OMT One Man's Trash...from Norman Leahy

Thursday, December 28, 2006 :::

Charities on the Dole

For the longest time, I've been harping on the General Assembly's practice of funding nonprofits which is does not control from the general fund.

At the blogger conference last August, Bob McDonnell said his office has looked into the practice. Later, Chris Saxman said he had requested the review. I hope that if and when an opinion is available, it will be made public. But until then, consider this WSJ editorial on the effects of government funding on private charities. The conclusions ought to give at least some legislators reason to think:

But the problem with government money goes beyond just its volatility: Studies by economists over the past decade have demonstrated that government spending on nonprofit activities actually lowers private charitable giving. In the case of social welfare services, a dollar in government funding to nonprofits generally suppresses private giving by 25 cents or more. Part of this is due to a lower perception of need among charities when they get public money. There is also evidence, however, that charities spend less effort fundraising after governments give them money.

The bottom line is that there is nothing free about cash from the government. Perhaps this should come as no surprise, given what we know about the effects of public subsidies to individuals, such as welfare recipients. I would not argue that the destabilizing effects of government subsidies and the downward pressure on giving are reasons to eliminate public funding to nonprofits. But these effects do represent serious unintended consequences of nonprofit reliance on the government.

My personal experience with nonprofits who actively seek and receive public funding is that is does make asking for private funds more difficult. In many cases, the public funding is ether downplayed or not mentioned at all -- for the very reason described in the above quote.

Nonprofit fundraising is very competitive and becoming even moreso as the number of nonprofits increases. Turning to local, state or federal funding sources may seem like effective fundraising. But in the long term, I think it weakens the organizations far more than it helps.

::: posted by Norman Leahy at 12/28/2006 0 comments


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