Common Waters, Diverging Streams

As I am sure someone much wiser than I once said, “There are lessons to be learned from tragedy.”  So, I hope nonprofits all around the world are watching what is happening in Pennsylvania. 

Pennsylvania is almost two months overdue in passing a state budget.  Until last week, state employees had not been paid since the start of the new fiscal year.  Vendors have not been paid since the start of the new fiscal year.  And the emergency budget that was passed last week only opened up the bank to state employees, not to the vendors. 

Many of the vendors who have not been paid for almost two months now are nonprofits who have state contracts to do a variety of things, from jobs training and GED classes to helping abuse victims find shelter to feeding the elder and home-bound.  Many of these organizations are used to the state not passing the budget on time and, thus, are used to a tight July.  They know how to handle that without too much, if any, disruption to their work.  But a tight July and August, with the possibility that this budget stalemate will malinger into September?  This, they are not prepared for, and it is showing.  If they are among the lucky organizations, they are surviving by dipping into reserves and/or tapping a line of credit.  If they are not among the lucky, they are doing all of that as well as laying off staff, closing down programs. 

Terrible, right?  Absolutely, no question about that!  But how much of this did they bring upon themselves?  Quite a bit, I’d have to say.  When, as is the case with many of the organizations currently suffering, they rely on the government to supply 90 percent of their budget, they have brought their current distress on themselves.   

No organization is in a safe position when the vast majority of its income comes from one source.  Organizations that want to be to fiscally sound, that want to be able to weather bad economies, shifting funder priorities and timelines and the other vagaries of raising money must have diversified income streams, relying on as many of the streams available to them—foundations, corporations, government, individuals, and earned dollars—as possible.  And within each stream, there must be diversification as well.  Then, if one stream goes dry or there are shifts in priorities by members within a stream or in a whole stream, the organization still has significant dollars coming in from other sources to carry on its business. 

Having a successful and sustainable diversified funding stream requires an awful lot of work by both board and staff—much more than if you simply have one source of income.  But how much work does it take to decide which of your vital programs should be cut or closed down?  How much work does it take to decide if the organization can survive and still be here next month or next year?  And it takes more than just work to turn away an abused woman or a hungry child or a homeless family. 

So, let’s learn from the tragedies of this budget fiasco and take a pledge to never allow your organization to be in the position of facing the possibility of closing because of something you didn’t do but should have done.  Diversify now.