The following is a conversation between Antony Bugg-Levine, the CEO of the Nonprofit Finance Fund, and Denver Frederick, Host of The Business of Giving on AM 970 The Answer in New York City.
Denver: The business models that we have all become accustomed are changing at an accelerating rate. There is hardly an industry or a sector that is not undergoing an upheaval of epic proportions, and that is nowhere more true than the nonprofit sector. One organization that sits at the very heart of this transformation is the Nonprofit Finance Fund and I’m delighted to welcome to the show their CEO, Antony Bugg-Levine. Antony, welcome to The Business of Giving!
Antony: Thanks so much. It’s great to be back.
Denver: So let me begin by asking you this: How have nonprofit organizations in this country traditionally been financed and what have been their sources of revenue?
Antony: Well, in the very early days of the nonprofit sector, they were traditionally financed by the charity of rich families and cities around the country. That model has really changed over the last 20 or 30 years and most of our nonprofits, when we think about homeless shelters and soup kitchens and especially those nonprofits providing essential services in our community, are largely funded through government contracts. It’s something I didn’t appreciate myself until I started working in the Nonprofit Finance Fund a few years ago.
And so the typical model for most of those organizations is to raise money from city contracts, state contracts, for some people, the county level, and pay for the services they deliver. Those contracts tend to pay less than a dollar for a dollar of cost and they make up the difference by raising money from you all in annual appeals, donations, and private donations. But the basic model is substantial share of their cost get funded by government and that the top off is what the private donors are asked to cover.
Denver: And fees for services on top of that, and that pretty much completes the pie. So let me ask you this: What has been changing in recent years that has been making that model perhaps a little less effective and maybe not up to the task anymore?
Antony: Coming out of the recession, at the Nonprofit Finance Fund, we have been doing a lot. For the last six years, we run a survey of nonprofit financial health. Our motivation was coming out of the recession and asking, “Is this model going to sustain itself?” And one thing it set clear is during the recession, the demand for services go up. So there’s more need for homeless services. There are more people showing up in lines for food bank. There are more people in need for job training and workforce development program. And so the demand for services goes up and that hasn’t stop since the recession ended.
One pressure that is on this model is that many of these organizations are being asked to do more because the needs in our communities are growing. At the same time, the government is a little bit out of gas when it comes to being able to fund a lot of these organizations. And so the dynamic we have is demand has gone up and has gone up every year, and the money available from government and from private donors is not growing at the same pace. And so a model that was always under pressure is now really starting to show signs of cracking.
It is not realistic to expect this system to sustain itself if the major source of funding, which comes from the government, is not paying for what it actually cost to deliver the services.
Denver: And I think even additional pressure is being placed on it by all the new nonprofit organizations out there, so that marketplace is getting very crowded. So what is going to happen to replace, if not replace, certainly complement or augment this model and what is the Nonprofit Finance Fund doing historically and currently in that regard?
Antony: Yes, I think there are two big movements that we’re very interested in. One is a movement that’s partly about advocacy and political pressure to make clear that we have to pay what’s called a “full cost” of service. It is not realistic to expect this system to sustain itself if the major source of funding which comes from the government is not paying for what it actually cost to deliver the services. So, from a political perspective, there’s a movement at the federal level and here in New York and elsewhere to really make clear that government needs to pay the full cost of services and cannot rely on organizations providing services where they lose money and have to make up the difference [in] private sectors. So I think that’s one interesting area.
You mentioned earlier there’s a lot of innovation going on for organizations to find new sources of revenue. A lot of our clients at the Nonprofit Finance Fund will have ideas about starting side businesses as an attempt to try and make money that can cover the cost. Most of our guidance [will tell them] not to do that. We certainly have some clients who have amazing organizations that are able to generate profits and subsidies for their core work by running businesses. It’s not typically something that works for those nonprofits.
And then the third thing, which I hope we’ll get to later, is a much more radical approach to really reorienting our system away from paying for services and instead making clear that we should be paying for the outcomes and the results that those services create. And we really believe that in that transition is something, a very high potential way to change the fundamental problem we have of always trying to get by on a system that doesn’t quite cover its cost.
There is an opportunity to make our system more efficient if we can empower people running organizations like the Center for Employment Opportunities to figure out what they need to do and to spend their money on delivering services that work rather than spending their money on checking boxes to make sure that they’re complying with all those rules from their funders.
Denver: Tell us a little bit about that outcome orientation. We’ve talked a lot about that has been the holy grail that this sector has been looking for for a long, long time, and it seems that we’re getting there in successive approximations but it always seems we fall a little bit short. Give us some good examples of organizations that have been really been able to get to that outcome and used that in a way to leverage additional funding.
Antony: So here in New York is a good example of an organization that’s called the Center for Employment Opportunities. That’s a nonprofit organization that for many years has worked with people leaving prisons and helping them to get some basic job training, get an entry-level job, and ultimately, transition them to full-time employment. The old model of funding an organization like would’ve been for them to go to the government and say, “You should pay us for the number of people we trained.” And in that model, they, as with most organizations, would likely end up in a contract in which the government doesn’t quite pay the full cost of what it takes to do that work, and they rely on private donors to make up the difference. About two years ago, they struck a different deal with the state of New York where they said, “Rather than paying us for the number of people we train, pay us only for the number of people, who after going through our training, stay out of prison and are in permanent long-term jobs.” And so what might sound very simple and perhaps semantic is a profound change in how that organization works. Because they are no longer asking for money for the service they’re delivering, they’re asking to be paid for the results they achieve.
And two things happen in that transformation. The first is that they can actually make a case for the full cost of what those results are because, politically, it’s much easier to pay an organization that actually achieves those results, especially when the organization is willing to take a risk and say, “If we don’t achieve them, we won’t ask for the state’s money,” which is what has happened in that case. But the other really important change is that the relationship between them and their funder has fundamentally changed. Rather than the state saying, “Here’s our money and we’re going to make sure you comply with all the rules we set up and make sure you said you would do what you did,” instead the state is saying, “We’ll make the money available and it’s up to you to figure out how to get the results.”
Denver: That’s refreshing.
Antony: And so, there is an opportunity to make our system more efficient if we can empower people running organizations like the Center for Employment Opportunities to figure out what they need to do and to spend their money on delivering services that work rather than spending their money on checking boxes to make sure that they’re complying with all those rules from their funders.
Denver: And have they been successful?
Antony: That particular project is ongoing and we will know. It is based on similar approaches they’ve done elsewhere that have been successful.
What a social impact bond does is shift the risk away from the state, who will not pay anything unless the project works, to investors who provide the money up front, and if the project works will be paid back by the state with some profit…
Denver: Would this be, I guess, something akin to social impact bonds?
Antony: Social impact bonds are one way to finance this kind of arrangement. So in the case of the Center for Employment Opportunities, they raised $13.5 million from investors who made that money available to them and they will only be paid back if this project works. What a social impact bond does is shift the risk away from the state, who will not pay anything unless the project works, to investors who provide the money up front, and if the project works will be paid back by the state with some profit. So a social impact bond is a particular financing tool, and it is getting a lot of attention. In my experience in this field, nothing has created as high a ratio of a word spoken to “deal is done” as social impact bond. So some of you out there who might have heard about them, they are very exciting and at the Nonprofit Finance Fund, we are working on some very interesting versions of that.
In Cuyahoga County around Cleveland, we invested in a social impact bond that is helping to coordinate services in the emergency shelter systems so that mothers who are fleeing domestic violence or will end up in homelessness can more easily and more quickly be reconnected with their children. The premise of that program is that if we can meet the outcome of getting these families reunified more quickly, it will save so much money in the foster care system that the state will actually be able to pay that nonprofit to deliver that service for the full cost of delivering the service and still save money.
So we are very excited about social impact bonds as one way to finance this kind of arrangement, but it is a very narrow way to do it. There are a small number of organizations who have a level of sophistication operating in a small number of jurisdictions where there is a political will to organize that kind of social impact bond where it’s very exciting. What’s even more exciting are the many more ways in which we could orient our contracts around paying for results rather than this compliance mentality we’re stuck in, which, frankly, creates a lot of inefficiencies and puts a real tax on organizations who are just trying to deliver services in our community.
Most of our clients at Nonprofit Finance Fund around the country are currently in contracts that are about checking boxes, but it’s not what motivates them. I have a client in Philadelphia who runs an early child care center…Her motivation is not to simply babysit these children. Her motivation is that more kids who come through her center go to college than otherwise would…
I really believe that around the country, while most nonprofits are in a box-checking system, they have real aspirations to be in an organization or a business that really produces much better outcomes for their clients.
Denver: I think it also kills the morale of those organizations which are just checking boxes.
Antony: Something I’d say is most of our clients at Nonprofit Finance Fund around the country are currently in contracts that are about checking boxes, but it’s not what motivates them. I have a client in Philadelphia who runs an early child care center. She is paid by the states to keep 3-year-olds to 9-year-olds safe and paid a little bit more if she feeds them and proves she does that. Her motivation is not to simply babysit these children. Her motivation is that more kids who come through her center go to college than otherwise would.
Here in New York City, there’s an amazing homeless service organization called the Bowery Residents Committee (BRC). We helped finance a shelter that they put up in Manhattan. The head of Bower Residents Committee will tell you he is paid to make sure his beds are filled. He doesn’t want to be in the hotel business. He wants to be in the business of ending homelessness. For him, a shift to an outcomes orientation would mean no longer being paid to simply keep those homeless shelter beds filled, but instead being paid for the number of people who come through his shelter who he helps get out of homelessness. And I really believe that around the country, while most nonprofits are in a box-checking system, they have real aspirations to be in an organization or a business that really produces much better outcomes for their clients.
Impact investing is a very simple idea that a for-profit investment can be both a morally legitimate and economically effective way to solve a social problem… Impact investing really sits at the middle and says, “Actually, an investment can be an effective way to help address issues you care about.”
Denver: I can’t agree with you more. Gallup came out with a recent poll and about 70% of all employees in this country are totally disengaged. And when you ask them why they’re disengaged, they’re doing things which they have no reason why they’re doing other than to comply with somebody’s set of rules. But when you give them that sense of independence and decision-making to get outcomes, it absolutely changes everything. Another tool and vehicle that has also generated a lot of talk has been impact investing. And I remember you around the show with your co-author, Jed Emerson, probably back in around 2011, and you had just come out with your book Impact Investing: How to Make Money While Making a Difference. Tell us exactly what is impact investing and has it developed the way you thought it was going to four or five years ago?
Antony: Impact investing is a very simple idea that a for-profit investment can be both a morally legitimate and economically effective way to solve a social problem. And that’s a fancy way of saying that we can make loans to homeless shelters if we want to end homelessness, we can make an investment in a company that is producing a new technology that improves educational attainment of poor kids, as two examples of ways in which we can make for-profit investments where we are seeking to get paid back but are making them for a specific purpose because we want to make a social or environmental problem less problematic. And so, impact investing on one end is a very radical idea because it challenges a sense that we have in our society that investing is just for making money and that people who want to address social problems should be giving donations to nonprofits. Impact investing really sits at the middle and says, “Actually, an investment can be an effective way to help address issues you care about.”
At the Nonprofit Finance Fund, we’ve been making impact investments by that definition for 36 years, and we began here in New York City in 1980 by providing loans to large settlement houses, big homeless shelters who are being bankrupted by their heating oil bills. They came as a nonprofit would at that time and said to their donors, “We need more donations because we need to pay the heating oil company.” Nonprofit Finance Fund was born out of a very simple idea. You don’t need to make a donation to an organization being bankrupted by the heating oil bills, you just need to provide them a loan. And with that loan, they can put a new boiler in their basement, they can put new windows that will trap the heat which will reduce the amount of heating oil they need, so they can afford to pay back the loan because of the savings they have incurred through their investment.
And so, we were lenders and as a lender, we are an impact investor. When we make a loan, we expect to be paid back and over our history, we have almost always been paid back. And yet our clients are able to deliver better services in their communities because they’ve had access to investments. At the same time, we’ve been able to make these investments get repaid, which allows us to run our programs and then also invest in the next organization. And so this is a very important way to take the precious resources we have and make sure they are being used most productively.
Denver: I come across people who are just so excited about impact investing. It is a compelling idea. It has tremendous potential and promise. But every once in a while, you run into people who are a little frustrated that the hype has actually gotten ahead of the actual deals on the ground. Would you agree with that sentiment?
Antony: Certainly. I am impatient by nature and I think those of us who do this work are incredibly impatient about how much work needs to be done to make our communities truly just and vibrant the way we want. And so, I would hate for us to be complacent. At the same time, I do share the frustrations that many people have, that the hype has certainly gone out ahead of the reality and perhaps that’s the nature of this kind of movement.
It is so powerful to see what our clients are able to achieve when we are able to structure investments for them that work for what they need.
Denver: I think it is. I was thinking the other day about that, Antony, and it’s sort of what I think they call the Gartner’s cycle. A good example of that for me would be online education. I remember when it came to be about 10, 15 years ago and all the colleges thought it was going to revolutionize education and higher education, and it really didn’t. People still wanted to go to college. After that hype, you get into this period of disillusionment. But now I’m looking at it, and lo and behold, a period of enlightenment is beginning to come and you see the differences it’s going to make, and I think the exact same thing is going to happen in impact investing.
Antony: Yes. What certainly happened in the last year noticeably has been engagement by large financial services companies in impact investing, at least in setting up programs and starting to talk about it. And that has changed from the last time we spoke. If you look at organizations like Morgan Stanley and J.P. Morgan, the big banks, they are now responding to their clients saying “I want to be able to put my money to work in investments that make a positive difference in my community at the same time that they make money for me.” And the large institutional investors who manage our pension funds and insurance assets, they, too, are starting to get into this, and so there is certainly ever more interest and excitement and, as you said earlier, the challenge is matching that to deals.
In the kind of work that we do and the organizations like the Nonprofit Finance Fund, it’s not easy. It’s a very thin vein we have to mind in which an organization has the financial stability and prospects to be able to pay back a loan and so can be a recipient of impact investing capital at the same time that they are not able to access more commercial sources of money. But I’ll tell you, I would say with impact investing, there’s only three kinds of people: there’s hypers, haters and doers. And the hypers are the ones out there saying this is the most amazing solution to all our problems.
Denver: Right, which is never going to be.
Antony: It’s never going to be. And the haters are the ones saying that this is, on one hand, morally reprehensible, on the other hand, naïve. And then there are the doers. We try to really ground what we say and what we do, and I don’t think the doers can be hypers or haters. Because if you are a doer, you can’t be a hater. Because when this works, it is so powerful to see what our clients are able to achieve when we are able to structure investments for them that work for what they need, so I can’t be a hater. At the same time, it is very hard to make this work. And as we said at the beginning, this is not a system that is awash in surplus. It is a system that is always trying to scrape by with minimal resources. And so in that environment, it’s very hard to make these deals work, but when they do, they’re really powerful. So we are doers and [unintelligible 0:17:19], we really can learn a lot from what’s happening with the experimentations that’s going on out there.
I would say with millennials and everyone else, there is sometimes a naivety in this conversation that in fact we can solve all of our social problems if we just come up with the next for-profit app. The truth is a lot of the work that needs to get done to make our society the kind of place we want to live in does, at the end of the day, require government to fund nonprofits and to provide essential services.
Denver: Well, I know how tough it is to change mindsets and I think you alluded to it before, we have a mindset in this nation where the government and charities take care of social problems and businesses make money. And that bifurcated view, although people may pay lip service to the fact that it needs to go away, it’s really, really difficult, but I do see it happening and I think particularly, you probably see it with millennials, don’t you?
Antony: Certainly. There’s a lot of evidence in polling research. Lots of people are talking about millennials and saying that they are a group who are less inclined to think in what we call the bifurcated worldview, that making money is one activity and then at night or when you retire, you think about doing good. I like to listen to the millennials themselves rather than what people are writing about them, and there are certainly a few inspiring examples of millennials who are starting to have influence in their family foundations, millennials who’ve created their own companies, who from the very beginning are just rejecting these idea that we have to separate how we make money from the good we create.
At the same time, I would say with millennials and everyone else, there is sometimes a naivety in this conversation that in fact we can solve all of our social problems if we just come up with the next for-profit app. The truth is a lot of the work that needs to get done to make our society the kind of place we want to live in does, at the end of the day, require government to fund nonprofits and to provide essential services. And so the challenge is how do we make sure that impact investing is a movement that complements and sits alongside a real conviction and commitment we have to doing the other work that’s required and not thinking we can allow the private sectors to solve everything.
We think the state of our sector is—the word we use is brittle. It is not in the crisis it was in in 2010. There has been stability, but it is stabilizing into a very brittle position. And the challenge we have is, a belief we have at the Nonprofit Finance Fund, that simply making business as usual a little bit more efficient is not going to get us through this challenge of meeting the demand. And so we have to fundamentally reorient our system around figuring out what works and figuring out how we can pay the full cost of delivering it.
Denver: Well, I do think impact investing has helped change the way people look at things. I think before it came along, people never look at the business of doing social good. They had corporate social responsibility, but that was off to the side. Now, you sort of have it really embedded into the business itself. And from there, you have B corporations and benefit corporations. So I know you said that it has gotten people to think differently about what the role of business is in society, so aside from its direct benefit, I think indirectly, it’s changed the conversation. Let’s talk about the overall health of the sector. One of your signature reports at the Nonprofit Finance Fund, Antony, is something which you call the State of the Sector Survey. Few noteworthy things caught my eye. Seventy-six percent of nonprofits reported an increase for demand and services yet over half, 52%, said they could not meet that demand. What’s your assessment of the overall health of the sector? What organizations are struggling? What organizations are thriving?
Antony: That’s a great question and as I’ve said, we started that annual survey in the height of the recession when people are very wary that the whole system was in the brink of collapse. And one data point that’s very important is what you mentioned, that demand for services are going up. Last year, when the survey came out, and the prior year [with] the data it covers, unemployment went down and the economy grew, and the recession is officially over. And yet, our homeless shelters, our food banks, our soup kitchens, our elder care centers, most of them are reporting that the demand for their services is going up.
And this is a very important point for us as a society to appreciate that we are not in a situation where when the economy is growing, somehow the social system gets to breathe a little bit. The demand is going up for a set of structured reasons we don’t have time to get into and it’s not going to go away. That’s an important challenge. And as you mentioned, 52% of the people in the survey said they couldn’t meet the demand and we asked this year “what happens to your clients who you have to turn away?” Some of them are able to get services elsewhere but many of them are not. So when we put all these data together, that’s scary news. The good news in the survey is that we’ve had the best results in the six years of the survey when what percentages of organizations were able to generate surpluses. But these are not surpluses that allow them to replenish the banks. These tend to be very small, just barely break even.
And so we think the state of our sector is—the word we use is brittle. It is not in the crisis it was in in 2010. There has been stability, but it is stabilizing into a very brittle position. And the challenge we have is a belief we have at the Nonprofit Finance Fund that simply making business as usual a little bit more efficient is not going to get us through this challenge of meeting the demand. And so we have to fundamentally reorient our system around figuring out what works and figuring out how we can pay the full cost of delivering it. The challenge is that re-orienting the system takes an investment. We wouldn’t expect a major car company to retool his production lines to go from making diesel engines to hybrid engines without investing in that adaptation.
And one of the challenges we see is we have a system that’s brittle and surviving, but in most cases, most of our organizations do not have the ability to invest in the adaptation they need to invest so that they can reorient in the way that the organization Center for Employment Opportunities has done. They’re a very good example. Millions of dollars of private foundation money went into that organization to prepare them, to give them the capacity to make that change. Now, they have the opportunity to grow their programs and make a huge difference in thousands of people’s lives. But that is built on a commitment by their supporters not just to allow them the least that they needed to just deliver services this year, but actually to enable them to invest in their own capacity.
And so, there has been movement in the last year around the conversation of overhead and whether an efficient organization is one that spends as little as possible outside of the delivery of those services.
Denver: What’s your take on that?
Antony: Our take on that is that overhead is [unintelligible 0:22:59] private funds has been seeing for many years as very bad measure of efficiency because it focuses on the question of how did you spend your money and not on the question of what difference did you make in the community you served. So, on one hand, it’s a very frustrating measure. On the other hand, I absolutely understand why people fall back on it, because in an overwhelming set of options of where we can donate – it’s easy [unintelligible 0:23:24] and you can compare across. And so, we have to, as a system, create the structures that allow us to make a relatively easy comparison of who is doing great work, so that we don’t have to rely on the question of who’s spending the least amount of money on activities outside of their programs.
Adaptive capacity is really the ability of an organization to figure out what it needs to do to be sustaining its services in the long-term and to make those changes.
Denver: Another thing in that survey that caught my eye, picking up on your point, is that when you asked these nonprofit organizations what their biggest challenge was, the number one response at 32% was achieving long-term sustainability. Now, you, Anthony, have maintained that the key to doing this is adaptive capacity. What exactly is adaptive capacity and how do organizations build it?
Antony: Before I answer that, I think there’s another question that’s very interesting in the data. The number one, as you mentioned, what is your most important and pressing priority is long-term sustainability. We then asked “what actions did you take last year” and most of them were about short-term health, and we asked “what are you comfortable talking to your donors about?” and the number one answer was “expanding our programs.” So we think there’s a real mismatch and this is the moment we’re in as a sector. There’s recognition among the leaders of nonprofits that in the long term, we have to change. At the same time, they don’t have the space or the ability to focus on long-term changes because they’re really focused right in front of them on how do we get to the end of the year, meeting as much as of this increased demand as we can and breaking even.
That is the challenge we have as a system. We know we have to change how we operate in the long term and yet we are not positioning ourselves to make that happen. So when we talk about what is it going to take, adaptive capacity is really the ability of an organization to figure out what it needs to do to be sustaining its services in the long-term and to make those changes. And when we work with our clients, I think there are two things people often say that will allow an organization to adapt. The first is “let’s invest in IT.” A lot of conversations, “Oh, well. All we need to do is spend a million dollars on a new computer system.” That’s what we mean. The second one is “let’s give them some financing so that they can cover their costs this year while they’re waiting to change the future,” what we call a working capital.
The truth is there are two other really important elements that all nonprofits need. The first is simply the insights to know what’s currently happening. And we talked about business models. As you said earlier, nonprofit is a tax designation. Just because you’re a nonprofit doesn’t mean you get to not have a business model. Nonprofit leaders need to understand what it cost to deliver their services now and how that’s going to change in the future. So there’s a real intellectual capital need. And the other real need is around leadership. These organizations need the leadership teams and their board to create the space and the will to make these long-term changes, which is incredibly difficult, because these organizations are generally led by people who are passionate about the mission, who see this unmet demand at their doorstep and would move heaven and earth to meet it. Often doing that makes it harder for them in the long term to be successful.
Denver: I think in the nonprofit sector in particular, because of that passion and commitment, people go to work every day and put their heads down and put one foot in front of the other to get the job done. And if there is a sector with leadership that lacks peripheral vision and knows what’s going on in the rest of the world, the nonprofit sector sometimes goes to the top of the list. And again, it’s [unintelligible] nonprofit. There are apps coming out of Silicon Valley, there are social businesses. It’s a changing world, but I think that they’re so much into their day-to-day, just as that point you made. I think it really is a danger. Tell our listeners a little bit about the Nonprofit Finance Fund. You touched on it before, but a little bit about your history, some of the other new stuff that you’re up to.
Antony: We are thirty-six year old now, a community development finance institution. That’s a fancy word for saying that we, as one of our activities, provide loans to organizations who are serving low-income populations. There’s almost a thousand community development finance institutions in the US now. So we really do three things. We provide loans to nonprofit organizations around the country, what we call tailored investments. We also, coming out of that experience of helping nonprofits figure out how to structure loans that work for them, we have built a consulting practice that helps nonprofits and their funders figure out what is going on within an organization and how it can both understand its financial condition and make strategic choices that allow it to expand its programs and become sustainable.
So we have a lending program. We have a consulting team. And then the third part of what we do is what we call accessible insights. We believe it’s very important for us not only to serve our clients but also through conversations like this, those of you who are listening help all of us to understand what it’s going to take to most effectively use the resources we have, which will always be limited to meet the very high aspirations we as an organization have for the society could deliver for all people.
Denver: Well, you certainly play an invaluable role. Let me get you out on this: What do you think of what’s in store for the sector over the next three to five years? Are these lines between the sector going to continue to blur? Are we going to have a big shakeout of the 1.6 million nonprofit organizations? What do you see happening in the next few years?
Antony: We think one of the most exciting and scary ship showing up at the shores of our sector and our clients is the implications of Obamacare and health care reform, not only for those organizations who see themselves in the healthcare business or who are delivering healthcare, but for a wide range of organizations whose work enables people in poor communities to have a better life. So whether that’s an elder care agency, there’s the child care center I mentioned, there are many ways in which the activity of nonprofits helps their clients become healthier. And for the first time, because of Obamacare, there’s going to be money available for those activities that help prevent health problems.
In the past, we’ve treated ill health in hospitals. And so if someone got sick, if someone had diabetes, if someone had asthma, they showed up in an ER and Medicaid paid for it. The shift that’s happening now is Medicaid is not going to pay when those people show up in ERs at the same level. And so the hospitals have an incentive to figure out how they can keep people healthy. And the answer for many of those activities is to work with the nonprofits who are already in those communities helping train families and keeping their kids from asthma attacks or helping to promote healthy food, which is a much cheaper way. It’s much cheaper to get a nonprofit to do healthy food training than it is to pay a pharmaceutical company for insulin. So we believe that health care reform over the next few years is going to start creating echo effects in our nonprofit sector that are only starting to show up and are very exciting, and so that’s one trend we’re watching.
Certainly, how impact investing plays out is a second trend. We, in many ways, have created a huge swell of interest. The challenge over the next few years is building conduits that allow the money of investors to flow into those organizations who really are making a difference in our community.
And then the last thing we’re excited about is this movement toward outcomes and how do you shift the system from paying for activities to really paying for the results that we can achieve in our communities. On that last front, the Nonprofit Finance Fund is very excited to be announcing a partnership with the San Francisco Federal Reserve Bank where we will be working over the next two years with them to promote a national discussion about what it’s going to take to shift our social system around outcomes and being realistic about not just the hype and the theory, but the reality of what it takes for nonprofits on the ground to adapt. We’re very excited to have a range of supporters in that effort including many private foundations as well as the Bank of America Charitable Foundation that are going to allow to bring that story across the country.
Denver: Well, Antony Bugg-Levine, the CEO of the Nonprofit Finance Fund, thanks for being here this evening. It is always so interesting to have you on the program.
Antony: Thanks so much. It’s always great to be here.
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