It’s certainly understandable that leaders of nonprofits now receiving—or hoping to receive—significant funding from the federal government would feel relief at the recent Congressional Budget Office (CBO) announcement that the deficit for FY 2013 is falling rapidly and is likely to end up around $604 billion, a full half trillion dollars lower than FY 2012. After all, the specter of gargantuan deficits sparking draconian spending cuts has obvious, serious, and real consequences for anyone getting or seeking federal money.
However, while the CBO release is unambiguously good news for our society, it would be a huge mistake for nonprofit leaders to assume that the threat is past and that the good ol' days of rising appropriations for nonprofits—so well documented last month by the Chronicle of Philanthropy (subscription required)—will return anytime soon. Indeed, far-sighted leaders should seize this time to redouble efforts to prepare for what could become a full-blown competitive shake-out at the federal level. And the best way to prepare would be to aggressively develop strong data collection and measurement systems and master how to use them.
The reason a shakeout remains likely is clear: despite current progress, super-sized federal deficits are probably here for a long stay. In fact, the same CBO study released last month projects that declines in the deficit, driven mainly by recent policy changes and the improving economy, will bottom out in FY 2015 and then begin to systematically grow because of entitlement spending for aging Baby Boomers and interest payments on the accumulated debt. This will only increase pressure for further cuts in non-military "discretionary" spending—i.e. funding for social services and pretty much everything else other than entitlements and interest. Unless young people start voting in greater numbers or elected officials develop backbones, little is likely to change until a full-blown crisis is upon us.
The reason strong data represents a powerful lifeline is also clear: momentum toward the federal government basing more funding decisions on evidence of results will probably continue to grow. This trend, which has slowly built through the past couple of administrations, accelerated with the FY 2014 budget process and the issuance by the Office of Management and Budget (OMB) of explicit directives favoring programs that have solid data of superior performance. To some degree this has been grounded in a more enlightened philosophy of government that believes taxpayers deserve the highest possible return on their social investment. But enlightenment alone doesn't ensure good practice. Moving forward, as discretionary money remains scarce but human needs remain high, simple politics should increasingly reward the funding of programs that can actually prove they work.
Regardless of the motivation, if this trend plays out, a lot of organizations will lose federal funding. At the same time, others may actually gain. If that happens, for the good of our society we should all hope the winners will be nonprofits that have developed robust data capabilities that enable them to do two powerful things:
- find more ways to improve programs and operations in order to provide greater value to the people they serve; and
- objectively prove to funders and the public that what they do actually makes a significant difference in people's lives, especially relative to other organizations making similar claims.
For the sake of the people they serve, nonprofit leaders who received CBO's news mainly with relief—especially those who rode the wave of increased federal funding based on their skill in meeting the criteria of yesterday—would be well-advised to take advantage of any respite to determine how their organizations can prove the dollars they received led to real, measurable results.