September 2002
When VPP investment partner Heads Up, a provider of high-quality
tutoring and mentoring programs to children in the District,
completed its comprehensive planning effort early this year,
it began pursuing a promising new funding stream through
the DC government. Unfortunately, Heads Up has run headlong
into the city’s budget woes. At a time of increased
need, the city has been forced to severely curtail the subsidy
program.
We hope and believe that Heads Up will eventually secure
the DC subsidies. But the sad reality is that thousands
of organizations throughout our region are feeling the pain
of major government shortfalls. The shortfalls are hitting
simultaneously at the federal, state, and local levels,
exacerbating the effects of stock-market-related declines
in charitable giving.
In just the past week, federal budget forecasts have taken
a turn for the worse. As recently as last year, the Congressional
Budget Office estimated that the country would run up a
budget surplus of $5.6 trillion over the next ten years.
By January 2002 the projection had fallen to $1.6 trillion.
Last week, the figure plummeted further, to $336 billion.
In a year and a half, more than $5 trillion in projected
surpluses has vanished before our eyes.
How did so much money vanish so quickly? About 20 percent
of the decline can be traced to increased spending, primarily
on defense and homeland security in the wake of September
11. Another 40 percent is the result of the economic decline
and technical changes in the estimate. The remaining 40
percent is the result of the large tax cuts signed into
law by President Bush last summer.
The state situation is just as troubling. Virginia Governor
Mark Warner managed to close a $3.5 billion budget shortfall
earlier this year, but it wasn’t enough. He recently
told legislators that the budget situation had deteriorated
further and that the Commonwealth would “be forced—out
of necessity—to reconsider what is typically considered
exempt” from cuts, including primary and secondary
education and health care. Meanwhile, Maryland and DC are
facing revenue shortfalls of $1 billion and $200 million,
respectively, and will be forced to make some of the same
Solomon’s choices.
Given these dramatic government shortfalls, private funders
need to think long and hard about how they can help their
grantees and investment partners through this difficult
time—not just with money but also with other forms
of support. For example, funders can and should play a role
in helping community organizations amplify their voices
when government budgets are being appropriated and allocated;
many established philanthropic institutions are already
very good at this, and new funders like VPP can learn much
from them. Funders can also help partners learn how they
can diversify their funding base. And they can make introductions
to business, philanthropic, and government leaders that
could lead to new funding relationships.
There are no easy answers to these funding gaps. But VPP
and other private funders must step up to the plate. Our
help has never been more important.
—Mario Morino
