'PhilanthroStimulus': How donors are recharging the US

First, of course, is the steep economic recession and the painfully obvious toll it’s taking on many people. Even with recovering equity markets, unemployment in the US is at historic highs, with low expectation for rapid relief.

According to recent figures, nearly 15% of Americans are going hungry or worrying about where their next meal will be. Community feeding programmes face longer and longer lines – while donations of both food and money are dropping. Credit remains tight, even for sound borrowers, and by some estimates a quarter of American homeowners are behind on their mortgage payments.

Fifty million Americans now lack health insurance, and medical bills are a rising reason for bankruptcy. Just as there are no atheists in foxholes, there are no libertarians in recessions. While many Americans continue to favour a limited role for government (especially in health care), and others question the wisdom of the financial bailouts, few would argue that the public sector has no role to play in easing and shortening the recession. The philosophy that private enterprise and private philanthropy alone can reshape our world is being quietly rephrased.

The second important factor is the Obama administration, which has accelerated a resurging commitment to public service in the US. The Obama Administration is encouraging private philanthropy for donors across the resource spectrum. To spur and enable individual donors with limited resources, for example, the White House has created the website serve.gov to help people volunteer effectively. At the other end of the spectrum, the Office of Social Innovation has been working to build relationships with major funders to build a pool of capital for philanthropy far larger than the $35m to $50m that Congress is likely to authorise.

As a result, many donors whose philanthropy essentially ignored public sector programmes and funding streams have begun to seek opportunities to connect their giving to government programmes combating the recession – what we at Rockefeller Philanthropy Advisors are (almost ironically) calling ‘PhilanthroStimulus’ in a series of briefings for US donors.

Examples include donors providing supplementary funding to city-wide initiatives to provide non-profits with volunteers, or grants to organisations that help people get available government benefits. Some donors see their role as stepping into breaches that government can no longer fill – replacing lost public funds for arts organisations.

More and more foundations are using their endowments to provide loan guarantees, bridge financing, and capital for non-profits that can no longer tap into commercial funding. Investments in community development institutions also increase the flow of capital for housing and small enterprises.

It would be a shame if these astute uses of philanthropic capital fade away when the recession does. Philanthropy is and always will be a fraction of public funds.

What might keep this collaboration going even in good economic times? First would be consistent, concerted and coordinated outreach from governments and multilaterals themselves. Some cities in the US – President Obama’s hometown of Chicago comes to mind immediately – have long traditions of open and ongoing communication among city officials, the community foundation, corporation and major foundations. New York, Los Angeles and Newark also have sound initiatives in place. But in many regions of the US, as well as among some major multilaterals, that dialogue is totally absent, and instead bureaucratic procedures actually make collaboration impossible. Frustrated would-be funders have complained about being required to fill out application forms as if they were seeking rather than making grants. Certainly in the post-Madoff era it’s essential to know whether your funder’s money is real or not, but it’s also important not to build artificial barriers.

In addition, donors – and those who advise them—need to make the effort to understand how public funds flow toward the problems they’re trying to solve, and how their private funding can work in concert. Too often, private funders explore only what other private funders are doing – which means they’re essentially operating in a knowledge vacuum. We should all hope that one enduring lesson of this horrific recession is a stronger awareness of how tightly intertwined government, business, philanthropy and charities can and should be.

Melissa A. Berman is president and CEO of Rockefeller Philanthropy Advisors. www.rockpa.org