Cohen: Ten stories that defined 2010 for the nonprofit sector

January 6, 2011 at 9:35 am Leave a comment

By Rick Cohen, noted author and speaker

Did you think 2010 was a tough year?  Most Americans did.  Three fourths of people polled in a December survey conducted by the Pew Research Center for People & the Press said that they were dissatisfied with national conditions, almost nine out of ten rated the economy fair or poor, and more than half contend that the U.S. is losing ground in the battle to narrow the gap between the rich and the poor.

Not solely due to the “shellacking” the incumbent president’s party took in the 2010 elections, the Associated Press summed up 2010 as “Obama’s terrible, horrible, no good, very bad year.”  It might have been a tough year for President Barack Obama and the Democratic leadership of Congress, particularly as Nancy Pelosi hands the speaker’s gavel to Republican John Boehner of Ohio.

Perhaps his December comeback as a political Harry Houdini, getting the lame duck Congress to overturn the military’s don’t-ask-don’t-tell policy, ratify the START treaty, and push through an all-classes tax cut tied to an extension of unemployment benefits suggests that 2010 might not have been as bad as the poll results suggest.  Admittedly, the DREAM Act failed, as Congress decided to penalize kids for the fact that their parents immigrated to the country without documentation, the omnibus funding bill failed to include money to implement health care reform, and the tax cut included an unnecessary continuation of reduced tax rates for billionaires, but it was a productive end of the year for the President and, incidentally, for nonprofits.

Tucked into the tax bill was the extension of the IRA charitable rollover, the 2006 tax law provision that allows people 70 ½ years old or older to withdraw as much as $100,000 from their IRAs to donate to eligible charities. The provision had expired at the end of 2009, leaving donors and charities in a state of limbo until the lame duck Congress took action. The bill not only extends the rollover through 2011, but allows for IRA rollover donations made up to February 1, 2011 to count toward a taxpayer’s 2010 taxes, though the provision that prevents IRA rollovers from going into donor-advised funds leaves community foundations and DAF managers nonplussed.

So maybe 2010 wasn’t half bad for nonprofits after all?  Could it have possibly been as bad as 2009 when nonprofits watched in shock and horror as charitable donations and foundation grantmaking plummet?  For nonprofits, 2010 had twists and turns that just perhaps give glimmers of home for their prospects in 2011.

State budgets cratering
One has to wonder why Jerry Brown, comfortably ensconced as California’s attorney general, would campaign to inherit the responsibility of a state budget with a deficit of $25 billion as of November,  increasing daily as evidence mounts that much of Governor Schwarzenegger’s budget-cutting tricks were mirages.  But rather than complain, nonprofits picked up their advocacy cudgels and aimed at the state capitols.  With a powerful report from the Urban Institute accompanied by research from its members, the National Council of Nonprofits launched a mobilization of nonprofits on the ways state and local governments muck around with payments and contracts.  The deficits are hardly just the nightmares of the likes of California, New York, and Illinois, they’re almost everywhere, with impacts of gutting nonprofit programs (State Budget Deficits in 2010 and Welcome to the State We’re In). In localities across the country, nonprofits face a proliferation of user fees (Minnesota example and Illinois example) and “voluntary” contributions (the so-called PILOTS) that are all but unbundled mandatory taxes assessments. Nonetheless, the state associations are doing more than bemoaning the pain of their members.  The advocacy dynamic feels qualitatively different going into 2011.

Social innovations in transparency
The highest profile nonprofit program of the Obama Administration launched in 2010, the Social Innovation Fund, creating the biggest hullaballoo over a $50 million national appropriation that ever existed.  People debated the meaning of social innovation and the characteristics of social innovators and then whether the eleven big-time regrantmaking institutions were likely to pick real breakthroughs or just groups expert in the language and self-promotion of social entrepreneurialism (view grantees).  While the debate is out over what kind of innovation the SIF hath wrought, the process of recruiting and selecting awardees generated a furor over elements of its secrecy.  Whether the demands for transparency were rooted in concerns about public program accountability or social impact and learning, the Corporation for National and Community Service was hit from all sides, ultimately promising new levels of transparency going forward, although having an unnamed SIF staff person make the begrudging transparency announcement.  The innovation isn’t the SIF’s slow movement toward de minimus transparency; it is getting an administration that campaigned on a platform of open government to make that platform a reality.

Wickedly disruptive leaks
Having campaigned against the Bush Administration’s secrecy, the Obama Administration has been just as promiscuous with its application of “top secret” and “classified” to many documents that are neither.  Hoisting the secrecy of the American government on its collective petard, a tiny, largely volunteer nonprofit called WikiLeaks based in Europe released a treasure trove of secret documents, initially some 90,000 documents on allied military actions in Afghanistan followed by a quarter million classified cables from the U.S. State Department-.  To his supporters, WikiLeaks founder Julian Assange is a hero in the fight for disclosure, even though WikiLeaks itself has been reluctant to disclose details of its finances and staffing (Transparency: Good for the (Wikileaks) Gander).  To critics, Assange may be guilty of espionage and his revelations will leave “blood on his hands.”  As governments target Assange and WikiLeaks, Assange promises a new raft of disclosures revealing the secrets of financial institutions such as the Bank of America.  In the Internet age, WikiLeaks has proved that a small nonprofit with a cadre of volunteers can shake the rafters of powerful nations and multinational corporations.

Cross-breeding nonprofits and for-profits
A staple of science fiction has been the creation of new species by splicing the genes of animals with humans, in The Island of Doctor Moreau or in last year’s Splice, but with results that are sometimes scarier than their creators intended.  In the charitable sector, we have “low-profit limited liability corporations,” given the acronym L3Cs, “B Corporations,” and other forms of socially responsible corporations.  For many people, the emerging L3C form is a flashpoint generating strong opinions pro and con.  Frightening or friendly?  Though still a tiny part of the social sector, these emerging forms are garnering state government authorizations and recognition.  Futurist and historian Lucy Bernholz has suggested that their importance is not their size or power arrayed against 1.8 million 501(c) organizations, but a challenge to the resonance and distinction of the tax exempt corporate form.  If governments, donors, and the public begin to see non-nonprofits as able to deliver what charities are thought to do, do the hybrids become “shots across the bow” to the legitimacy and perhaps tax-preferred status of nonprofits? (The L3C Big Picture)

Nonprofits saving the press
Someday we dinosaurs might be telling our grandchildren about reading folds of newsprint with printed words on them that were once called newspapers.  Some of us would even have them delivered to our homes and offices.  In 2009, the nonprofit journalism movement was building.  In 2010, we found nonprofits working on business plans to change the “ecosystem” of journalism.  Half of the foundation grantmaking to nonprofit journalism sites have focused on investigative journalism, rebuilding a part of journalism that was on life support regardless of whether traditional print media might survive.  The remolded ecosystem may be one that doesn’t simply find ways of maintaining alternatives to screaming heads on cable TV, but helps guide American journalism toward generating news that people can really use to hold business, government, and hopefully nonprofits themselves accountable.

Billionaires and billionaires
Astronomer Carl Sagan might be more impressed with their burgeoning numbers than the billions and billions of stars he used to gush over on PBS.  The bipartisan tax bill might have given billionaires a surprising and undeserved tax break, and few of them, even the nominal liberals, have been feeling particularly generous with the notion of paying taxes, notably Steve Ballmer of Microsoft, Microsoft co-founder Paul Allen, and Jeff Bezos of Amazon who combined their lobbying forces to oppose Washington State’s effort to create a minimal 1.2 percent state income tax. They may not like paying taxes, but they’ve been making a big splash about their charitable generosity.  Facebook co-founder 26-year-old Mark Zuckerberg, one of the world’s richest people, made the largest charitable donation ever for someone his age, a nine-figure gift to the Newark public schools.  The Wizard of Omaha, Warren Buffett, developed a “giving pledge” for the world’s billionaires, getting 40 including buddy Bill Gates Jr. to promise to give away half of their wealth before they died.  The question for the pledge, just like the questions about the charitable deduction itself, is giving for what?  It’s like a contest to give and give more, but it is giving determined and directed by the oligarchs, not based on the needs of the peoples and communities whose ideas for using the largesse might be different.

The United Way’s Way Strays
Most charities will never get a whiff of Warren Buffett’s giving, but lots of them live day to day in part because of the money they get from working people making charitable donations through payroll deductions.  In most cases, their contributions go to and through the United Way system, but that system is changing.  Although the formal network of United Way competitors, the National Alliance for Choice in Giving, has collapsed, dissatisfaction with the United Way’s new strategic fundraising and distribution strategies has rubbed lots of charities wrong—especially those that found themselves on the outside looking in and on occasion going out of business.   Increasingly there are local gatherings of former United Way charities simply agreeing to fundraise outside of the United Way, such as the “Central Florida Gives!” effort.  In other locales, the experimentation was within the United Way itself, lengthening fundraising campaigns or eliminating fundraising goals, distributing funds earlier due to charities’ recession-time needs (Metro United Way Distributes $$$ from Current Campaign), consolidating or merging affiliates and chapters.  This past year, the United Way’s perpetual reinvention seemed to be more widespread and perhaps in this economy, a little desperate.  In the midst of over $300 billion in charitable and philanthropic giving, the United Way’s slice is tiny, but it is also hugely important.  Notwithstanding the pledges of Warren Buffett and his friends, the most generous people in the U.S. —as measured by proportions of income and wealth given to charities – year in and year out are moderate and middle income working people, particularly those who give through workplace campaigns in the private sector or the Combined Federal Campaign in federal government agencies. Through giving each pay period, that is how most Americans personally touch organized charities.  With technology obviating the need for a fundraising intermediary, they may be sending a workplace message to the United Way that the United Way won’t like.

What’s a 501(c)(4)?
In the wake of a variety of questions regarding how much of charitable giving should be kept secret, Congress toyed with legislation to compel some measure of 501(c)(4) disclosure, but then cut a deal to modify the bill to protect the confidentiality of contributions to the National Rifle Association.  Ultimately, even that highly criticized deal failed to save the legislation, as Democrats discovered themselves not much more interested than their counterparts to have corporate and special interest donors identified.  Staring at a gridlocked Congress unable to clean up elections, some states are now contemplating their own disclosure regimes.

But money flowed like a torrent into (c)(4)s, particularly from corporate interests and the U.S. Chamber of Commerce, in the end outspending the political parties themselves, headlined by the fundraising prowess of Karl Rove’s “Crossroads GPS” organization.  One set of (c)(4) beneficiaries was the array of Republican candidates that ran as adherents to the Tea Party philosophy, winning the support and financing of the 501(c)(4)-structured Tea Party Express and others.  In the wake of a variety of questions regarding how much of charitable giving should be kept secret, Congress toyed with legislation to compel some measure of 501(c)(4) disclosure, but then cut a deal to modify the bill to protect the confidentiality of contributions to the National Rifle Association.  Ultimately, even that highly-criticized deal failed to save the legislation, as Democrats discovered themselves not much more interested than their counterparts to have corporate and special interest donors identified.  Staring at a gridlocked Congress unable to clean up elections, some states are now contemplating their disclosure regimes.  Despite the President’s “post-election session” successes with Congress, DISCLOSE seems unlikely to escape gridlock.  For nonprofits, will the states become not just the monitors of charitable fundraising, but the venues for regulation and oversight of the nonprofit sector come federal government retrenchment and stagnation?

The education flashpoint
Could there be an issue in the nonprofit sector this year that was more contentious than the direction and content of public schools?  Nonprofits were in the thick of this battle, as some nonprofits took advantage of the Obama Administration’s clearly pro-charter stance, particularly as embedded in the Department of Education’s Promise Neighborhoods program and the Race to the Top.  Charters have been promulgated as solutions to all kinds of school district problems, from the rebuilding of the public school system in post-Katrina New Orleans to empowering through a “parent trigger” disempowered parents in California who feel that the school system’s bureaucracy and the teachers’ unions are impervious to their needs.  Assiduously promoting nonprofit engagement in charter schools have been conservative funders such as the Walton Family Foundation and more liberal funders such as the Bill & Melinda Gates Foundation and the Broad Foundation, but the charter school results are increasingly being revealed as much less than breathtaking in both educational performance and public accountability.  Nonetheless, foundation spending on youth stuff is always popular and foundations are growing more comfortable with grant support of K-12 or particularly K-6 education is hot.  Foundations of all political ideologies tend to lean away from public anything unless they control it.  In 2010, nonprofits and foundations in education may have cemented a bipartisan trend toward increased support for charter schools and other alternatives to traditional public education.

Living, working, writing, and fundraising in the Internet
If you don’t tweet, if you haven’t discovered Tumblr, if you don’t work your Facebook page, if you haven’t explored activism through Jumo, you’re simply not with it.  It is now a time when technology is substituting for interpersonal, tactile engagement.  It’s hardly just a matter of using email and posting to blogs.  Entire swaths of the nonprofit sector’s functions have fallen into the ethersphere as though they were part of the story in the Jeff Bridges sequel to Tron.  Even those of us who are far from Luddites see the sector’s dynamics changing.  Is it for the good or the bad?  Like the concept of reading a newspaper one holds in one’s hands, with newsprint ink covering your fingertips and splotching your dress shirt, connecting with a nonprofit’s constituents and supporters may be shifting from knowing the person to knowing the login name and IP address.  This year, the Washington Post’s end-of-the-year best-and-worst tabulations included the ten best internet memes, headed by the “hide your kids, hide your wife” YouTube  of Antoine Dodson.  It is a new world, for nonprofits and everyone else.

2010 was a tough year for nonprofits, perhaps an unsettling, turbulent year.  Much of the discussion revolved around a concept of “the new normal,” sometimes dismissed as so much horse-hooey, sometimes averred as almost immutably altered circumstances that nonprofits had better get used to (Long Beach Nonprofits, A New Normal for Nonprofits and New Normal of Money in Politics).  But nonprofits never find themselves dealing with a stable state.  It is their flexibility and resilience that helps communities and the nation find solutions to the constant turbulence that increasingly characterizes modern society.  Americans might not feel positive and confident about the nation’s future prospects, but they should feel somewhat more secure that the nonprofit sector weathered 2010, as it did the depths of the recession in 2009, and is still punching above its weight.

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