Speed Kills- A Discussion on Philanthropy and Moving Fast While a Door is Open
You have to move fast as the the opportunity window will close fast...
The last of my Sunday Installment. I apologize. I did not think I would be writing this much, but it is flowing and when you write, you know there are windows you have to go with. I promise, this week should be quieter.
The fun part about dictating the pace is you have to keep going. The hard part is you have to keep going, keep iterating, keep pushing.
Speed kills in politics. It can kill you moving fast or it can kill those not able harness the speed. Speed is a loss of control. It scares Power Players. They do not like to go fast. You might miss something. However, you can pick up the pace if you want to move things along if you have a clear objective. Throw curveballs at us. We will hit them. Initiative is key in battle military folks will tell you. Do not lose the initiative. We have initiative right now. We have the ideas. We have the path. Let’s keep going.
What we are doing here is moving the conversation and waiting for the “establishment” to figure it out. They are using our words. They are looking at tools like CRA. They have not gotten to the “how” yet. The “how” is the hard part. Let’s push the envelop. Let’s put our foot on the gas. Let’s try and bring along the hardest part- philanthropy. We can do it in ways nobody is expecting, and unlock funds at a level few can imagine.
When we started this Stack, it was about driving the conversation. After we got that going, now we have to keep moving ahead to “drag the stone” so to speak. We got people seriously talking about CRA. We got them talking about AB 797- the mechanism. They are talking about buying land with nonprofits to preserve values for the vulnerable. Great we got to step 1.
Now we are discussing the “how” of the rebuild. How can we use CRA to rebuild? How do we find other tools? Let’s start discussing things relevant to those in Power.
They want certain things, and so do we.
Where is the common ground? Opportunity Zones? Makes sense. We know how it is scored budget-wise. Can we use those ideas to get more funds to rebuild our disaster area? We just moved where no one saw us going. We found the way to get there for that one.
But is there another angle we can take to continue to grow the pot of “no money” before January 7? We can keep unlocking new funding sources. Remember, it was all CDBG-DR and State funds then. Let’s keep unlocking more.
So, the question is what about philanthropy? Philanthropy is a big part of the funding stack, but they are also some of the most hide-bound. They have so many different pressures we cannot imagine, so how do we combine their concerns with the federal questions/dynamics at play? We need to de-risk philanthropy. But what if we can shift the risk elsewhere or to “lost money?”
As we said last week, philanthropy is concerned about excise taxes on the largest foundations. For most of the larger foundations, there is talk about increasing their excise tax to 5% for $250 million to $5 billion in assets and 10% over $5 billion. Philanthropy is a key to moving the needle for reinvestment in our capital stack and beyond, but they are reticent to move ahead. What if we could invest their excise taxes into things like Opportunity Zones for broader goals, especially if we can use it in disaster areas at first and then underserved communities thereafter? What if the increased excise tax with a tax credit is the way for local governments facing a threat to their funding structure to transfer costs off their books (looking at you City of LA and State of California) by ensuring certain philanthropic efforts funded CBOs otherwise funded by City/State budgets? Wow, we just took a disaster in Altadena and broadened the scope considerably, changing the way the Game is played.
Here is the best part, we have proposed language for disaster areas and know how we can make it “revenue neutral” for disaster response. Could we do the same for the proposed excise tax? Of course we can. Essentially we can give the proverbial “win, win,” and maybe even a third win. R’s can claim they are cutting the budget. Philanthropy is just rearranging the funds they otherwise put in their corpus into a new funding category. And, most important, municipalities can leverage such efforts to build and invest in economic development, which they otherwise are facing a drought with, or even get more money than they had before the changes envisioned by Washington. Change brings opportunity.
Thus, if you are going to “eat” a tax increase, why not make it so you direct the funds to support your mission?
That suggestion makes too much sense. To actually realize the suggestion being a reality, we have to move fast. We have a bill winding through Congress. We have a chance to do what is going to be best. Give people something and get something more in return. You know what to do, so why fight it? Because it is different? Because it is not “how it is done?” So what. Things change. Move fast and strike hard. Change is where opportunity is. Fulfill your mission. Take on the challenges of tomorrow by setting up the funding right. I know, easy for me to say. But is it really?
Imagine how much additional philanthropic capital we can unlock if we get the suggested changes? Imagine how much more “locked in” the “interests” get as the funds are used to invest in societal building functions for efforts like Opportunity Zones. They are much stronger as a result if you do it right. You think they can cut those funds ever again? You think the federal government reinstates Block Grants when we are unlocking 5x that amount? Would there ever be an ask for unlocking those funds? Maybe for rural. Maybe we find a way to expand philanthropy to incentivize rural development. We are imagining a new funding mechanism and philanthropy sits at the center of it all. It is a new “king maker.” There are some in philanthropy who might like this new role.
Think about it this way, if LA had $500 million in excise taxes available to distribute, or even 1/2 that from its largest foundations, and we could apply those funds to Opportunity Zones and investments in specific projects which can catalyze growth in communities, why would we not? Even at $250 million, that is 2.5-4x what we get in CDBG (for community development) money from the federal government and without the “overhead” associated with managing such projects.
Oh, and if it makes money, if the social enterprise generates revenue, then there is a return to the community on that money invested, increasing the opportunity to invest in communities down the road. It is a recurring investment instead of one time grants. Why would we not then renew the opportunity for another round?
Sometimes you win by losing.
Lean in and think differently.
Move fast.
The door is open.
Go.
Get the Opportunity Zones for disaster areas. Get it for philanthropy. Get it for our local governments. Get it for the mission. Get it for what the future could look like. Let them charge you an increased tax. Who cares? If you can still distribute the funds and get a return on it, it is better for the mission.
It is all about how you see things.