Why Raise Taxes When You Can Raise Money? Governments Take a Dip in the Donor Pool

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A by-product of the Great Recession and the growing calls to restrain spending, governments at the state and local level are turning to traditional fundraising in a surprising number of ways. Of course, fundraising for public entities and services has happened for years, usually at arms-length via friends’ groups or foundations for state universities, libraries, parks and, increasingly, local schools. But as federal stimulus money ends and the economy continues its uneven path, state and local budgets remain embattled. Seeking private gifts, which are voluntary and convey the notion of marketplace approval, is a path increasingly being chosen or considered across the nation.

What Is Government up to?

Some government efforts are new and range from creative to questionable:

  • Mayor Sam Adams’ office in Portland, Ore., has an active presence on Kickstarter, the online gift aggregator specializing in funding local art projects. The mayor “is pleased to highlight a rotating selection of Portland-based projects,” because, the site says, Portland’s creative culture and DIY ethic “are a perfect match for Kickstarter.” It’s a case of local government as incubator, aggregator and champion.
  • Last year’s terrible floods prompted Gov. Bob McDonnell to establish the Virginia Disaster Relief Fund as “a permanent part of disaster relief tools.” Its website looks and acts exactly like any relief charity. It raised over $1.5 million for hard-hit Virginians, and asserts that the money is used in coordination with local relief charities as a “last resort” when other funds are simply not available. It’s a case of government presumably adding a tool to help in extraordinary situations.
  • Last July, the governor of Kansas famously abolished the state’s arts commission and vetoed all state arts funding, forming a new arts foundation charged with raising money as a 501(c)3. He ended up on the receiving end of such withering criticism that a few weeks ago, he quietly signed authorization for the Kansas Creative Arts Industries Commission—with arts funding returned to the state budget plus an income tax check-off box for individual arts gifts, just for good measure. This is a case of government trying a ham-handed strategy of simply dumping the arts funding problem on “the donor marketplace.”

Some government efforts, like the familiar income tax check-off boxes, seem to be enjoying more attention as budgets tighten. California’s Voluntary Contributions Fund shows how the process is evolving. Battling budget deficits, last year Gov. Jerry Brown signed a bill that directs the state Franchise Control Board to remove, at least temporarily, four options from the check-off contribution option (including municipal shelters for spay and neuter, ovarian cancer research and others) because they did not meet the required $250,000 minimum in public support. But he mandated the addition of several other funds, including those for the arts, ALS/Lou Gehrig’s Disease research, child victims of human trafficking and the California sea otter. The directive also included tax credits for donating fresh fruit and vegetables to the state’s nonprofit food banks.

The California state controller may take up to two percent of proceeds, and the Franchise Control Board may take up to three percent. Donors may reasonably think that a total of five percent for administration, with zero fundraising costs, is not a bad deal. But it begs the question: What has been the impact of these efforts on the overall picture of voluntary support for the causes chosen?{loadmodule mod_banners,Newswire Subscription Plea}

California illustrates the struggle of governments trying to juggle hard budgets with community needs. It also reminds us of the assets government can bring to the struggle to fund those needs, among them comprehensive databases, the ability to call attention to community needs, and the power to give or withhold rewards and recognition.

What Do These Government Fundraising Efforts Have in Common?

Whether they occur on Kickstarter, television or your income tax instructions, there are four elements that the great majority of these efforts have in common:

  • They are for a fairly specific area or need.
  • They are for current needs, or what fundraisers would call annual giving. They help this year, not long-term.
  • It usually isn’t clear what stewardship or accountability can be expected. Nor is it clear what, if anything, happens to the database of transactions and donors, an asset fundraisers understand for analytic and targeting value.
  • They don’t seem to be aimed at building a group of loyal donors for follow-up, cultivation, bigger gifts or joining with like-minded people.

A comprehensive review of government programs is well beyond the scope of this article, and it could be that functions like transparent stewardship, reporting and savvy planning may be present in some government programs. Professional fundraising colleagues with whom I checked said they simply didn’t know. Perhaps it’s time to find out.

Where to Start? A Modest Call to Action  

We in the nonprofit sector don’t know enough about emerging or contemplated activities by state and local government. Let’s fix that with an inter-sector discussion, a national debriefing on the experiences—good and bad—of government-as-fundraiser. I believe both sectors, not to mention donors including our friends in the business sector, would welcome a strategic, high-level review of government charitable fundraising activities. Let’s organize cases in some meaningful way (e.g., response to emergencies, supplementing core operations like schools, replacing public funds, supporting new services, etc.). Then, together with government officials, let’s ask some key questions, including:

  • Where has private giving via government helped fund an otherwise unmet need—and where has it had little or no impact? Have government fundraising efforts helped increase the number of donors and donations in communities, or simply introduced yet another competitor with a zero-sum result?
  • When do governments see themselves as a “fundraiser of last resort?” When do they regard their fundraising as a kind of “lead gift,” drawing attention to a need they hope others will eventually take off their plate?
  • Do states or cities plan to adopt new fundraising strategies, and how are they advising their government colleagues? (I was struck by how often state and local governments meet, just like our sector, in conferences to compare experiences. See below.)
  • How do government agencies report the results of their fundraising and communicate the use of the funds? When acknowledging these gifts, is there an effort to direct donors to local nonprofit organizations able to provide more information or to connect donors with others sharing their interests?
  • In cases where fundraising for “current needs” has been successful, do governments plan to begin raising money for endowments or multi-year gifts? Are they willing to help promote nonprofits which do exactly that?
  • Is it time for the opinion researchers to look into government fundraising? What surveys or focus groups might help enlighten both sectors?

Such a national discussion should be hosted by an institution known for smart, disciplined and objective thinking—one with well-established relationships in both the government and voluntary sectors.

Who would participate in this inter-sector discussion?

The nonprofit community could be represented by Independent Sector or one of the various groups representing nonprofit CEOs and board members. The Council on Foundations and the Association of Fundraising Professionals should probably be at the table. I would also urge that any high-level discussion of government charitable activity also involve the newer charities (i.e., those created within the last ten years, which are often technology-driven). The discussion should also include big players like Donors Choose as well as many local and regional groups that are too often absent from our sector’s conferences even though they have fresh thinking to offer.

On the government side, two groups seemed suited to the task. The Council of State Governments (CSG) has in-depth national and regional conferences probing everything from new technology and innovations in education to state government structure. CSG also has affiliate organizations which include national associations of state technology directors, emergency management officials, attorneys general, CFOs, and others—just the people you’d want around the table when pondering inter-sector issues involving fundraising.

CSG also provides highly qualified specialists in their “Expert Guide,” available to consult with states on topics like government structure, the economic impact of the arts, conservation, school finance and social justice. But I saw no expert on voluntary giving or philanthropy. Perhaps our sector should offer a few experts to provide counsel to states seriously involved in—or considering—charitable solicitation for government functions.

Another candidate is the National League of Cities, which is meeting in July at Tufts University to discuss the impact of income inequality on cities. It has a Center for Research and Innovation, which in May announced a three-year MacArthur Foundation grant to study the fiscal health of cities. The research will be conducted with the University of Chicago and advised by the Federal Reserve. So there is no shortage of serious, smart people working within state and local government associations to look at the big issue of meeting communities’ needs.

If these groups have case studies evaluating government fundraising activities, let’s assemble and evaluate them as a sector. If not, let’s help develop them.

Three Cautions for Our Sector

Nonprofit professionals generally react to the notion of government fundraising with doubt if not outright hostility. After all, there is a tide of skepticism in the general public about the ability of government to solve or even tackle big problems. And, while efforts like Portland’s use of Kickstarter may increase overall giving, other government fundraising is clearly an abject failure in terms of addressing important albeit difficult funding decisions. While it may prove inevitable, we should strive to avoid taking sides in contentious political debates over the proper role of government, much less taxation or spending policy. We should at least begin by acknowledging that the great needs in our communities require an “all-hands-on-deck” approach. Every productive idea, regardless of its origin, should be welcome. I would counsel my colleagues in the nonprofit community to:

  1. Start by assuming everyone wants to do the right thing; leave your ideology or political passions at the door.
  2. Look for ways our sector can help guide, measure and influence the future of private fundraising by government. Look for ways government can help attract increased support for nonprofit agencies—and be ready to help government when it is channeling money to a need in ways we’re not capable of doing.
  3. Be prepared for any outcome—except for a return to the way it used to be, back before the recession, the technology revolution and seismic demographic shifts changed America forever.

The new world may at times appear scary and without a roadmap, but our job is clear: to be fiercely determined and creative in exploring ways to meet the needs of our communities. American donors and those we serve have always expected our leadership. So let’s lead, starting with a clear-headed, inter-sector look at the results and implications of government going into the fundraising business.


Richard McPherson is chief innovator at McPherson Associates, Inc., the Philadelphia-based agency he founded in 1984. He has raised money for organizations in conservation, higher education, women’s rights, public broadcasting, international relief and the arts, and advised the late Mrs. Martin Luther King, Jr. and former President Jimmy Carter. He is on the faculty of the Heyman Center for Philanthropy and Fundraising at the NYU School of Continuing and Professional Studies. He is author of Digital Giving: How Technology is Changing Charity (2007, iUniverse) and the forthcoming Mobile Giving: How Your Phone is Changing Charity, due in print, e-book and mobile app in late 2012.

 

Editor’s Note: NPQ is a place for dialogue. We’d love to hear readers’ opinions on this proposal regarding the fundraising of government bodies.

  • Terry Fernsler

    Yes, I agree with Mr. (Dr.?) McPherson–we definitely do need more research on government fundraising, not only on the impact on the nonprofit sector, but on the provision of public goods and representative democracy as well. In this vein, it may be too early to caution the nonprofit sector to look for ways to “help guide, measure and influence the future of private fundraising by government.” Let’s not make up our minds before the research gives us sufficient information about impacts.

    I believe also that it is important to [U]not[/U] leave ideology and political passions at the door. How government performs (or avoids) its purposes–which is at the heart of politics–is at the very heart of the desire to create a better society. Nonprofits have a certain expertise in bettering society, and politics plays a role in that. When we are silent about the impacts of policies, when we do not lend our expertise and absolve our responsibility of corporate citizenship (not personhood, by the way), we do ourselves, our constituents, and, ultimately, the People of a democratic society a grave disservice.

  • David G. Snyder, CFRE

    Over the past 20 years I have seen PTO school fundraisers multiply into the launching of public school foundations. Certainly library foundations have begun taking on more and more of a role in capital campaigns and programmatic funding. One of the stronger partnerships I have seen and appears well organized, is within the arts community between the National Association of State Arts Agencies and the regional arts councils.

    I would agree and be comfortable with the Independent Sector taking on a leadership role in launching a discussion on the topic. (Of course funding such an initiative also needs to be lined up.) But adding to that would be the research and resources of the Center on Philanthropy at Indiana University and the Center on Wealth and Philanthropy at Boston College.

    I mention Boston College in the hopes of inserting some ethical discussions about the balance between public, tax driven funding, and philanthropy as the generous distribution of wealth by individuals.

    An issue of concern that comes up constantly in any governmental fundraising efforts I have seen is the issue of redirecting funds to alternate purposes as approved by legislative bodies once they observe a large pool of extra cash within reach of a governmental office.

    As the fundraising efforts within government agencies rise how do we secure those funds for the stated purpose?

    The other major issue that seems to arise in these discussions is, “What is the obligation of taxpayers to fund this?” balanced with “What can we fund as a project that does not allow government off the hook in funding their obligations?”

    These two issues require that we invite legislative bodies and our elected officials to the table so as to insure protection of the funds being raised.

    Unfortunately as we struggle with these issues those who are most in need go without.

    I agree that it will not, “..return to the way it used to be..” and believe that we should reach out to and assist those in the governmental agencies who are charged with raising funds. Besides these are our towns, cities, schools and communities.