Grant Makers Must Focus on Government’s Role

Although foundations account for only about 2 percent of nonprofit organizations’ revenue, they make a huge difference to what many charities are able to achieve. Yet grant makers will have little ultimate consequence for today’s most critical issues if they focus principally on paying for immediate societal needs — such as feeding the hungry or cleaning up rivers or mounting museum displays — unless they also focus on finding ways to reduce the need for such support. Key is whether philanthropy has the wisdom and the courage to provide money to charities that take on fundamental questions about the role and function of government.

Many charities have been forced in recent years to focus on the key services they provide — seeking ever greater efficiency in meeting the needs of their constituencies, communities, and causes. They are scrambling to find new ways to finance their programs in the face of strained resources and growing demands for their services. In doing so, they quite often sacrifice some of the very activities that make the nonprofit world a distinct and valued component of our society.

Nonprofit groups are supposed to advocate on the behalf of those who don’t have a voice. Their function is also to improve and enrich community life by increasing civic engagement and strengthening democracy. The problem is that, with rare exception, charities are stretched so thin trying to provide services that few of them devote any time to their role in democratic life. And a less engaged citizenry becomes profoundly problematic as the federal government — and many states — increasingly try to shrink the role of government in providing domestic services.

Far more than at any time in recent United States history, it is up to organized philanthropy to help nonprofit organizations realize their full public missions. In every area of philanthropic interest, on every issue and problem that concerns nonprofit organizations, government is critically important.

It is only government, at all levels, that has the necessary power to improve public policy and public institutions, to set public priorities, and to gather and spend necessary funds in ways that will reduce or slow the emergence of need and curtail the demand on nonprofit organizations. Yet government is failing to do so in most areas of concern to charities and foundations. Private action and private dollars can never fill the vacuum left by a dissipated and disappearing government. Nevertheless, foundations can do much to reverse the enfeeblement of government.

To understand why, it helps to follow the money. Charities get 35 percent of their budgets from government. But government’s financial importance to charities is much wider.

Welfare benefits and safety-net programs for the working poor are likely to reduce the number of people who turn to charities for help. Government spending on public health and disease prevention, on early-childhood education and recreation, on community development and revitalization, on recycling, and on many other areas all can reduce needs on a scale unattainable by charitable organizations.

Well beyond its ability to gather and expend revenue, however, government can reduce the need for charities’ services by the appropriate exercise of its powers to regulate the ways both public and private institutions operate. For example, it can set the minimum wage so that full-time work keeps families out of poverty, and make sure that financial institutions invest in their communities’ development. It can limit pollutants and reduce the burden on environmental cleanup groups. It can teach arts appreciation and build paying audiences for cultural institutions, and so much more.

The budget President Bush released last week reinforces just how much more government programs could be cut to deal with the ballooning federal deficit.

White House policies and proposals, such as creating private Social Security accounts, will add at least $10-trillion of additional long-term debt over 10 years and push this nation down an unsustainable financial path. Citizens for Tax Justice, a Washington advocacy group, says that, even without some of the changes in Social Security under consideration, “by 2013 and thereafter, the government is likely to be spending more on interest on the debt than on all domestic appropriations put together — from education, to the environment, to law enforcement, to science, to transportation, to veterans.”

Nonprofit and foundation leaders must consider what this means. While today’s federal revenue is no greater a part of our economy than in the 1950s, the administration is intent on cutting revenue further rather than raising it. And even though much of the shortfall comes from their tax cuts, the administration and its Congressional allies continue to blame government spending rather than revenue giveaways. Thus the budget cuts they have already made — and the far more devastating ones President Bush just proposed.

And it can get even worse. If Congress and the White House succeed in permanently repealing the estate tax, the nonpartisan Congressional Budget Office estimates that charitable contributions from individuals and estates will drop by at least $13-billion and possibly as much as $25-billion annually (based on 2000 data), a loss that is greater than the total of all the grants made by the 110 largest American foundations. That would come on top of a decrease in federal revenue by at least another $80-billion a year because of the repeal, and a loss of up to $9-billion a year in state tax revenue because states often tie their taxes to federal policies.

To be sure, not everything government spends money on is sacred. Some programs to help people and communities attain and maintain a reasonable life may need to be modified or replaced. But the responsibility of government for the public condition ought never be abandoned, never abrogated.

Today, some Americans would like to change radically what is expected of the state, to suggest that an unbridled global marketplace is and ought to be beyond the moderating influence of government. And some of the most powerful political leaders prefer to respond to private interests. They increasingly see the government as something that needs to be disaggregated and made private, and believe the market should be served over the public sphere. That is what must be faced and challenged by nonprofit organizations. And they cannot do that if foundations fear to tread this ground, fear to address the government.

Nonprofit organizations, forced by circumstances to become more focused on their central missions, more issue-oriented and specialized, generally have failed to recognize the threat of conservatives’ “starve the beast” strategy and what it means for government itself. Unless these current trends are reversed, nonprofit organizations will never succeed in meeting society’s needs and carrying out their missions.

This is where organized philanthropy needs to step in. Foundations must finance long-range efforts that enable nonprofit groups to understand that a strong government responsive and responsible to its people is essential to a strong civil society. While both must remain independent, they will always depend on each other to serve the public good.

Those who pay fees for charities’ services are not going to give nonprofit organizations money to take on the state; just as when they purchase something in the market, they simply want what they are paying for.

Corporations are unlikely to provide support to charities that want to push for companies and markets to face new regulations, although some might acknowledge that it is in their enlightened self-interest.

While some individuals might be persuaded to contribute to efforts to expand democratic participation, most people want to make a palpable difference in someone’s life, to meet immediate need.

And certainly a government controlled by those who advance this ideology of retreat from public responsibility is not going to support challenges from charities; in fact, it is trying to quash such dissent.

So that leaves organized philanthropy; foundations alone can do what must be done. Foundations must champion the state.

Nonprofit groups need to move to the offense — to talk about long-term visions of government and of society, and to build the infrastructure to realize them.

This agenda requires and goes beyond support for nonprofit advocacy.

It requires and goes beyond support for charities that expand and animate the electorate. It requires efforts to make real and routine activity by each and every charity to focus attention and energy on the critical public functions of the nonprofit world. It means financing research, grass-roots organizing, and nonprofit organizations that see an opportunity to expand civic engagement and democratic participation in all the services they provide. It also means foundations must encourage all of their grantees to build something that is greater than the sum of disconnected parts.

Most fundamentally, most critically for philanthropy, it means helping individuals and charities remember and truly understand that our government is itself and must forever be an agency of, by, and for the people.

Mark Rosenman works in Washington as a distinguished public service professor at Union Institute & University, which has its headquarters in Cincinnati.