Opening Statement, Laurel O’Sullivan
Partnering With Government: Opportunities and Realities
Independent Sector Conference, October 21, 2010
Good afternoon. It is wonderful to be here in Atlanta with all of you, and to be here talking about such a critically important subject, the partnership between government and nonprofits. It is central to the work we are doing in Illinois to advocate for a stronger, nonprofit sector, as I’m sure it is for most of you in the states where you work and possibly advocate.
To underscore this point, about a year ago the Donors Forum, released “Partnership Principles for a Fair and Sustainable Human Services Sector” which creates a conceptual framework for re-envisioning this critical relationship looking at contracting as the central mechanism for defining it. However, in Illinois we believe strongly in a 3 way partnership, with philanthropy the third partner at the table needed to leverage its best practices and ability to catalyze change.
Philanthropy bridges the distance between the government and nonprofits; serving one and regulated by the other, nonprofits and government have a symbiotic, yet sometimes adversarial, relationship to one another. As an invested stakeholder in the health of our communities, philanthropy understands the complexity of government, partners closely with nonprofits and is invested in a healthy State that is a careful steward of nonprofit resources and services. Above all philanthropy can navigate these mutual needs, accountabilities and processes while simultaneously de-politicizing the conversation.
So with that as a backdrop, when Pat asked me to participate in a debate on the topic, I was a little confused on where the disagreement might be.
Surely there is more agreement than disagreement on the fact we, government and nonprofits, are interdependent and share a mutual goal to create a livable America. This was the premise forged over 200 years ago during the days of Alexis de Tocqueville that our nonprofits have a vital and unique role to play in empowering the underrepresented in our democracy, amplifying their voice whether it’s through direct services, civic engagement, preserving the environment, or supporting the arts.
Forty years ago this implicit agreement was made explicit under Lyndon Johnson’s Great Society by attaching government funding, which has only grown and expanded under every president since Ronald Reagan. Its premise endures today and includes these, eminently reasonable things that we can hopefully agree on: 1) that we should serve our most vulnerable, 2) that we must do the most with limited resources and 3) that we agree nonprofits are unique and valuable partners because they represent local communities in ways government doesn’t; and the underlying premise of all of this is that 4) we have mutual trust in each other.
To be fair to our government partners, there are many champions within our state who are committed to cutting red tape and making meaningful change. But their job is not an easy one. The system is not so much a system, as a haphazard quilt of delivery mechanisms. It is highly complex and technical, driven by laws, lawsuits, and codes, and is a reflection of programs haphazardly layered upon one another over decades.
For example, IL has one of the most fractured service delivery systems in the country. Disinvestment over many years, an overly complex and nontransparent contracting system, and a failure to back priorities and commitments with funding are longstanding problems, now exacerbated by a severe economic recession. In Illinois, funding for human services has been flat since 2002, and simply to keep even with that year would have required an additional $4 billion in investments.
The Urban Institute released data this month on the human service contracting system nationally. It showed that Illinois is leading the nation in late payments to nonprofit providers, and number three for changes to contracts and not paying the full cost of services.
So, while I’m not sure any of us in this room would disagree with the earlier 4 premises on which the current partnership is based, somehow the interests of the sector are being pitted against those of the State. When it comes to making difficult decisions about what to fund in Illinois, as in many other states, budgets are often balanced on the backs of service providers because the recipients of these services don’t represent the same voting block or draw down the Medicaid dollars in the same way education and health care do. Nor is this sector perceived to be an integral part of the State’s economy or a critical structural pillar – which it is.
In Illinois we desperately need to revisit the premises of the Great Society to repair what has failed. Our state simply doesn’t have enough revenues to pay its bills. We have one of lowest tax rates in the country. By failing to balance revenues with expenditures, lawmakers have turned their budget problem into a cash-flow problem, pushing decisions of how to spread the state's fiscal pain to the governor’s budget office, which prioritizes payments, and to our state Comptroller who writes the checks.
The state’s huge pile of unpaid bills doesn’t show up as borrowing on its balance sheet, but that’s essentially what it is. Illinois pays only minimal interest for late payments, and that money comes well after it cuts checks to its vendors, service providers, universities and school districts. So the state is essentially taking out low-interest loans from nonprofit contractors, making them “involuntary lenders.” Those “loans” as of a few months ago amounted to $500 million for the first 6 months alone, due to over 2,000 nonprofits.
In Illinois we need leaders who can see beyond the next election cycle. To quote our soon to be former (note he is not running for reelection) Comptroller Dan Hynes: “It is time for our State’s leaders to recognize that the public service community and its hundreds of thousands of employees is not just an essential purveyor of critically needed services to our most at risk population, but is a significant element of our state’s economy.”
That fundamental economic benefit of the nonprofit sector is what remains invisible to many of our state officials, as well as the public:
· the Congressional Research Service recently reported, nonprofits employ more than the construction, finance, and insurance industries combined
· nonprofits collectively spend billions of dollars annually by paying rent on their office spaces, purchasing office equipment and supplies, and other goods and services from for-profit businesses that further fuels the economy
· through their labor, the nonprofit sector facilitates the circulation of money through local economies – by the provision of elder home care, a working son or daughter is able to maintain stable employment, pay state and federal taxes, acquire and maintain housing or healthcare, purchase goods and services from local vendors and contribute to the economic, as well as the social, health of their neighborhood.
Rather than draining the economy, or enabling others who siphon from it, the nonprofit sector is productive, contributing to the capital of our society and the sustainability of our communities.
Toward a solution
But all these benefits of the nonprofit sector depend on a re-envisioning of what a new social compact between government and providers might look like. In this new vision, blame can be set aside and mutual accountability can become the norm. I will close with just a few thoughts. Under this new vision, state governments can :
Lead. By making tough, not always politically popular choices. It takes courage to make difficult choices to cut programs while doing lest harm to state competitiveness and quality of life. When policymakers confront budget deficits they often find it easier to cut spending on programs than raise taxes.
And lead by being thoughtful and learning to embrace innovative. In this new environment, old solutions may not apply and new, cross-sector collaborations with philanthropy, business and nonprofits will be critical.
Solutions are not the responsibility of government alone; mutual accountability requires that nonprofits and philanthropy also have skin in the game. Our sector must:
· Act responsibly. The majority of us do our best to comply with government's regulations and laws, but all of us must renew our efforts to comply with contract requirements.
· Just say no. Learn to refuse contracts that aren’t manageable or cost effective.
· Speak up for both those we serve and our government partners. Recognize that government officials often want to work with us to craft solutions; being proactive in communicating sector needs and possible solutions can help put an end to an unwieldy and often dysfunctional system.
· Also, government partners who work with us often do so in the background. A thank you for their hard work on behalf of our sector should be second nature.
In closing, I want us to think about what we want our communities to look like in the difficult years ahead and how this 3-way compact between the nonprofit sector and the State can help make that vision a reality. I look forward to our exchange and learning from you all/audience’s participation.
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