I was in Connecticut last week listening to the radio news while driving between appointments. It was announced that the state legislature had reached an agreement on the state budget for the next year. This was accomplished with a few tax increases and plenty of budget reductions. Choices had to be made and I am sure some of those choices were not easy. The news reported this morning on the Washington State legislature and the challenges they are facing to close a $5 billion budget gap. Tomorrow they begin a special session only focused on budget issues. The mood is such that increased taxes will be out of the question. (As an aside, last November, voters in Washington State approved a tax rollback of 2 cents per bottle on soft drinks and water that had been approved by the legislature last year. It seems that voters wanted to pay 2 cents less for their liquid refreshments rather than pay for state services.) The Washington State legislature, along with many other states, will be making some key choices over the next thirty days, $5 billion worth of choices.
The impact on nonprofit organizations will be tremendous. Social services and healthcare will be impacted by all this, causing further reduction to services that have probably already been reduced over the past several years. Even arts and culture institutions, some of which are closely aligned with state and local governments, will be feeling the budget tightness due to cuts in the funds they receive from government sources.
As a society we are facing choices like never before, and those choices will test what we truly value in life. Some think Washington State failed the test when they voted to reduce a 2-cents-per-bottle tax rather than pay for needed social services provided by the state. Others might suggest that this is a time when reductions force these very choices and we learn to make do with what we have and live within our means.
Once these reductions play out in nonprofit organizations, and they face the same challenges state planners and legislatures are confronting, more choices will have to be made. If nonprofits have fewer resources, and they will have fewer resources, how will they spend them to serve their constituents while maintaining excellent services?
Last week on my Connecticut trip I visited with one major nonprofit facing these choices. They chose to reduce staff including their fundraising operations. At a time when financial resources are at a premium, it was surprising to me that reductions were made in fundraising rather than increasing the amount allocated to gathering more resources. Capital formation is important right now, and one of the least expensive ways to increase capital is to raise it philanthropically.
We all face choices in our lives. Over the next six months, you may face choices that you haven’t in the past. How will you respond?
All the best,