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The Nonprofits’ Dilemma: The ‘Private-Public’ Squeeze

By Calvin Thomas
The Times of Trenton Op-Ed

Although the financial earthquake occurred in the fall of 2008, the aftershocks are still being felt by the nonprofit sector.

The Support Center for Nonprofit Management recently conducted a Meet the New Jersey Grantmakers forum July 14 at the PSEG Headquarters in Newark.  The forum was attended by more than 100 nonprofit leaders from all parts of the state who represented a diverse range of services and sizes.

Calvin Thomas

Calvin Thomas Jr.

If I had to pick one clear and bold message from the comments made by the nonprofit leaders who attended, it would be this:

The financial “squeeze” is beginning to really take its toll on our ability to adequately provide services much needed in New Jersey.

The squeeze that is becoming more apparent to the sector is what was referred to as the “private-public” squeeze.

On one side, the private foundations and corporations in New Jersey have significantly reduced their grant dollars to the nonprofit sector due to the negative effect of the financial meltdown on their financial portfolios and income statements.

And on the other side, the state legislators have just passed a FY2011 budget that significantly reduces spending for social services that they relied on from the nonprofit sector through state grants and contracted services.

The question echoed by the nonprofit leaders was:

“Where do we go for financial support to service a rapidly growing population of citizens in dire need of help?   Funds are being significantly reduced or completely cut from both sides.   We are stuck in the middle.”

What makes this “private-public” squeeze a tumultuous time for the nonprofit sector is that the state of New Jersey — that is, the public sector — is depending on the foundations and corporations — that is, the private sector — to assume more of the financial responsibility to support the nonprofits.

However, in this very weak economy, the private sector has yet to recover from the recent economic meltdown.

Foundations are trying to rebuild their portfolios while corporations are trying to protect their bottom lines.

The latest prediction from the federal government is that the recession could last another five or six years before any indication of normal growth to the economy is seen.

I believe that having these Meet the New Jersey Grantmakers forums throughout the state is critical for creating a roadmap to navigate through the present financially challenging times.  It allows for creative and meaningful dialogue between the leaders of both the nonprofit organizations and private grantmakers.

Grace Egan, Executive Director of New Jersey Foundation for Aging (NJFA) and a panelist at the forum, stated that NJFA granting policy prohibits it from granting private funds to nonprofit applicants that are looking to replace public funds that were cut or reduced.

After hearing the concerns of the audience and the impact that this “private-public” squeeze is having on their ability to operate, Egan plans to raise this issue with her foundation’s board to consider changing its policy.

I am certain that there are a number of New Jersey private foundations that operate with that policy.  In these challenging times, I implore any private foundation in New Jersey with such a policy to reconsider its position. It is one step in the right direction that will make a big difference.

The nonprofit sector may not have been responsible for the 2008 financial earthquake.

However, leaders of the sector are responsible for their survival and long-term sustainability.  The leaders must take the opportunity during these trying times to re-examine their organizations’ mission, infrastructure and capacity.

Now is the time for organizations to engage in an independent and thorough:

  • Organizational
  • Financial assessment
  • Board development
  • Staff development and
  • The development of a strategic and fund-raising plan to take them into the future.

The next financial aftershock or earthquake may be just around the corner.

Nonprofit leaders must build their organizations to adapt and endure.

With the current state spending reductions, they may be the only service providers in their communities.  They owe it to their customers.

Calvin B. Thomas Jr. senior associate consultant for the Support Center for Nonprofit Management.

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