Excerpts Series: Exploring Public Funding

Let’s begin with a general understanding about public money and what we mean when we talk about it. In general public money is what we think of in terms of tax dollars. We all know that if we’re in business and we’re paying corporate tax there is tax money that’s removed for us. If we are employed individuals then we’re obviously paying some tax dollars — some federal taxes as well as state and local taxes. When we talk about public money from a nonprofit perspective what we’re looking at is: how do we apply to get some tax revenue back into the nonprofit work that we’re doing? When we talk about public money we’re talking about tax revenue at the federal, state and local levels that we might be able to tap into for the work that we’re doing as nonprofits.

The purpose of public money and the purpose of our activities are both for the common good. 501(c)3s (we commonly refer to nonprofits as 501(c)3 organizations)are given tax benefits. This means that 501(c)3s are not having to pay corporate taxes as a nonprofit registered charitable organization because you’re providing public benefit. Nonprofit work is for the common good. When we talk about public money, we know that public dollars are being used for the common good, that’s why it’s collected. The work that we do as 501(c)3s is also for the common good. This is where tax dollars and nonprofits connect — as nonprofits we are seeking public money (used for common good) for the work that we’re doing (for the common good).

Public money can exist both at a federal or state level and can even be at the local level. When we talk about the entirety of public money, we’re talking about it from all three of those public entities — federal, state, and local.

We also know that public money can trickle down. The trickle down means it starts at the federal level — there’s federal money that comes through to the states and then those states often put those out to the local communities. As we consider using public money, we want to look at it not just going directly to the federal, state or local levels, but also looking at how public dollars trickle down because that can provide some other access to monies that we might want to consider when we talk about looking at public funds.

Also with public money, the distribution and how that money comes down really varies according to different priorities. One of the things that we often think about in terms of public dollars is that there are trends to those public dollars. There will be different markets and different priorities that the federal, state or local governments will look at and indicate one certain area or prioritization — that’s how they decide to distribute their funds. One of the tricky things when we talk about public money is — we have to know what they care about, what is on their list of priorities and know that the distribution of those public dollars are usually going to follow those priorities that are set by grantor. Some of the advocacy work that we see in the nonprofit sector — people who do advocacy work — often are the groups that will be really looking at these trends because they care about where those distribution dollars are coming from. This is some of the polarization we see between the conservative government and the more liberal government. Really you can look at the platforms they are prioritizing and you’ll see the distribution of funds. How they distribute those funds and where they put those dollars really go according to their platform priorities. As nonprofits, if we understand that we can look at what the different funding structures are and where those priorities are and look at how they’re going to be distributing funds based on those priorities. Something to keep our eyes on in this work of helping nonprofits secure public money.

There are really four basic ways to get public funding. We will talk more specifically during the training today, but in overview there are:

• Designated funds — these are funds that are designated for certain charitable projects. You might think of Medicaid as being a designated fund. There are specific funds at the federal state and local levels that are designated for certain causes, activities or services. When we look at the work that we do — are there any designated funds that we might tap into?

• Formula allocations — A public funding source that we at CDP often look at is a community development block grant. This would be an example of a formula allocation — funding that’s going to be allocated. There are certain criteria that the public funders are looking at in order to allocate those dollars and they do so by formula. In the case of CDBG, we know that communities that are 50K in population or higher are going to get some CDBG money. Grantors look at the poverty levels, the population and educational levels and then they use a formula that they’ve developed for CDBG. The communities will get a “pot” of money or an allocation of funds based on that formula. When looking at public funding for nonprofits we want to look at and consider what those formula allocations are and determine if there are some opportunities in applying. This is one of the ways that public money gets distributed.

• There are also competitive allocations — these are what we consider when we look at going after public money through a request for proposal, which we will talk about later in this training. These are competitive, which means that the grantor has a pot of money they want to give it out in order to accomplish a certain purpose and many different nonprofits compete to get those dollars. We will focus on competitive allocations largely in our training today because this type of public funding is the most available and accessible funding.

• Line item in the budget — We hear a lot of talk at the federal level about nonprofits that are line items in the budget, which means they automatically get the money every year. Habitat for Humanity would be one of those on the federal level. There’s always a budget line item for them. It is very difficult as a nonprofit that’s working in a community to ever rise to level of being a line item in the budget. These are largely national organizations that have a strong history and advocates who lobby on their behalf, but it is one more way that public funding is allocated by being a line item in the budget.