Public Research Universities’ Shifting Funding Models

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April 7, 2016; Siebel Scholars and American Academy of Arts & Sciences

During the Great Recession, state funding of nonprofit organizations, including colleges and universities, dropped precipitously. As the recession fades into memory, some states are slowly increasing their funding for higher education, but many cannot. Economic need is spurring the majority of public university leaders to advocate for additional government funding, be more efficient, and create new funding opportunities to close the gap.

Today, public research universities across the country educate 3.8 million students annually. As public institutions, they depend on government funding, particularly from states, to maintain the essential services students and communities depend on. But, state appropriations have dropped thirty-four percent in the last decade. Colleges and universities also continue to receive other public funding, including $3.5 trillion from the federal government in fiscal year 2013. Unlike the $65 billion from state appropriations, the majority of federal funding is project-based instead of general operating. A strong source of general operating funds is essential for a nimble, healthy nonprofit organization.

A college or university may be categorized as a nonprofit organization, similar to a homeless shelter or workforce training program, but tuition provides a strong revenue stream most other nonprofits can only dream of. Additionally, unlike state government agencies, public colleges and universities also have some flexibility administering the programs and services offered as well as in setting their employee salaries.

Beginning in January 2013, the American Academy of Arts & Sciences authored five reports documenting the dramatic shift in funding and advocating for state reinvestment. It released its final report last week, Public Research Universities Recommitting to Lincoln’s Vision: An Educational Compact for the 21st Century. (The title refers to President Lincoln’s creation of the public university system under the Morrill Act of 1862.) The report builds on the previous publications and presents recommendations to colleges, government leaders, and the communities that depend on these higher education institutions.

The ACAD frankly outlines two crucial recommendations to their institution members to maintain—and, in some cases, restore—public trust. The first, strengthening the institution’s governing board, has been identified by many, including the Nonprofit Quarterly, as necessary for many large nonprofits. The ACAD’s report quotes the Association of Governing Boards of Universities and Colleges:

While boards are not the source of the governance challenges facing higher education, changes to boards and their structure can lead to improved leadership across higher education—in setting goals, in using data to evaluate performance, and in making strategic investments in ways that create value.

Secondly, the report highlights the demand on public research universities to be more efficient with their resources rather than continuing to increase tuition and other fees. In the past, colleges and universities raised tuition and fees to make up for the decrease in government funding and increase in other program expenses. Now, as student debt rises to record levels, the public backlash from these increases has reached a critical juncture. Eighty-three percent of all first-year students receive some form of financial aid, and 71 percent receive federal, state, local, or institutional grant aid. Even with all of these scholarships and aid programs, in 2012-2013, 54 percent of undergraduate students graduated with student loan debt and 19 percent had student loan debt over $25,000. Continuing to raise tuition will lead to a lack of diversity and a further decrease in public trust.

Connected to the growing use of public aid, the ACAD recognized the need to make applying for financial aid easier for students and their families. Every year, sixteen million students apply for financial aid through the U.S. Department of Education’s Free Application for Federal Student Aid (FAFSA) program, including Pell Grants, Work Study, and other essential federal aid opportunities. Currently, the application consists of 108 questions and 88 pages of instructions. Clearly, simplifying this process will open college up to more low income and first-generation college students. (44,45)

ACAD makes a strong plea to state governments to reinstate funding for their college and university systems that was reduced before and during the recent recession. Although higher education remains the third-largest state priority, funding has declined an average of 34 percent nationwide over the last fifteen years. In that same period, state funding of Medicaid has increased from 9.5 percent to 19.1 percent of state budgets, overtaking and sucking away higher education’s allocation.

Higher-Ed-Medicaid

Since the higher levels of state public funding revenue are a distant memory, colleges and universities are developing new funding opportunities and efficiencies through collaborations with other nearby schools and public-private partnerships. These efforts begin with making it easier for students to transfer between state institutions. Other developments include programs that stretch resources of multiple universities to create exciting new programs and opportunities for students to learn together, connect with professors and mentors at multiple schools, and expand research efforts. For example, three colleges (the College of Engineering at Virginia Polytechnic Institute and State University, the Wake Forest School of Medicine, and the Virginia-Maryland Regional College of Veterinary Medicine) established a joint graduate program in the Virginia Tech–Wake Forest University School of Biomedical Engineering and Sciences, offering students access to all three campuses.

Public research universities are also creating new partnerships with corporations and other private organizations. These collaborations lead to expanded research activities, new courses and department chairs, internships, and scholarships. Additionally, colleges are also stepping up their own development activities. Of the seventy-seven institutions responding to the Lincoln Project’s survey, ninety percent recently completed or are in the midst of a capital campaign for one or more institutional purposes.

Finally, colleges are increasing the revenue they produce from related student expenses, including food, dormitories, and healthcare. Dorms are becoming more luxurious; food is more expensive; fees are growing, and health services fees in particular are on the rise. Overall, student fees and tuition make up more than half of a public university’s core educational support. And like tuition, schools are quickly realizing these extra fees decrease diversity, increase student debt, and lead to public backlash.

Public research colleges and universities are better equipped than many nonprofits to handle the shift in states’ funding priorities due to their access to alumni and other stakeholders with resources to support fund development efforts. This capacity, however, does not excuse states from providing enthusiastic support and increasing funding to assure the sustainability and growth of public universities for at least the next 150 years.—Gayle Nelson

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What’s the Potential Impact of This Billionaire’s Charity Network Consolidation on the Philanthropic Community?

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March 8, 2016; Forbes and Jewish Business News

Nonprofit Quarterly has featured many articles on the effects billionaires can have on the philanthropic community. Often, they begin by creating foundations to distribute large checks. Many quickly move on to other projects in the hopes they will expand their impact and scale their ideas onto the community. This is the road Todd Wagner has taken. Sadly, because they are out of reach of most local small service organizations responsible for the majority of the work in the sector, the tools he created and enhanced will likely have little overall effect.

Todd Wagner and his partner, Mark Cuban, saw potential in streaming video before the technology was even fully developed. They founded Broadcast.com in the late1990s, when many were still accessing the Internet via dialup. They sold the company to Yahoo in 1999 for $5.7 billion, the most expensive Yahoo acquisition to date, and although much of the service has been disbanded, Wagner and Cuban became billionaires.

After the sale, Wagner turned his focus to philanthropy. He started the Todd Wagner Foundation in 2000 to support young people who have few opportunities. Much of its work centered on Miracles, a program it created and then spun off to the Boys and Girls Clubs of America, as well as supporting other large nonprofits.

Over the last two years, as his foundation activities became established, Wagner pivoted back to online activities, this time focused on the needs of nonprofit organizations. He founded and bought three online fundraising platforms in an attempt concentrate and expand online charitable giving: Chideo, Charitybuzz, and Prizeo.

Wagner created Chideo in 2014. A portmanteau of “charity” and “video,” the platform offers exclusive videos developed by stars from diverse areas, including entertainment, sports, business, fashion, and culture, to support charities of their choice. Visitors support the charities by viewing the videos.

Wagner acquired Charitybuzz and Prizeo in 2015. Charitybuzz auctions luxury experiences and goods to support charities. Items include meals with celebrities and Fortune 500 CEOs, tickets to movie premieres, and other limited opportunities. Prizeo reaches out to a wider audience by offering similar items in a sweepstakes instead of an auction. Visitors entering the sweepstakes online pay a “small contribution” to enter; contestants can enter the sweepstakes for free by mailing their entry.

Wagner is working to centralize online giving by combining the three platforms into Charity Network. All three platforms continue to operate as for-profit entities providing 80 percent of the money raised to charities. Together, they have raised more than $200 million for 3,000 charities. Although 3,000 on its face sounds like a large number, in a sector of 1.5 million in the U.S. alone, it barely covers the tip of the iceberg.

Sadly, Wagner’s description of his efforts as “disrupting traditional fundraising” could not be farther from the truth. Wagner’s efforts remind me of a dream many small but savvy nonprofit leaders explore but quickly move away from. The analysis begins with the question: What if we could reach out to [fill in your local billionaire or entertainment legend]? If only Wagner could add a method on the platforms for the small local nonprofit, located in the town where said billionaire or entertainment legend grew up, to grab their attention and potentially build a relationship. Now that would truly disrupt traditional fundraising.

Funding the Nonprofit Grocery Store: A Variety of Models at Work

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March 26, 2016; Waco Tribune and NPR

In the United States, 2.3 million people live in food deserts—places without access to grocery stores offering fresh fruits and vegetables at reasonable prices. Across the country, grocery stores serving rural and low-income areas are struggling and many are dying. As the large chains leave, residents are banding together to explore new methods of maintaining their neighborhood stores, including membership, connecting to other nonprofit or business services, and crowdfunding.

In Waco, Texas, Mission Waco has raised thirty-eight percent of the funds it needs to convert a vacant 6,500 square-foot building into a vibrant “Jubilee Food Market.” Its goal is to raise $488,000 to transform the eyesore into a community asset. Many years ago, the building was home to a Safeway, but the grocery store has long abandoned the community. Now, the nonprofit is looking to donors from as far away as Maine to rebuild this essential resource.

Jubilee Food Market supporters purchase shares of stock for as little as $25, although larger investment options are welcome. Mission Waco’s project budget consists of 4000 $25 stock shares for remodeling, 10,000 shares to operate the store for the first year, and 5525 shares for the ECSIA Hydroponics Greenhouse. Shareholders receive quarterly reports on the store’s status and the opportunity to participate in the shareholders’ meeting. All donors and residents of the 76707 ZIP code receive an Oasis Club Card entitling them to discounts on store purchases. The store is scheduled to open in September 2016.

Mission Waco chose to open a grocery store after surveying residents and learning the overwhelming majority wanted a supermarket. The organization’s mission is to provide Christian-based holistic programs that empower the community’s low income. The organization also operates a World Cup Café and Fair Trade Market, Jubilee Theatre, and Urban Edibles food trailer.

In Bowdon, North Dakota, residents are also at work. They came together to continue the operation of their grocery store after the store’s owner died and no other owners came forward. The next closest grocery store is eighteen miles away.

Run as a membership store similar to Costco and Sam’s Club, the effort is working but the margin is tight. They recently opened a thrift store and bakery nearby to increase business. The tiny town surrounded by fields of soybeans, wheat, and corn lost its community school years ago. Without the grocery store, the town would disappear from the map.

The loss of community grocery stores and its effects on rural America led to six federal agencies creating an $800,000 Obama administration initiative, “Local Foods, Local Places,” to support programs to create community owned grocery stores and farmers’ markets. Twenty-seven communities were selected from over 300 applications. Each community will work with a team of experts to recognize local asset and opportunities, set revitalization goals, and develop an implementation plan using these resources.

Throughout the United States mega-grocery stores are abandoning their rural and low-income urban communities for wealthy city edges and suburbs. Without these businesses, residents lose access to fruits and vegetables and gain more processed fast food outlets and convenience stores full of fat, cholesterol, and sugar. This phenomenon is contributing to the obesity epidemic and leading to an increase in heart disease and other diseases associated with this condition.

Food is Power, a California nonprofit “seeking to create a more just and sustainable world by recognizing the power of one’s food choices,” found that wealthy areas have three times as many supermarkets as poor ones. And the disparity is even more pronounced when comparing racial makeup: White neighborhoods have four times as many grocery stores as African American communities, and the stores in African American communities are smaller with a more limited selection. Overall, according to the Economic Research Service of the US Department of Agriculture, 2.2 percent of all households do not own a car and live more than a mile from a supermarket.

Although creating and running a community-owned grocery store is a challenge, Willow Lake, South Dakota’s Lake Grocery has been a beacon for the community for over five years. Operated by Willow Lake Area Advancement, the store employs a full-time manager and two part-time employees in addition to volunteers. Although the organization described the project as a leap of faith, it has worked out well for the community and the nonprofit.

Original site: https://nonprofitquarterly.org/2016/04/01/funding-the-nonprofit-grocery-store-a-variety-of-models-at-work/

The Promise of Partnerships between Mental and Physical Health Services

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February 23, 2016; CNN (Kaiser Health News)

Serious mental illness (SMI), including schizophrenia, bipolar disorder, and major depression, affects more than 9.5 million adults, almost four percent of adults living in the United States. A 2006 report from the National Association of State Mental Health Programs revealed adults suffering from SMI die an average of twenty-five years earlier than those without these conditions, and that the rate is rising. Grants funded through the federal Substance Abuse and Mental Health Services Administration (SAMHSA) indicate locating physicians and other physical medical partners in mental health clinics improves physical health in this needy population.

Although Tracy Young has to take two buses to San Fernando Mental Health Center, she never misses an appointment. The fifty-year-old describes these appointments as key to controlling her depression and schizophrenia.

Unfortunately, like many people suffering from mental illness, Young did not always receive regular medical care. The lack of essential care leads to a higher percentage of people with severe mental illness dying prematurely, often from treatable chronic diseases such as hypertension, diabetes, and obesity. It also leads to an increase in the cost of care and gaps in the care received.

Frequently, the barriers low income individuals suffering from mental illness face are due to transportation and lack of integrated care between the mental and physical health care systems. Increasing cooperation and communication between providers is a goal of the Affordable Care Act.

In the past, leaders focused on adding mental health services to physical health offices. Recent grants are focused on offering physical health services in mental health clinics, as is the case at San Fernando Mental Health Center. Joint clinics are in development in many states, including California, New York, Washington, and Florida. Many are funded by grants administered under the Primary and Behavioral Health Care Integration (PBHCI) program of SAMHSA. Since 2009, the department has awarded $150 million in grants for this purpose.

Clinics funded under the program received up to $500,000 annually to integrate physical and mental services. In 2014, The RAND Corporation evaluated fifty-six of these programs around the country. Their study revealed patients receiving primary care at their mental health clinic increased their control of their diabetes and hypertension. Results were not as positive for patients who smoked or suffered from obesity.

The clinics also reported early enrollment success measured by over half of patients using integrated services in the first year they were offered. But care specialists found it difficult to target those most likely to benefit from integrated care.

Although many of these clinics successfully developed models of co-locating behavioral and primary care services, they struggled to develop a joint culture and long-term funding.

Original cite: https://nonprofitquarterly.org/2016/03/01/creating-partnerships-between-mental-and-physical-health-services/

2 Foundations Choose Higher Payouts, Inviting Others to Do the Same

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February 16, 2016; Philadelphia Inquirer

NPQ has often advocated for foundations to consider higher payout rates, taking up the issue in some detail in Buzz Schmidt’s classic, “‘Deliberate Deployment’ or Perpetuity: Questions to Inform Timing Strategies for Philanthropy.” Since then, we have seen a number of foundations moving to deploy more of their assets in the here and now—if not by “spending down” more quickly, then by investing more of their full assets in mission-related activity. But Schmidt also suggests that foundations consider a set of questions in a more “deliberate deployment” strategy, and that is what we see in this story.

Two influential leaders in the Philadelphia area philanthropic community passed away this past January: Patricia Kind and Harold Taussig. The foundations they created, the Patricia Kind Family Foundation and the Untours Foundation, are memorializing their legacy through increased grantmaking. Together, foundation leaders are asking other foundations to join them in giving away more than the five percent required by law.

Throughout Patricia van Ameringen Kind’s long life, she supported some of the most vulnerable. She was trained as a nurse, and this training influenced her philanthropic support of those living in poverty in her community. She and her husband founded the Patricia Kind Family Foundation in 1996 to support the needs of Philadelphia’s poor. The foundation recognizes the essential work of smaller nonprofits by focusing its giving on organizations with budgets under one million dollars.

A day after Mrs. Kind’s death, another of Philadelphia’s most generous leaders, Harold E. Taussig, passed away at the age of 91. Mr. Taussig never forgot his roots as a small-business owner and entrepreneur. He was one of the first to see the value of offering vacationers the opportunity to stay in apartments instead of hotels. Through his Untours Foundation, he provided low-interest loans to startup businesses and other enterprises to create economic opportunity to alleviate poverty throughout the world. Since its inception, the foundation has made more than $7 million in low interest loans.

Although their methods differed, Mr. Taussig and Mrs. Kind shared a dedication to those living in poverty. To memorialize their generosity, the foundations they created are reaching out throughout the philanthropic community, asking other foundations to dedicate more of their resources toward alleviating poverty and underwriting second chances.

Foundations are only required to give away five percent of their assets to maintain their tax-exempt status. Administrative expenses, including staff salaries, are eligible to be included in that five percent, so even less than five percent of their assets may be given in grants each year. Leaders of the Patricia Kind Family and Untours Foundations are advocating for a different use of resources.

“The standard foundation structure of using only 5 percent of foundation assets to address a foundation’s mission is a waste of 95 percent of its assets,” said Elizabeth Killough, director of the Untours Foundation. “On top of not addressing mission, that 95 percent is often invested at cross purposes to the foundation’s mission.”

As the divide between rich and poor continues to expand, will these foundations’ efforts toward building a movement to spend more of their assets on the work of social change catch on?—Gayle Nelson

 

2 Foundations Choose Higher Payouts, Inviting Others to Do the Same

Sesame Street Explores New Frontiers in Education

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Sesame-Street

February 1, 2016; Fast Company

In the 1960s, creating educational programming for children on television was innovative. Today there are more channels than ever before, and more children first meet Big Bird and other Sesame Street friends on phones and tablets. At the same time, children’s educational needs continue to grow, from obesity to autism, and parent deployment to bullying. Leaders at Sesame Workshop, the parent of Sesame Street, are exploring creative methods of reaching out, educating, and helping children thrive.

Although its programming began on television, Sesame Workshop quickly realized the medium was just the beginning. Sesame Workshop developed websites, cable shows and networks, and 16 million “outreach kits” and events that reach hundreds of thousands of children and their parents through partnerships with over 3000 organizations. With a budget of $104 million, though, more work is needed to fulfill its mission of helping kids grow smarter, stronger, and kinder.

Sesame Workshop recently announced the creation of Sesame Ventures, a partnership with a venture capital firm called Collaborative Ventures, and the subsequent creation of a new fund, Collab + Sesame. The $10 million fund will invest in startups developed by corporations and other for-profit organizations in six broad areas: entertainment and media, food, health and wellness, family development, education tools, and social and emotional development.

We are in the midst of an extraordinary time in the history of how digital technology can change the education, health and welfare of kids around the world,” Jeffrey D. Dunn, Sesame Workshop’s CEO, said in a statement. “History suggests that much of that change will spring from new companies. By partnering with some of these startups, Sesame Workshop can help grow the next wave of kid-focused innovation and improve the lives of children everywhere.”

The Workshop’s funds for its half of this new venture stem from the sale of its stakes in Noggin and Sprout. Both projects were innovative activities of their times: Noggin, the first all-educational cable channel for children, was launched in 1999 in partnership with Nickelodeon, while Sprout, a cable network targeting preschoolers, was developed in 2005 in partnership with PBS, HIT Television Ventures, and NBC Universal.

Projects funded through Collab + Sesame will be offered technical assistance and the opportunity to make use of Sesame Street characters and branding, as well as $1 million each. Although few would give up these perks, Sesame Workshop CEO Dunn places no preconditions that might make one suspect that the group is simply trying to extend their brand on the use of the funds.

Original site: https://nonprofitquarterly.org/2016/02/04/sesame-street-explores-new-frontiers-in-education/

Is a Microloan Any Different from a Payday Loan?

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Microloans

January 12, 2016; Hyperallergic

More and more philanthropy is funded by crowdfunding, and more and more sites are in competition for donors’ attention. Most highlight the heartfelt stories and hide the underlying costs and the meager return on investment. Yet once the costs are evaluated, the variations are staggering.

The meaning of Stephanie Rothenberg’s new project at the ZKM Center for Art & Media in Karlsruhe, Germany, “The Garden of Virtual Kinship,” is hidden at first glance. Visitors are captivated by the plants growing and flourishing in individual glass planters. Each seedling waits its turn to be watered, but one can’t help noticing the large amount of water leaking out and missing the thirsty plants. As your eyes follow the leak to the large tank underneath, one realizes just how much water the plants could be getting—if only the leak were repaired.

The project, part of the exhibition GLOBAL: infosphere, examines crowdfunding and microlending costs and return on investment. Each plant represents a campaign in a certain region of the world listed on the crowdfunding site Kiva. As a donor makes a donation, a plant is watered, yet more water leaks into the tank below. The leaking water represents the money that fails to reach the borrower due to high interest and fees charged by the site.

Combined with a second project, “Planthropy,” on view at Manchester’s The Lowry, displaying how social media affects philanthropy, Rothernberg explores, “the intersection between social media, finance, and philanthropy,” Rothenberg toldHyperallergic. “Both pieces are questioning what it means to donate through the click of a button.”

Why are the costs of microfinancing so high? Some of it is the nature of the industry itself and the need for scale. Many microfinance sites research and authenticate the site projects. These activities are cost intensive, particularly in developing rural areas. Costs are also incurred to market and connect the sites to social media, thereby creating a platform donors are drawn to. Other considerations include the method of computing the interest. Overall, these costs add up to a palatable percentage on a $10,000 loan, but for a $550 or $1000 loan, these same costs take up a much higher percentage.

Many donors are drawn to the stories and fail to examine the costs of investing and the meager returns. The microfinance sites highlight the opportunity to use the funds more than once as the initial loans are repaid, but once fees are tacked on, the amount that can be reloaned is minimal. Further, donors are often unaware of the lackluster rate of return because many sites hide the costs and charges. Some studies even suggest that the high interest rates and fees have similar effects on borrowers as payday loans do in the United States.

Rothenberg appeals to donors to research these sites before investing and ask the hard questions: Does the return justify the donation? What is the loan’s cost to the borrower? What is the method of calculating interest payments? (She’d also like them to share their findings on social media.)

But microloan sites charging high interest rates and fees are not the only models. Another option is to support institutions that create tools to help people in developing countries save. Often, group savings can fuel similar opportunities without the high fees and interest rates. Further, since little money is actually rechanneled, donors might consider donating instead of lending. Websites like GivingGrid only charge credit card fees and ask donors to make a second donation to the site to cover its fees and mission. Another site, Benevolent, is a nonprofit raising donations from foundations and individuals to cover its costs. Benevolent partners with other nonprofits to validate the client’s need, and since the donation is channeled through the nonprofit, donors can deduct their donation from their taxes.

As donors research and invest in sites with lower costs and fees, competition will work to decrease fees and increase return on investments.

Original cite: https://nonprofitquarterly.org/2016/01/29/is-a-microloan-any-different-from-a-payday-loan/