Episode 48: Government-Nonprofit Partnerships

It’s wonderful to welcome you back to another edition of “Around with Randall. Today we venture into the idea of public-private partnerships and how nonprofits fit into that and how that might be applicable to you, no matter if you're in social services, healthcare, education, things of that nature. There was a recent announcement in the last maybe ten days or so, so just before the beginning of August here in 2021, an announcement that the City of Kalamazoo, Michigan brought forth with a large press conference announcing a $400 Million gift. 

What's kind of amazing about this and caused me to think was is that this was a foundation that was set up in 2017 by two of Kalamazoo, Michigan's long-standing citizens, wealthier that they had given about $70 million in that year, 2017, to help stand up Kalamazoo with some basic services. The intent of the foundation, which is kind of unique, is that the foundation was really set to help lower property taxes to make people be able to better afford homes. Number two, to underwrite major opportunities and things of that nature, and number three was the idea of really attempting to bolster basic services. 

And what this comes down to is Kalamazoo didn't have enough money to do everything it wanted to and in some ways had become depressed in terms of economic survivorship. The anonymous gift that was given - the $400 Million here in 2021 was to further enhance that opportunity. That money looks to be like it will be endowed and will create a regular revenue along with the money that was given in 2017 to total more than 500 million dollars in an account that will underwrite basic government services. 

It’s a little unique how non-profit work, philanthropy, is helping to drive basic infrastructure. That caused me to think a little bit about what does that mean? Are there other examples of this? And these are more maybe localized to my life and the things I’ve experienced but I think about where I live in Omaha, Nebraska, which I champion all the time. Frankly, this type of thing has been happening here for as long as I can remember and I was basically born here. But the idea of public-private partnerships is something that Omaha and philanthropy has driven and now into extreme places, which is i think fascinating. 

Much along the general theory or thought process of Kalamazoo's situation, in Omaha let me give you a couple of examples. The baseball park where the College World Series is played, TD Ameritrade, is a public private-partnership that about 40 of the money came from government sources but the other 60 percent was privately fundraised. For the CHI Center, which is across the street, which is the huge convention center plus the arena, that's that Creighton University plays in much the time was built on that premise of government dollars as well as about 60 to 70 percent being philanthropic fundraising to build it. 

If we go beyond that i think about my experience locally where the superintendent of the school district for which I went and my children now attend struck a deal many years ago that the infrastructure of an education would be paid for by normal either state funding or bonding or tax dollars however you want to look at that but many of the improvements to the co-curriculars - athletics, drama, would come from private funds. The reason i know this is is that I was a very quiet part of my father's efforts as he looked towards getting out of the business world and looking for some fun things to do basically started a foundation where he spent 15 years raising millions and millions of dollars to rebuild the football stadium, to put in a baseball complex, a tennis complex, a softball complex, a new performing arts center at the middle school, all through private dollars. 

If we go to, maybe the area where private-public partnership is the most robust, we don't think about it that way. If we look to higher education, Pew has done some fabulous research on how we fund universities and what they're finding is is that the average student cost, so let's say tuition plus books, rooms, all of that in 2016, about  $5,000, $5,099, so whatever it cost to go to school the first $5,099 was funded through philanthropy in some way shape or form. If we jump to 2020 in, their latest data, $7,345 of the total cost to educate a student comes from philanthropy, and there's an old joke in the world of higher ed that public education for higher at universities used to be state-funded. Then it was state-assisted. Now it's just state-associated. That the amount that the state is funding has decreased dramatically, and when we look inside research, so if we bring maybe academic medicine as well as pure research into our public universities, our higher ed system, over one-third of the dollars that go in for that research comes from private philanthropy. So in many ways, private philanthropy fundraising is elevating higher ed to where it is today. It can be argued that's a good or a bad thing. It's …is that increasing costs are we not being smart all things that are probably too diverse to talk about in this particular podcast and would take way too long.

The idea of this pro-private-public partnership isn't new. I just think it's becoming more robust, more normalized. The first private-public partnership where philanthropy was a major player was actually in 1792 when they built the Philadelphia Lancaster Turnpike. That it was local citizens adding money to the state coffers in Pennsylvania to develop a turnpike to go from a to b from Philadelphia to Lancaster or Lancaster Philadelphia, however you want to look at it. So this is not a new concept but it's adding another layer of priority and importance to fundraising. This is also being driven, as we've talked about many times on this podcast and others have spoken about it at length, and giving us a kind of “owns the space” in terms of data, that fewer people are making a bigger difference, that the number of donors in the United States is decreasing but the amount of money that is being given is increasing, which means fewer people are making a bigger difference. And now you have basic services, basic infrastructure, cities looking to expand or to create opportunity, looking to philanthropy, like Kalamazoo, to ensure they can remain viable because if they can't then there's a decay. And if you take the example of Kalamazoo and you don't have good roads and you don't have good security, or if you take the example and add on Kalamazoo to something like Westside High School in Omaha, Nebraska, and you don't have good facilities you don't have good teachers you have a community that begins to diminish and philanthropy may be part of the solution.

The theory behind this is kind of two-fold. Number one is the idea of contract theory and it's a little bit to do with the law but more about business relationships. The contract theory, which was really started in about 1960 in terms of a business practice, is the idea that it's in creating an implied trust between one, two, three, four parties to accomplish a similar goal where none of the parties can accomplish it on their own. The second is just a pure financial issue. There doesn't seem to be as much money in some communities or in some government entities to function at the level that they want so when you take contract theory and financial scarcity you end up with these unique opportunities. They don't come without criticism. There are those that would articulate that when you add other revenue streams that this is a betrayal of what the government was functioning to do in the first place, that it could be rife with special treatment for people, that certain special interests are served, that the betterment of the whole is slightly compromised because of this new input of resources philanthropy dollars. On the other side of the argument is the knowledge that if it weren't for these revenue sources certain things may not get done. Kalamazoo is going to use this $400 Million, now $500 million endowment with the $400 Million gift to do some pretty basic services. 

What happens if that $20-$30 million dollars a year isn't there? Are fire departments, police departments, roads, basic infrastructure not as robust, not as responsive to the needs of the citizenry? I can't answer that question, but the advocates of this kind of new world thinking that it's actually not all that new world but growing would tell you that we need this stuff and we have to find creative ways of doing.

So, what does this mean for you? So whether you're not, whether you're in health care or education, social services, whatever else, the first thing I would say is that this actually might be applicable to you if your community has holes, and by the way every community has holes. Where are things, most importantly, people, falling through the cracks? Where are there gaps? If you know that there's a gap you might be part of a solution.

Let me give you another example. In Nebraska, at least, they have found that it's better to outsource the idea of child welfare to a third party. Now if you google that you're gonna find that there's been some trouble with it but the theory is is that when you bring on a non-profit third party who specializes in this they can provide a unique specialized talent set experience series of experiences that will benefit the end-need, which is we got to take care of kids. Let me give you another one, Humane Society. Many communities don't have their police manage animal control issues or animal behavioral issues or animal direction in terms of government intervention. Humane Societies have done a fabulous job of setting guidelines and setting benchmarks and partnering with government cities, maybe counties, to enforce those. Where is your nonprofit, its mission, and where the whole is, how do you partner with a government entity?

 So let me give you some thoughts to take away. This is the tactical piece to ensure that you're thinking about it in the right way. So number one is, is it back to this contract theory. You have to have shared goals. The outcome of what we're trying to accomplish has to be the same. If it's not in lockstep this isn't going to work, so start with the big picture. What is it we want to do? What can our nonprofit offer city government, county government, school district, whatever, that is going to support where the organization, the community, the government is going? That's the easy one. The other ones are much more challenging. First thing I would recommend is, you're going to have to reduce egos anytime you get into these situations there can be a power struggle. Who has control? The first part of reducing that challenge is to reduce egos and make this about the outcome not about the people sitting around the table to making the decisions. All too often, and this is why I love fundraisers or at least the best ones, they're not in it for themselves. They're in it for their organization, for the mission. We need to keep that in mind both on the government side and the non-profit side. the second thing is is to create a very clear, very well-defined series of responsibilities. who is doing what ,and no sense of nebulous thought or unsure unsuredness of what's gonna happen next. Everybody has to be aware of what they're responsible for and has to be clearly written out and articulated so that everyone can do their piece in the.. put their piece into the puzzle.

The last thing is is that I would articulate that having bigger goals is critical. If it's something smaller, the nonprofit probably could fill that gap without the government support, but if we take something like the TD Ameritrade here in Omaha, Nebraska, the baseball park where the College World Series is played, Creighton plays there, a non-profit couldn't do that on its own and the government was struggling to justify its expense for something that may not be used all that often. Perfect example of a great public-private partnership. Or if you look at the Humane Society. Huge goal. We want rules as to what animals, how they should be treated, what are the rules to own an animal, that's a huge area if it's not taken care of by the community, and yet the specialization of something like Humane Society can create a defined specific directed series of responsibilities, laws, ordinances, that are are adopted by the community and then enforced by the Humane Society. But all of those things are bigger goal opportunities, big things that need to be done, and it's those big things that make our community better places. 

So the tactical is is to look at your mission, look at the holes, and then begin to figure out how do we share those goals with a government entity, possibly, and then create some clear responsibilities, reduce those egos, share the responsibilities, and make sure that we're accomplishing what we are intending. Kalamazoo, Michigan $400 Million gift is to better serve basic services in the community. Very interesting how philanthropy can continue to make a difference. 

Couple reminders as always if you're interested in further information i'm doing blogs two three a week ninety second reads check them out at the website www.holletphilanthropy.com, or if you wanna communicate with me directly think this podcast or something I said in it as I say, reeks, r-e-e-k-s at hallettphilanthropy.com. Tell me that you disagree or if you have a suggestion for a future podcast or something for me to cover that's info at hallettphilanthropy.com.

I say this each time and I hope people believe it because I do, this is a an amazing profession and if you're a part of it you're doing great things. I can't imagine doing anything else because at the end of the day we're helping people, we're helping our community, we're making a difference through the non-profit to better serve others, which is the true definition of philanthropy. Love of mankind, love of humankind, it isn't about the money it's a byproduct, it's about what we do every day to make the world a better place. 

And that brings me to my favorite saying some people make things happen, some people watch things happen, then there are those who wondered what happened… an old Gaelic saying. Philanthropies in the business of making things happen for people who are wondering what happened and I hope you feel as if you're doing that every day because if you're working and serving in a non-profit you're changing lives, whether you see it directly or not, it's important and I want you to know that I value it and I hope you do as well. Thank you for your time today. I look forward to seeing you next time right here on “Around with Randall”and don't forget make it a great day.