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Philanthropy in the New Age of Government Austerity

By Daniel Stid, Alison Powell, and Susan Wolf Ditkoff

As the ongoing debt ceiling/fiscal cliff negotiations remind us, our political leaders face tremendous fiscal constraints. Regardless of the deal(s) worked out over the coming months, it is clear that there will continue to be long-term pressure to trim the size of government from city halls to the White House.

These fiscal trends have a number of implications for philanthropists pursuing social change, whether they seek to influence government policy through advocacy or simply to fund charities whose budgets rely on government support.

The Bridgespan Group, a nonprofit advisor to mission-driven organizations and philanthropists, performed two pieces of original research to help donors think through what strategies to employ given these trends. A Bridgespan team sought to first identify what proportion of big-dollar philanthropy works in and around government. We analyzed a random sample of the $1 million plus gifts from the Center on Philanthropy at Indiana University’s “Million Dollar List”1 over the last decade and found that 40 percent of such gifts in our sample were connected to government in some way (the largest chunk – 17% – being gifts to state universities). Even omitting these gifts, over a fifth of large gifts were intended to shape or improve what government does / how it functions, or increase the effectiveness of nonprofits that government agencies rely on to implement their policies. We also performed an extensive number of interviews with leading philanthropists to garner their expertise – many of them available to view for free on our “Conversations with Remarkable Givers” website. We have hyperlinked to a number of these interviews below.

We identified three promising approaches that philanthropists are employing today that allow them outsized impact despite fiscal challenges: first, investing in the government’s capacity to govern (by supporting leadership or other such “overhead” efforts. (An example is Eli Broad’s work to build leadership in public education.) Second, helping high-performing nonprofits make better use of public funding (An example is Edna McConnell Clark Foundation’s role in growing the nonprofit Nurse-Family Partnership). Third, mending broken political and budget processes (See Pete Peterson talk about how his foundation works proactively to tackle the country’s national debt). For more on these strategies complete with donor case studies, see our full report.

In addition, we identified six suggestions for donors working in and around government.

  1. Garden in your backyard: state and local government is where a lot of the action is. Some 80% of philanthropic gifts in our sample were at the state or local level. Your dollars and influence may take you further here.
  2. Play the angles and the levels: At the same time, recognize that local, state and federal governments are often highly interdependent. Hear John and Laura Arnold on how their education reform efforts rely on systems change.
  3. Learn from others, and share what you learn. There are 50 states and thousands of local governments. Don’t reinvent the wheel – or worse, try a failed strategy. And if you invent something promising, publicize it. See Carrie Avery discuss how her foundation helped bring a promising idea to Los Angeles.
  4. Accept the constraints: government can’t – and shouldn’t – turn on a dime: Government leaders are accountable to their constituents, so don’t get impatient. Once the government flywheel gets rolling, the potential is tremendous. Listen to Barbara and Pitt Hyde discuss how their education reform work in Memphis was years in the making.
  5. Look for the change makers: If leadership is critical to get things done in the private sector, it is even more crucial within government.
  6. Complement, don’t backfill: Identify high-impact opportunities to provide dollars that government can’t supply, or make investments to leverage the larger sums of public funding. Ted Turner, for example, carefully selected his UN Foundation’s focus.

Daniel Stid and Susan Wolf Ditkoff, partners with The Bridgespan Group, and Alison Powell, a manager there, are authors of the paper that this piece is in part excerpted from, “Philanthropy in the New Age of Government Austerity.”