns on investment. 
• The opportunity to develop strategic alliances or even mergers with other nonprofits will be important to examine early and often. 
• Investing in smart communications will be even more critical as nonprofits work to message their community value to existing and potential donors. 
• The importance of strategic thinking on the board level, helping organizations make tough decisions — but always with the larger community in mind — can help every region use the collective resources it has to achieve the fullest potential. 

As always, this sector will not slow its commitment to the work. It needs everyone on board to do it well.

There are a lot of funding changes happening and more challenges are coming. Nonprofits are no longer expected to just be society’s safety net. They are now expected to take over functions that the federal government has been facilitating for generations. In one fell swoop, the independent sector ostensibly took on many new unexpected jobs without the corresponding funding or infrastructure to conduct the work. 

Partnerships among nonprofits, communities and philanthropy do enormous good and make an inordinate amount of functions possible. But we can’t guarantee equivalency between where the funding will be needed and where philanthropists want to give. So, with a potential disconnect representing billions of dollars, nonprofits need to be their own best advocates. It is important to diversify funding streams, shore up business models, focus on the strongest programmatic areas of expertise and find partnerships wherever possible. Great service delivery ability requires great strategy.

The preceding content was provided by a contributor unaffiliated with NonProfit PRO. The views expressed within may not directly reflect the thoughts or opinions of the staff of NonProfit PRO.