LA Philanthropy Watch

Regarding the latest round of proposed budget cuts in Sacramento, a lobbyist for school districts said, “They’re beyond considering any kind of policy implications…. It’s, ‘What can we cut under the law and get away with?’”

The Chronicle of Philanthropy’s Government and Politics Watch reports today that the White House is trying to reassure nonprofit leaders about Obama’s charitable tax proposal. Jeffrey Liebman, chief economist at the White House Office of Management and Budget, acknowledges that this is an extremely challenging time for nonprofits, but he urges them to look at the “broader context.” He argues that universal health care would reduce costs for charities that serve the uninsured, while a rising stock market will boost contributions.

“If our general economic strategy works, and health care is an important part of the economy being strong in the medium to the long term, basically everything is going to be fine for charitable giving. And if it doesn’t, it doesn’t matter what our tax policy is — things are still going to be crummy.”

This reinforces a point made by the Center on Philanthropy in its statement opposing Obama’s tax proposal. “Charities and the public need to understand that in the current economic environment, which is creating difficulty for some nonprofits and their constituents already, this public policy change is likely to have an additional negative effect. However, changes in personal income and wealth, both of which have declined in the past year, have a greater impact on charitable giving than do tax rate changes.”

Is California’s budget debacle the result of out of control spending? Michael Hiltzik reviews skeptically the idea that spending has far outstripped inflation and population growth. Kevin Drum looks skeptically at Hiltzik’s numbers.

Americans in the lowest 20% income group are comparatively the most generous – and their giving declines less during hard times than the giving of the more affluent. Members of this group – the least educated, the oldest, and the most religious – with an average pre-tax household income of $10,531, gave on average 4.3 percent of their income to charity in 2007. The richest 20% gave at less than half that rate: 2.1%. The three income groups in the middle all gave less than 3%.

Frank Greve, reporting for McClatchy Newspapers, did a wonderful job finding quotes and anecdotes to bring to life an engaging story (highlighted this morning by Philanthropy Today) from a Bureau of Labor Statistics consumer survey.

“The lowest-income fifth (of the population) always give at more than their capacity,” according to Virginia Hodgkinson, former vice president for research at Independent Sector.

Why? “As a rule, people who have money don’t know people in need,” suggested a laid-off security guard and single mother. She added, “I believe that the more I give, the more I receive, and that God loves a cheerful giver.”

Arthur Brooks, president of the American Enterprise Institute and author of Who Really Cares, an analysis of giving in the US, suggests that church-attendance is the key factor. Certainly many church-goers tithe and McClatchy provided some anecdotal evidence for this view, yet other themes also emerged. One nonreligious giver, living on a fixed income, suggested that it lights up his life to look into the face of someone he is being generous to. Another giver suggested that living with little money made one less fearful of poverty than more affluent Americans.

Several themes especially struck me, based on the anecdotes in Greve’s report: Identifying or empathizing with others; personal encounters – at a bus stop, for instance – with others in need; and a fearlessness about making genuine ‘stretch’ gifts. The giving illustrated was more personal, more immediate – with instant gratification in some cases, and more of a sacrifice than the typical experience of a financially secure donor writing a check in response to an annual appeal letter.

I recommend this article, which is thought-provoking on a number of levels. The link I provide is to a longer version of the piece (with a nifty table) than the version the Chronicle of Philanthropy linked to.

Just a final word: this may be more than a human interest story or a sociological slice of life – offering insights into major gift fundraising. Think about cultivation and stewardship activities. Why do we do what we do with major donors? To increase their involvement, to make it more personal, to show them first-hand the results of their giving and the people they’ve helped, to provide satisfaction; in short, to light up their lives.

Advancing Philanthropy (the bimonthly publication of the Association of Fundraising Professionals) includes a ‘President’s Report’ by Paulette Maehara, AFP’s president. The topic of Ms. Maehara’s report in the May/June 2009 issue is Obama’s recent tax proposal, which would lower the charitable tax deduction from 35% to 28% for individuals earning more than $250,000 annually. In her seven paragraph report (titled, “Tough Times, Tough Decisions”) the first six paragraphs set out the case against this proposal:

• One mission of AFP is to support public policies that are “ideally beneficial for fundraising and philanthropy or, at the very least, not detrimental.”
• In this challenging time for nonprofit organizations, “little changes and fluctuations in the economy, donor perceptions or incentives are quite likely to make a significant difference.”
• Thus AFP is “particularly sensitive” to proposals such as Obama’s.
• Although some development professionals have argued that the proposed change is not “that significant,” it would in fact “directly – and negatively – affect how much existing donors might be willing to give.”
• Some have noted that the decline in charitable giving would be “only minor,” but AFP replies that the proposal would have resulted in an estimated decrease in giving of nearly $4 billion in 2006 and a projected drop of $9 billion in 2011.
• Others have suggested that “charities need to do their part too,” but the demand for charitable services is greater than ever; seen in this light, the proposal “seems pointless and self-defeating.”

In the final paragraph, which I will quote in full, Ms. Maehara reveals (what was left unstated earlier) that AFP has decided to oppose this proposed change:

“Leading in public policy means making tough decisions based on how such decisions will affect the entire profession and sector. Making the decision to oppose this proposal wasn’t easy, and it wasn’t done in haste or without serious consideration. Ultimately, however, we believe it was the best decision and will do the most to help the sector in these challenging times. No doubt there will be even tougher decisions down the road, and we’ll continue to strive to make the best choice for the long-term benefit of the entire profession.”

While I admire Ms. Maehara’s consummate diplomacy, and I am certain that AFP decision-makers didn’t act “in haste,” I submit that far from being a “tough decision,” this was among the easiest decisions ever made by AFP or any professional organization. AFP’s members expect it to represent the interests of development professionals and the nonprofit organizations they serve.

And that is just what AFP did. It is not the mission of AFP to balance the interests of fundraisers and nonprofits with others in society. There is a bigger picture here – in issues of tax fairness, social justice, the richest haves vs. the have-nots, finding a way to fund universal health care (none of which were mentioned in Ms. Maehara’s discussion) – nonetheless, the top 1.4% income group in this country gives a bundle to charity. And no one disputes that collectively they would  give less if the tax incentives were reduced. (For perspective: their giving totaled $81.26 billion in 2006, according to the Center on Philanthropy at Indiana University.)

It is no more the role of AFP to take an altruistic or utilitarian stance vis-à-vis this proposal, than it is the role of the Sierra Club or the Business Roundtable to give equal weight to the interests of its opponents. A decision to endorse Obama’s proposal, or even not to take a stand at this stage of the debate, would have been virtually inexplicable – “pointless and self-defeating,” in Ms. Maehara’s words.

It is possible for a development professional or a nonprofit executive to step back and regard the big picture, and even to oppose one’s professional interests (as opposed to the broader public interest or principles of social justice or one’s commitment to health care for all). But that’s not the business of AFP – at least not at this stage of the debate, when an isolated initiative (which conflicts with the organization’s mission and is not inextricably linked to an appealing proposal late in the legislative process) can be opposed with virtually no blow-back.

Disclosures: i. I have been a member of AFP since spring 1991; ii. I worked full-time on Obama’s campaign from late summer 2008 through Election Day; and iii. nothing on Obama’s agenda is higher on my wish-list (as a public policy enthusiast) than universal health care.  See my earlier post on this tax proposal (before I was aware of AFP’s opposition).

The lead story in this morning’s Los Angeles Times warned of the long-term effects of California’s budget crisis: “Corporate leaders and Wall Street investors, watching the daily festival of seeming incompetence, political partisanship and governmental dysfunction, could be persuaded to limit or eliminate their investments here.”

Economist Steven Levy commented, “We lose competitive advantage by being the state that can’t solve its problems.”

California’s increasingly dysfunctional state government is especially disheartening to anyone with a long memory. I moved to California in the ’70s to attend graduate school. I had majored in political science at the University of Illinois, where I learned how well California state government functioned. Sacramento was home to a ‘model legislature,’ providing responsive and effective leadership. In the previous decade or two California’s infrastructure, including freeways, aqueducts, and the university system, was put into place to encourage growth and prosperity. The state legislature and several thoughtful governors ensured that California was building for the future.

Was that ever a long time ago.  That future is now long past.

The Times noted following last Tuesday’s election that California voters – who tend to blame politicians for not doing their jobs and solving these problems – have been complicit in California’s dysfunction. Stretching back decades, Californians – through the initiative process – have made it extremely difficult for the state to raise taxes; they have imposed term-limits, which reduce both legislative competency and the long-term horizon required to solve intractable problems; and have tied the legislature’s hands with spending mandates. Last Tuesday, voters continued this pattern, rejecting higher taxes in voting down Proposition 1A, and declining to loosen mandatory spending (for public schools, preschool and mental health) by voting down Propositions 1C, 1D, and 1E respectively.

The Times reports on the business page today that California high school and college graduates, competing with the recently-unemployed as well as with each other for fewer jobs, are facing the worst job market in decades. An increasing number of graduates are looking toward the nonprofit sector. Applications for Teach for America are up 42% and Peace Corps applications are up 16%.

That might pass for a silver lining – except, of course, most nonprofits (with shrinking resources and rising demands for services) are hardly in a position to snap up promising new graduates.

A Patt Morrison interview with LA philanthropist Eli Broad appeared in Saturday’s LA Times.

The first exchange:

Do you sometimes suspect that all L.A. nonprofits have a glass case on the wall and a sign that reads, “In case of financial emergency, break glass and call Eli Broad”?

I hope there are other phone numbers in addition to mine!

The LA Times reported today on three Santa Ana “fake charities” caught up in a crackdown by the FTC and California officials: the American Veterans Relief Foundation, the Coalition of Police and Sheriffs and the Disabled Firefighters Fund. The groups were said to have raised $19 million between 2005 and 2008, but only 5% of the proceeds found their way to legitimate charities.

Their phones were “disconnected or were not taking messages,” their founder (a convicted felon who has served jail time for trying to hire a hit man in an unrelated case) was indicted in 2006 on mail fraud and money laundering charges connected to fundraising for the three bogus charities and remains on the lam, but their attorney explained that little of the money raised was given to charities because, “Telephone solicitors are just not a very effective mechanism for raising money.”

Well, at least not an effective way for nonprofit organizations to raise money; it seems to have netted his clients quite a haul.

Update – May 30: California continues its crackdown on fundraising fraud, filing suit against a dozen and a half telemarketers and fake charities, including: Rambret Inc. (of Glendale); Coalition of Police and Sheriffs, American Veterans Relief Foundation, and Disabled Firefighters Fund (which shared an office in Santa Ana); American Association of Police Officers (formerly of Los Angeles); Association for Firefighters and Paramedics (Santa Ana); and Association for Police and Sheriffs (Fullerton).