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Philanthropy

White House, Federal Agencies Invest in Pay for Success Initiatives

A recent blog post from the White House describes some of the ways that the Administration and other federal agencies are beginning to invest in so-called Pay for Success initiatives. Under the Pay for Success model, governments partner with philanthropic and private investors who fund innovative projects with up-front capital that the government later reimburses if predetermined measurable outcomes are met. With this model, government funding is not invested in programming that does not achieve results; but rather in organizations that do achieve successful, measurable outcomes reducing families’ and individuals’ need for future services.
 
Among the examples of Pay for Success initiatives taking root in the federal government are: HUD’s recently announced $5 billion in Hurricane Sandy infrastructure rebuilding, the Department of Labor’s $25 million grant program to improve employability and reduce recidivism among ex-offender populations in New York and Massachusetts, and the Treasury Department’s recently issued Request for Information (RFI) to design a $300 million Incentive Fund to expand Pay for Success initiatives.  Some of these initiatives are part of the proposed $500 million investment in Pay for Success included in the President’s FY2014 budget.
 
If you want to learn more about the federal government’s impending investments in Pay for Success, check out the Office of Social Innovation and Civic Participation, part of the White House Domestic Policy Council.

Funding Opportunity: Connecting Kids to Health Coverage

A new federal funding opportunity to provide outreach and enrollment assistance for Medicaid and CHIP due to changes in health reform is available. You do not need to be directly providing health services in order to apply - the focus is on getting kids enrolled.

Applications are due February 21st. Grants are expected to be between $250,000 and $1 million each; a total of $32 million is available. Details about this grant opportunity can be found in the funding announcement and CHIPRA Outreach Grant website.

60 Foundations Promise Major Giving to Underserved, Advocacy

Congratulations to the National Committee for Responsve Philanthropy for today's announcement:

More than 60 leading foundations from across the country that together give close to $2.5 billion a year in grants to nonprofit organizations promised to dedicate the majority of their giving to benefit underserved communities and a substantial amount to strategies that address the root causes of social problems, the National Committee for Responsive Philanthropy (NCRP) announced today.

Foundations and other grantmaking organizations that have voluntarily signed on to NCRP’S  Philanthropy’s Promise initiative will allocate at least 50 percent of their grant dollars to address the unique needs of the poor, elderly, disabled and other marginalized groups, and at least 25 percent towards supporting advocacy, community organizing and civic engagement to promote equity, opportunity and justice.

The list of 60 participating foundations can be found in their press release.

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Bridging Silos in Philanthropy

The Obama administration has engaged philanthropy and philanthropists to an extent unmatched by prior administrations. This engagement has been evident in programs like the Social Innovation Fund (SIF) and Investing in Innovation (i3) Fund. It is also evident in Promise Neighborhoods, particularly locally where foundations have played a major role by providing matching funds.

While all of this activity has been happening locally, national foundations have also been exploring ways to help. In the fall of 2009, shortly after the national conference hosted by HCZ and PolicyLink in New York, a group of major national, regional, and local foundations assembled to discuss how they could help to support Promise Neighborhoods applicants and the growing movement. One result was to pool some of their resources to support the Promise Neighborhoods Institute at PolicyLink.

With Congress cutting the administration’s proposed $210 million in funding for next year, but most Promise Neighborhoods applicants saying they will proceed anyway, the role of private philanthropy has now become more important than ever. Given this, what lessons have philanthropists learned? While Promise Neighborhoods applicants are breaking down silos, how are philanthropists doing the same thing? And importantly, where do we go from here?

We asked one the nation’s leaders in philanthropy, Ralph Smith, the Executive Vice President at the Annie E. Casey Foundation. The Annie E. Casey Foundation is a long-time supporter of organizations that work in neighborhoods of concentrated poverty. United Neighborhood Centers of America is among the organizations that it has supported.

Building Neighborhoods: Thank you for joining us, Mr. Smith. As you know, Congress has substantially cut President Obama's funding request for the Promise and Choice Neighborhoods program next year. Given this, how do we keep the momentum moving forward on place-based work?

Ralph Smith: Addressing issues of poverty and opportunity in the neighborhoods and communities where people live, work, worship, form families and raise their kids is here to stay. Both as a candidate and as president, President Obama has brought a new level of visibility and credibility to the work that Geoff Canada and his team have been doing at the Harlem Children's Zone.

The reality, however, is that Geoff’s work has a legitimacy all its own.  The story of the Harlem Children’s Zone has generated optimism and fired the imagination of people all across the country, many of whom got to know about the Harlem Children’s Zone because of President Obama.

Last year, a number of funders attended a conference in New York organized by Harlem Children’s Zone and PolicyLink.  Ostensibly, the conference was to afford interested communities a closer look at the administration’s Promise Neighborhoods program and what it would take to win one of the twenty planning grants the administration announced it would make.  What we realized is that the energy in that gathering was not generated by the prospects of a planning grant.  The palpable excitement was the about people taking responsibility for doing something that would dramatically improve the prospects for children in their community.

With well over 100 communities represented at that conference, we knew that only a few of them would prevail and get the planning grants, much less a Promise Neighborhood implementation award. So that would mean that well over 80% of the communities in that room would not get the federal planning grant.  That harsh reality presented a stark challenge to those of us who applaud the intensity of this ground up commitment to community change.  And that was the primary reason why about a dozen funders got together, proposed the Promise Neighborhoods Institute, and decided to have it housed at PolicyLink.

Building Neighborhoods: That was certainly good planning on your part. Let’s talk about the role of philanthropy more generally. What are the national, regional and local grant makers doing? What should they be doing?

Ralph Smith: First of all, the distinctions and boundaries among national, regional and local aren’t as clear as they once were. A number of foundations that are considered national foundations now recognize and practice what we call “hometown philanthropy.” Many of us try to be fairly responsive to the realities, challenges and opportunities facing the communities and regions where we are headquartered.

That said, despite a few notable examples to the contrary, cooperation within philanthropy remains more the exception than the rule.  We’re starting to see more good examples of folks deciding that if we want better results, we’re going to have to find different ways of working.

There are other changes in philanthropy as well.  Many foundations are embracing “evidence-based” grantmaking .  Partnering with the public sector is on the upswing, especially in support of innovation.  So is mission-related investing using endowments, not just grant making.

There are also those areas where progress is not discernible.  There hasn’t been much movement on creating capital markets for social enterprises.  As a consequence, we are left with the odd assortment of ad hoc arrangement to incentivize and reward performance.

There is still no concerted effort in philanthropy to find a solution to retirement insecurity. So we have people who have spent their entire careers going work in the non-for-profit sector and cannot afford to retire, long after they would prefer to and know they should.

Building Neighborhoods: You mentioned that the Obama administration has been playing a role in promoting a partnership with philanthropy. What are your thoughts on that? How well is it working and what is the role that philanthropy should play, as compared to government?

Ralph Smith: I think that Mayor Bloomberg got it right when he said that there are things that philanthropy that can do, risks that philanthropists can and should take, that public officials with public dollars should not. As a general rule, it makes sense to target public dollars on the tried-and-true, where there’s the best evidence, where the investment of those dollars will really make something work.  On the other hand, it also makes sense for government to prime the pump and to find ways to encourage innovation and the search for innovative solutions both inside and outside government.  The administration is seeking to do both.

What philanthropy can do is come to the table, with resources in the form of flexible dollars, experience and intellectual capital, and even more importantly, with the independence and freedom needed to experiment and then offer up advice and guidance. It’s a unique contribution, and if those of us in philanthropy can figure out how the public, private and social sectors could to cooperate and collaborate to solve big problems, we would have made quite the contribution.

Building Neighborhoods: You mentioned “risks that philanthropists can and should take,” but given that risk sometimes means failure, does philanthropy deal well with failure?

Ralph Smith: I think that very few of us will say truthfully that in any aspect of our lives we deal well with failure.  Failure is not seen as okay even in the venture capital world, where failure is accounted for in the risk/return calculations.

In any case, there is increasing evidence that philanthropy is learning how to learn from what does not work and why.

Building Neighborhoods: They say sometimes you learn more from failure than from success.

Ralph Smith: That is said usually by folks who fail.

Building Neighborhoods: (Laughs.) Good point. Moving on, let’s talk about the power of ideas. There are ideas behind Promise and Choice Neighborhoods. What are the ideas that attracted you as a philanthropist to these programs?

Ralph Smith: I do think that there are compelling ideas undergirding the work, but I think what drew most people was that it seemed to be working. The Harlem Children’s Zone is seen as an effective, high-performing institution with great leadership, stable over a long period of time, and constantly aspiring to be more successful in producing results for children. Those are the qualities that were attractive long before the core ideas were manifest.

On a closer look, the notion of long-term efforts to engaging the lives of young children and providing them a continuity of support throughout their early years, the early grades and into high school and beyond is a powerful set of ideas from which it is hard to depart. This notion that community led effort can disrupt intergenerational poverty through a long-term commitment to educational success for young children is a powerful and compelling idea.

Building Neighborhoods: You mentioned a focus on young children. I understand that the Annie E. Casey Foundation has another initiative that has drawn your interest and others, and that is achieving grade-level reading. Given that our audience is really focused on placed-based work, do you see those two sets of work overlapping? If so, then how?

Ralph Smith: (Laughs.) Knowing my colleagues, they’d probably suggest that you would have to work hard to get me to talk about anything else. As it turns out, there is considerable overlap.

Undergirding the HCZ work, the Promise Neighborhoods work, and the Choice Neighborhoods work, is the often unarticulated and unacknowledged, but ever-present reality of poverty. Not just the new poverty created by these uncertain economic times, but the persistent intergenerational poverty that is so predictable for so many kids from they day they are born. That poverty that attaches to so many newborns is so at odds with our identity as an opportunity society is uncomfortable thing to acknowledge, admit or even discuss.  So many of us resort to euphemisms and put our energy into programs and the fixes and hope for the best.

Poverty is in some respects so overwhelming. It’s not only embarrassing to the nation, it’s embarrassing to the people who live in poverty. It’s embarrassing to the people who live near poverty, and it’s embarrassing to the people who think about it, so nobody wants to talk about it. It’s like Voldemort – that which should not be named.

The reality is, however, we have to commit more explicitly to the disruption of intergenerational poverty.  We have to name it in order to set the stage for the two-generation interventions that will help parents, caregivers, and adults succeed in the economy today, with all the limitations, burdens, and extra support that this might require. And it will mean doing what we must to ensure that children succeed in school, to graduate and to obtain post-secondary credentials.

Placing a premium on high school graduation means an all-out effort to reduce the dropout rate. To do that, we need to have kids reading on grade level by the end of third grade. The research is very, very clear that kids who read on grade-level by the end of third grade, on the whole, tend to make it through, and kids who don’t read on grade-level by the end of third grade, on the whole, tend to drop out.

Building Neighborhoods: Annie E. Casey has done a lot of other work, too. It has put its money where its mouth is, so to speak, by investing in place-based initiatives over the years, including New Futures, the Rebuilding Communities Initiative, the Making Connections sites, and Civic Sites, including long-term investments places like East Baltimore and Atlanta. What are some of the major lessons learned from these efforts that apply to Promise Neighborhoods, Choice Neighborhoods or similar place-based efforts?

Ralph Smith: Thanks for the compliment.  The fact is that many of the “lessons” were learned the hard way.  My colleagues and I probably would have at the top of the short list a lesson that has turned into a conviction:

One, it is important to focus simultaneous on both the people strategies and the place strategies to build human capital of families and physical capital of the place.

Two, it’s also important to identify the economic engine that will produce the jobs and the entrepreneurial opportunities that will allow people to function as productive adults. Without wage earners and income sharers in society, the place is not sustainable.

Three, quality schools matter to everyone in every way.

Four, family mobility, especially when driven by housing insecurity, is a major disruptive force and can undermine even the most carefully crafted plans .

Building Neighborhoods: As a nonprofit advocate for place-based work, I am going to ask you a bit of a self-interested question. Beyond direct investment and technical assistance, can you talk a bit about how important advocacy is to achieving the reforms we need for Promise Neighborhoods and other place-based programs?

Ralph Smith: I want to quickly acknowledge that advocacy is enormously important and essential.  The best programs and best practice even combined are overwhelmed by bad policy.  And in the absence of policy reform few demonstrably successful solutions can be scaled or sustained.  So policy advocacy matters—a lot.

That said, in my view many of us have adopted much too narrow an approach focusing almost exclusively on the policy advocacy that involves decision makers in Congress, state legislatures and city councils.  And we tend to magnify both the successes and the losses.  Even when successful, too many of us drop the ball and under-attend the processes that translate the laws into regulations, only to find that the regulations significantly diminish the scope of the “win.”

When it comes to national policy, this is aggravated by the fact that too few advocates have the capacity to follow and monitor the 50 state roll-out to prevent the dilution that is the risk of devolution.  And at the point of implementation, even more advocacy is need to ensure that the most vulnerable populations and isolated communities are not left out, passed over and left behind even when they were the intended beneficiaries of the “win.”

So, we need advocacy, but we need advocacy that’s significantly more robust than the kind that we practice.

Building Neighborhoods: In your explanation you split advocacy into different levels – national, state, local, and even individuals who are active in their communities. You’re talking about advocacy on several different levels there. I wonder if different kinds of foundations could play a role at each of those different levels, and if so is it different from one level to the next?

Ralph Smith: A significantly more rational approach would require philanthropy, and the sector as a whole, to behave in ways that would seem quite foreign to us. We’d have to talk to each other, we’d have to cooperate, we have to have opportunities for linkages and hand-offs. But that’s not the way we in philanthropy tend to behave. If we’re going to take advocacy seriously, we need to change our practice so we become more effective. Right now, it is unconscionable what we allow to happen after the “win.”   A not perfectly apt analogy could be the observation from the military that the question is less whether you can win the war but whether you can win the peace.  At present, we do a horrific job in winning the peace.

Building Neighborhoods: It almost sounds to me like you’re saying that foundations and philanthropy are operating in silos. If so, do we need a bit of silo breaking in the foundation community? How does this happen?

Ralph Smith: Now you’ve really come to the question! You must be a real trouble maker (laughs). A few years ago I wrote a piece that cited Walt Kelly’s Pogo that “we have found the enemy, and he is us.”

In many respect, the practice of philanthropy resembles and reinforces silos in so many different ways. It’s not a question of ill will. Sometimes it’s just that we want to test a particular intervention.

The way we compartmentalize the world seems to make sense of the world, given our respective missions and priorities.  Unsurprisingly, our grantmaking tends to encourage our grantees to pay attention just to their particular corner. Because we have resources with which to make our own decisions, we rarely feel compelled to negotiate with each other and routinely miss opportunities to coordinate, cooperate, collaborate or at minimum align our efforts.

This changes only when we step back and ask “what’s the result we are trying to get?”  When the result sought requires the solution to a real, pervasive problem (which we’re not always forced to do), we come quickly to the conclusion that we can’t solve that problem alone, nor can we solve it just with grants and grantees.  Assuming that we do not shrink the problem to make it “manageable”, we have to ask “whose help do we need to solve this problem?”   It is at that moment that philanthropic practice becomes potentially transformative and more about building bridges than about reinforcing silos.

Building Neighborhoods: It sounds to me like Promise Neighborhoods and Choice Neighborhoods might not only have a positive impact on communities, but quite possibly also the world of philanthropy itself.

Ralph Smith: Absolutely. Those of us who met in New York demonstrated an authentic response. We were in the moment, feeling the energy in that room. We came together before leaving the building and said “we cannot let this energy dissipate by having most of the applicants who are not approved think they are losers in the federal effort.”

The question we faced was this, what can we do in philanthropy to maintain the momentum? Notice this is a “we” question. We had to do this together because none of us had the reach, the resources and credibility to maintain the momentum alone.  This is one of about a dozen plus collaborative efforts driven by a shared sense of urgency around a big problem.  Living Cities, the National Workforce Solution, State Fiscal Analysis Initiative, BUILD, Scaling What Works and several others are the forerunners of a new philanthropic practice.

Building Neighborhoods: Well, let’s hope that this is the dawning of a new day. Thank you for joining us.

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by Dr. Radut