Nonprofits look for ways to generate more income

A great piece in last week's Wall Street Journal for nonprofits facing a changing environment: see Helping Themselves by Shelly Banjo.

The folly of the stimulus strategy

Struggling with the early impacts of the economic downturn, educators across the country were thrilled to learn that they would receive more than $100 billion over the next two years through the federal government’s stimulus plan. And rightly so: given that funding is going to continue to tighten for the foreseeable future, perhaps substantially, these stimulus funds give educators breathing space to figure out how to operate in this changed environment. As Jack O’Connell, state superintendent of public instruction in California told the Wall Street Journal, “It’s going to mean a softer landing for us.”

But as more information has become available on the desired uses of that money, it has become clear that none of the desired uses of those funds will result in a softer landing at all.

Without going into detail on the many pathways that money is taking into schools (see here for volumes of information on that front), states are being asked to use this money to make progress in four key reform areas (as listed here):

• Increase teacher effectiveness and address inequities in the distribution of highly qualified teachers
• Establish and use pre-K through college and career data systems to track progress and foster continuous improvement
• Make progress toward rigorous college- and career-ready standards and high-quality assessments
• Support targeted, intensive support and effective interventions to turn around schools identified for corrective action and restructuring

These are all worthy goals, of course – we might even see some kind of uptick in student achievement. And the feds are asking schools not to pursue programs that involve financial commitments beyond the life of the stimulus funds.

But how will pursuing any of these objectives result in a softer landing when the federal money runs out, and when state and local funds for education are likely far lower than they are today?

More effective and better-distributed teachers may in fact result in higher student achievement (assuming we know how to make teachers more effective – the evidence is thin on that front). But how will that help when the money runs dry and we have to let a lot of those teachers go? I hope some of that professional development includes management of larger classes, because they’re going to need it.

Standards and assessments are also worthwhile, but they won’t reduce operating expenses. Similarly, spending the next two years turning around failing schools will do nothing to ease the impact of significantly lower funding in 2011.

Data systems, on the other hand, could in fact reduce operating expenses, if they’re focused on replacing personnel by automating routine tasks. But there’s no evidence that this is the focus.

You would think that the two-year hiatus made possible by the stimulus bill would involve a mandate for finding cost efficiencies, reducing manpower through improved operations, and otherwise preparing for the inevitable. But there’s nothing anywhere in this bill, or in the buzz surrounding it, pointing to the need for systems reengineering, finding alternate sources of support, or anything else.

So after $100 billion in extra federal dollars washes through the system, and we’re left looking at a steep drop in available funds in 2011, how prepared will we be to deal with it? We’ve been given a two-year reprieve to start preparing; I hope educators are taking advantage of that time, whether or not the feds are asking them to.

"We had no choice"

It's unpopular for politicians to cut education budgets - and when they have to, they'll do a great deal of public hand-wringing about it, as seen in "Cuts mark education policy shift," which ran in the 4/13 Charlotte Observer:

The changes approved last week [ed: specifically, much larger education cuts in the Senate budget than those proposed by the governor] represent a significant shift away from policies to which legislative leaders and Democratic governors have been linked closely over the past 15 years.

“Nobody can deny that,” said Sen. Vernon Malone, D-Wake, co-chairman of the education budget subcommittee.

“We had no choice. We agonized over this, but we had no choice. We had to find the money somewhere.”

Agony aside, it's going to happen more and more. When Malone says that they have to find the money somewhere, he's talking about money for other spending obligations, some discretionary but many mandated. And since states are required to balance their budgets, they have no choice but to cut spending in areas like education.

And in fact, education is about to face two hits at the state level. Not only are states starting to reduce funding for K-12 education, but they are playing a shell game with the federal stimulus money earmarked for schools, as noted in "Schools' money is 'falling off the truck'," which ran in the 4/13 Washington Post:

Educators across the country are counting on a federal stimulus windfall to prevent teacher layoffs and improve schools. But while Washington is giving, some state and local governments are taking away.

After hearing that an initial batch of $11.8 million in federal funds would soon arrive in Loudoun County, supervisors slashed $7.3 million from the schools budget. They also made clear that if more federal recovery money flows to schools, schools might be asked to give back an equal amount of county dollars.

"The money is falling off the truck between Washington and the local schoolhouse," said Robley S. Jones, director of government affairs for the Virginia Education Association, which represents teachers.

This is the new reality - the job ahead of us now is to accept a future of reduced government funding and develop strategies for dealing with it. Since expectations for outcomes are only going to increase, that means finding alternate sources of support, getting better results with fewer resources (i.e., improving ROI), or more likely, both.