Illinois’s Donors Forum Challenges SOI of State Budget Cuts

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March 25, 2015; Donors Forum (Illinois)

Recently, the NPQ Newswire referenced an op-ed from the interim director of the Connecticut Association of Nonprofits that took a tough stance toward Governor Dannel Molloy’s budget proposals which, he suggested, continued the dynamic of two decades of the state’s “chronic underfunding and additional reductions for essential human services,” resulting in what was tantamount to putting nonprofits at the short end of an “abusive relationship” with the state. The op-ed viewed, it seems, Governor Malloy’s budget proposals as the latest stage of administration after administration making nonprofits do more with less, particularly in the human services arena.

Is it any different in other states? Do the nonprofit associations in other states get to rest on their laurels as state budgets give service providers what they want and need? We’re guessing—confidently—that this isn’t the case, that the counterparts to the Connecticut Association of Nonprofits are gauging how to react to compounding budget cuts, even during the nation’s purported economic recovery, and what strategies work best in their state political cultures. There is more than enough evidence that it isn’t quite peaches and cream for nonprofits in current state budget proposals:

  • Oil-revenue-rich Alaska faces a $3.5 billion budget deficit, but budget expert David Teal, the director of the Legislative Finance Division, warned legislators in a “reality check” that they “simply cannot cut your way to a sustainable budget.”
  • In Kansas, despite a Kansas Supreme Court ruling telling legislators that they must adequately fund school programs, rural schools such as those in Elkhart (pop. 2,200) found that the state met the core funding requirement for schools by cutting other kinds of school aid, forcing the school district to lose one-fifth of its budget. School budget cuts are hitting districts across the nation, forcing some, like the schools in Guilford, North Carolina, to try to make up for significant lost revenues.
  • Due to state budget cuts, the director of the Gibson Center for Senior Services in North Conway, New Hampshire, may have to deal with what he calls a “catastrophic” shortfall of $150,000 in his $880,000 a year operating budget if social service budget cuts approved by a state legislative committee go through.
  • The proposed state budget in Illinois would cut the funding for the Illinois Breast and Cervical Cancer Program from $13.8 million to $4 million, with reverberations for local health clinics such as Peoria’s Heartland Community Health Clinic which uses IBCCP funds to serve 400 women in the Peoria area

The Illinois Donors Forum, which serves as both the state’s nonprofit association and grantmakers association, is pursuing a different strategy than Connecticut’s with the issuance of three reports demonstrating the social value of state-subsidized programs in youth services, the environment, and arts and culture. Working with the Social Impact Research Center on these studies funded by the Wallace Foundation, the Donors Forum found the following:

  • For every dollar invested in the Arts and Culture field, there is a $27 socioeconomic return.
  • For every dollar invested in the Environment field, there is a $58 socioeconomic return.
  • For every dollar invested in the Youth Development field, there is a $45 socioeconomic return.

These studies are part of a “Building a Stronger Illinois” campaign created by the Donors Forum to get the message out about the tangible, quantitative importance of the nonprofit sector, which in these reports the Donors Forum calls the “social impact sector.” The three reports provide calculations of the “Social Return on Investment” for each programmatic category, giving the potential qualitative impacts of nonprofit activities quantitative dollar values. For example, in the arts and culture report, the researchers come up with dollar values to the increased earnings of youth who graduate high school due to the availability of arts and culture programs, the improved mental or physical health of individuals whose stress and anxiety is reduced as a result of arts and culture, and the increased life satisfaction generated as a result of individuals’ volunteering for and helping to advance arts and culture programming, just to name three of the kinds of ROI attributed to these investments.

Obviously, SROI is a methodology fraught with assumptions that can be debated regarding the causality attributable to the investment and the specific monetization that is used. The Donors Forum report would seem to be a response to legislators who simply don’t fully grasp the importance of the nonprofit sector and whose path to understanding may be best pursued through numbers and dollar signs.

Here are the advocacy challenges once one leaps over the methodological issues inherent in SROI calculations. First, despite their oft-repeated calls for data and evidence, most legislators, sad to say, make decisions without a huge amount of attention to facts. However, facts, or rather, potential facts, gets nonprofit advocates through the door and into the meeting room with legislators, and that’s a critical first step. To that extent, the Donors Forum SROI studies can serve a purpose.

Second, however, is the need to show the efficacy of investing government dollars in nonprofits—that is, to demonstrate its presumably equal or greater efficacy than telling nonprofits to rely on private charitable donations. That means that the Donors Forum and others turning to studies like these have to counter the pernicious message that some nonprofits have delivered to Capitol Hill in recent years that a dollar of government money is significantly less efficient and effective than a dollar of charitable giving. That message undermines the potential persuasiveness of the Donors Forum message.

And the third challenge is getting legislators to see their slice of the funding of these types of nonprofits as the linchpins for other resources. For example, a Donors Forum fact sheet indicates that government pays for only seven percent of the investment in nonprofits that “work to provide cultural enrichment.” Legislators need to see that their seven percent is crucial toward making the other 93 percent work.

For the Donors Forum’s nonprofit members and for nonprofits everywhere fending off budget cuts, the solutions lie partly in getting legislators to wake up to the importance of the nonprofit sector. But partly, the solution is on the revenue side as well. In January, in the wake of Governor Rauner’s commitment to reduce taxes in Illinois, the Donors Forum came out in favor of extending the state’s five percent income tax rate past December of 2014, recognizing that viable replacement options for those revenues were simply not immediately evident or sufficient. That’s where the advocacy rubber meets the road, getting legislators to both recognize the legitimacy of investments in the nonprofit sector and see the need to fix state budget problems with sufficient revenues, not counterproductive social sector cuts.—Rick Cohen