My colleagues Daniel Stid and Vishal Shah recently authored a sobering report entitled “The View from the Cliff: Government-Funded Nonprofits Are Looking Out on Steep Cuts and an Uncertain Future.” Their research finds that so far, many nonprofits that are heavily reliant on government funding to provide social services for vulnerable populations (think homeless shelters, foster care services, and domestic violence prevention initiatives, to name a few) have been spared the dramatic cuts that they may have feared after the 2009 economic crisis. This reprieve appears largely due to stimulus spending and contracts that had been awarded before the downturn. However, of the approximately 70 nonprofits surveyed, a resounding 91 percent felt that federal cuts will “cause significant problems for our organization as we seek to fund our mission.”

Stid and Shah’s bleak outlook offers two rays of hope, both of which require innovation and a focus on funding solutions rather than problems. First, they recommend seeking ways to use improved human services to reduce health care costs. Given the dramatic rise in health care costs, and the oft-cited data about a small number of intensive cases accounting for a disproportionate share of health care expenses, the authors suggest that innovations in funding preventative care for, say, the child with asthma or the adult with early-onset diabetes may reap dividends down the line. In addition, they recommend that government agencies should pay far more attention to the proven effectiveness of their funded programs than they do today. Sounds easy, but in practice, this would mean the difficult task of saying “no” to organizations that aren’t getting results, and maintaining or increasing funding levels for those that are—something that, in the authors’ experience, occurs rarely.  

You might say, what does philanthropy have to do with all of this? Daniel and I are currently working on some research to identify some undervalued opportunities for philanthropy seeking to work with and around government in these challenging times. It seems clear that, while philanthropy is but a sliver of government’s budgets, its relative flexibility and long-term perspective offer some clear advantages. At a minimum, donors can likely play an interesting role in both leading and following government to promote and fund strong programs. What are other ways that you could see philanthropy rising to this unprecedented set of challenges that we, as a society, are faced with? We’d love to hear from you.