The coronavirus pandemic has made us realize — very suddenly — how utterly ill-prepared we are as a nation to handle a major health crisis.
If this had been a military attack by a foreign adversary, my guess is that we would have responded with force and focus. But a mysterious fatal virus? The federal government’s lack of preparation was stunningly negligent, and its confused, contradictory, and belated response to the pandemic could be described as comic were it not for the tragic consequences. Our governors, meanwhile, have reacted in vastly different ways, some forcefully, others casually, and only occasionally in concert with one another. Our body politic is in fibrillation.
In the process, we are grimly realizing some truths about America — and about the fragility of the charitable world.
We are now realizing that 40 years of methodical disinvestment in government has eroded our national capacity.
Since Ronald Reagan’s presidency, we have heard time and time again that tax dollars are inherently wasteful and that government is by nature inefficient and incompetent. This has become a self-fulfilling prophecy. For decades we have dismissed and underfunded schools, public health, and many other services — really, everything other than the military.
We have belittled government employees and, by contrast, venerated corporate leaders and financial titans. We have manipulated the tax code so the rich have gotten ever richer, while vital services to the masses have been neglected. We have replaced career officials (who have expertise) with political lackeys (who have none).
And now, when we need our leaders to take strong, authoritative, and concerted action, the federal government has indeed proven to be inefficient and incompetent — not inherently but by design and neglect. And all these trends without a doubt have been amplified significantly by the presidency of Donald Trump.
We are now realizing that having a health-care system that fails to cover tens of millions of American, and that has created fewer hospital beds per capita than other developed nation, leaves us terribly vulnerable in a pandemic.
Even those nations with universal health care and more hospital capacity have found themselves overwhelmed by Covid-19. But we’ve made things harder on ourselves here in the United States. People without health insurance are reluctant to get medical care and are more prone to diseases that leave them vulnerable in a pandemic. They are slower to seek health care when they develop Covid-19 symptoms.
Beyond the dire medical and economic consequences that places on those individuals, from a public-health perspective having a swath of uninsured residents serves to accelerate the spread of disease. Meanwhile, reducing the number of hospital beds and emphasizing out-patient care may have helped hospitals’ and insurers’ bottom lines in good times but do nothing to help us during a pandemic.
We are now realizing that some of the ballyhooed efficiencies in the way we do business, such as just-in-time delivery, don’t take into account possible disruptions in the supply chain, interruptions in foreign trade, or crisis-driven spikes in demand.
Would it have made sense for hospitals and the nation to have built up a supply of personal protective equipment for our health-care providers? Of course — but that wasn’t seen as a priority or a necessity until it was too late.
We are coming to realize that the safety net to support those in need is badly shredded.
How will unemployment insurance support the millions of freelancers and Uber drivers living by their wits in the gig economy, let alone employees laid off from more traditional companies? (Certainly, seeing the unemployment websites of many states crash has not been encouraging. The system didn’t anticipate more than 17 million claims in three weeks.)
How will the tens of thousands of small businesses stay afloat through the virtual shut-down of their commerce? How will we fund critical support for most Americans after we’ve already blasted a hole in the budget to slash taxes for the superwealthy and corporations?
How will we support workers and families on an ongoing basis if the unemployment rate hits 20 percent, as now seems likely? Many people will fall very hard and, I worry, will not have much help getting back up.
And we’re about to realize how utterly vulnerable our nonprofits are.
Charitable organizations have long been living on the financial edge, but nonprofits’ annual flirtation with an operating deficit seems downright nostalgic now that the bottom has dropped out of the economy. The pandemic is an existential crisis that is likely to destroy many of the charitable institutions that knit together services and culture in our communities.
Covid-19 is affecting nonprofits in the same way the pandemic is affecting nearly all businesses: by drastically altering the way they carry out their work — if they can provide the service at all. Schools and colleges are closed; Boys & Girls Clubs and YMCAs can’t open; nonprofit theaters have canceled their performances; groups that counsel people with addictions or victims of domestic violence or children in abusive homes — well, they can’t meet, or they’ve shifted to Zoom meetings, which frankly aren’t the same thing, even for that minority of clients who have access to adequate technology and a modicum of privacy.
In the process, performing-arts groups are losing ticket revenue, colleges won’t get the tuition dollars they counted on, and virtually all nonprofits are losing income from other types of sales or fees. Nonprofits have been forced to cancel all of their fundraising events for months to come.
Meanwhile, gifts from donors are sure to plummet as millions of us try to come to grips with the human and economic toll of this disaster. Our individual financial challenges translate to a colossal overall drop-off in charitable giving.
Ironically, and tragically, many of these nonprofits are the very organizations that provide the services that are most needed at a time of national emergency.
There is no simple fix for the chaos and calamity that are consuming nonprofits. But there is one action that would help significantly: Foundations and donor-advised funds should spend considerable parts of their assets to save the charitable world.
Calls are growing to put pressure on grant makers to do more, but we also need to urge people who control donor-advised funds to feel the same sense of urgency. After all, DAFs constitute a huge pool of assets that are already committed to charity. Granting from donor-advised funds does not cost the donors a penny, no matter how hard hit they’ve been by the crisis.
Terry Mazany, a longtime community-foundation executive, wrote in the Chronicle that this is the moment donor-advised funds were created for — and he believes they will be a major source of funding to the nonprofit world during the Covid-19 crisis. But will they?
I know that virtually every DAF sponsor is sending its donors encouragement to give to organizations that have been particularly hard-hit by Covid-19 or that are providing critical health- and relief-related services. That’s both commendable and expected. And donors are responding, somewhat. As the Chronicle recently reported, DAF sponsors report that grants are up over the same period last year.
But I take these early numbers with a grain of salt. Even if, as many indicate, grants in March 2020 are two or three times those in March 2019, and even if, over the course of the year, donors grant out, say, an extra 5 percent of their assets compared with pre-pandemic years, the vast heft of donor-advised fund assets — some $121 billion when last reported — remain invested in Wall Street rather than sent to people and institutions in dire need.
Fidelity Charitable recently issued a statement about how its donors had recommended grants totaling $100 million during the first month of the pandemic, and Fidelity was urging them to double that to a total of $200 million in the next month. “Doubling” is an exciting concept, and it gives the reader a sense of impact. But even if Fidelity’s donors do grant out that $200 million over two months, that’s well less than 1 percent of the $27 billion in total assets held at Fidelity as of its June 2018 report.
For DAF sponsors to urge their donors to give “more” is inadequate and does not speak to the enormity of the crisis. DAF sponsors should be urging their donors to channel most or all of the money in their accounts to charities. Is there a DAF sponsor that is saying, “This is the year to grant out 50 percent or 75 percent or 100 percent of your donor-advised fund assets?” In the face of the pandemic, they should. But I haven’t seen evidence that they will.
If the spend-down of DAF assets doesn’t occur, why not? Inertia, tradition, and lack of imagination, perhaps, on the parts of both DAF sponsors and donors.
Certainly, we’re all struggling to absorb the shock of what has hit us, and it may take a while for DAF sponsors and their donors to come to grips with the economic devastation our communities face. But there’s also a conscious or subconscious understanding that the business model for DAF sponsors depends on assets remaining invested for the long term.
No doubt, too, DAF sponsors are fretful about a plunge in asset values, thanks to dropping markets or increased grant making or both, which further threatens their income and business model. DAF sponsors may talk about encouraging generosity, but at some level they are leery of a frenzy of grant making that will leave them with a fraction of their previous assets.
It’s not news to anyone that there is a significant power imbalance between charitable organizations and their donors. Nonprofit organizations are reluctant to say what they’re thinking — that the $120 billion or so residing in donor-advised funds needs to be distributed now for good purposes. If donors have been saving their funds for a rainy day, then I’d argue that this is the rainiest day in the United States since December 7, 1941. Let’s mobilize. Let’s spend all the money in our donor-advised funds. Let’s save lives and save critical organizations. Now.