Think about an answer to the following question: At what point does a “recession” simply become the “economy?” It appears that putting a label on this economy is keeping those with cash on the sidelines, waiting for this magic switch to flip and the economy to be in what some consider a “recovery.”
Just like Johnny Cash’s “Boy Named Sue,” this economy is having a hard time living down the moniker. Perhaps Dr. Drew can launch a new reality series — “Economic Rehab” – and bring in the CEOs of Fortune 500 firms and investors with hundreds of billions of dollars on the sidelines and work them through their issues.
It doesn’t have to be this way. It can change and the charitable sector must lead the way. The national discussion is about jobs. In some states, such as New York, 20 percent of the jobs are in the tax-exempt sector. While the national economy was adding no jobs during August, the charitable sector was adding positions, according to Lester Salamon at the Center for Civil Society Studies at Johns Hopkins University in Baltimore, Md.
There was a day last month when Apple Computer had $76 billion in cash on hand, $2 billion more than the federal government. Where’s Apple investing in jobs? The jobs are in Asia, not the United States. What it will take to get U.S. companies to invest in the American workforce remains perplexing. During an era of tax cuts and business incentives, from May 1999 through May 2009, jobs in the private sector increased just 1.1 percent, according to Bloomberg/Business Week. The majority of those jobs were in health and education, areas dominated by the nonprofit sector.
While the general economy was idling, the nonprofit sector was doing the heavy lifting when it came to creating jobs and — if you’ll pardon the expression — economic stimulus.
What’s a better investment, Wall Street or Main Street? Both are needed but since Wall Street and Washington, D.C., seem unable or unwilling to lead the jobs push, the tax-exempt sector on Main Street needs to do it. Nonprofits create jobs by investing in people. That’s a return on investment that often can’t accurately be calculated. And frankly, there are cases when putting a number to something simply should not be tried. The federal government contracts with the sector to handle needs that it recognized the sector could provide more efficiently. It has abdicated its role as incubator of ideas for job growth and funding for it. Clearly, it is up to the nonprofit elements of the economy to spur growth and reignite employment.
President Barack Obama went before a joint session of Congress and proposed a $447 billion jobs program. The money would fund so-called shovel-ready projects. The challenge is that it must be paid for by other budget cuts. His bi-partisan, blue ribbon, budget-cutting panel won’t be reporting back for weeks and by the time legislation gets through Congress – if at all – it will be spring 2012 before money is available for the first hire.
It was a nice speech but this sector doesn’t need a fireside chat. And incredibly, he’s back on the horse of slashing the deduction for charitable giving.
This sector must kick-start getting Americans back to work. The president wants $447 billion. Round it up to $450 billion, for easy math. The tax-exempt sector must find the first 1 percent — $4.5 billion.
Just 1 percent — $4.5 billion — is sand on the beach for the 77,000 grant-making foundations in the U.S. These organizations paid out $33 billion during 2010, roughly 5 percent of their $670 billion in assets. That’s not counting endowments. When Harvard University alone can tout an endowment of $30 billion, the collective grant-making world can find $4.5 billion in a drawer somewhere.
Donors and foundations often mandate maximum levels of administrative fees, such as salaries. This has long been a contentious issue in the sector and it is ridiculous. It takes people to run programs and it is more efficient in many cases to add staff, rather than running it so leanly that a program’s potential is thwarted from its inception. The sector has spent the past decade paring down and it’s time to get realistic about what it takes to be effective from both a programmatic and community impact point of view.
As proposals come across funders’ desks, ensure that the workforce is appropriate to the intended outcome. Encourage proposals that deal with vital community needs that also add jobs. Funding community interest is contagious. Others will see the positive impact of these new workers and will build on it.
This sector is always handed most of the nation’s most difficult domestic challenges. Leadership in putting people to work is just another day at the office for nonprofit executives. NPT