The Game Goes On

A decade or so ago, when I was still a management consultant, a call came in to our office one afternoon from a social service agency we had done some work for in central California. The Executive Director was very excited about the potential for qualifying for grant money under Proposition 10, the California Anti-Smoking initiative. Fund development – and specifically grant writing – was a major part of our practice at the time, and the opportunity to develop a grant application for a client would generally have been a very welcome thing – except that the agency in question didn’t do that. They didn’t run smoking prevention programs, or even help people to stop smoking; they were a teen pregnancy prevention and education agency…

When we told the Executive Director (as gently as possible) that his agency didn’t do anything that could be paid for under Prop 10, and therefore would not be considered for grants under that budget, it didn’t seem to faze him in the slightest. “Oh, that’s all right!” he exclaimed. “We’ll just make something up!”

I’m still not sure what kind of spurious logic they would have come up with to qualify for such a grant (smoking during pregnancy is extremely unhealthy, of course, but the agency was already trying to prevent their clients from becoming pregnant); we managed to explain to the Executive Director that applying for funding that is not appropriate to your agency/program is a waste of time and money, and in this case they’d still have to pay us for writing the application if the grant wasn’t awarded. What makes this story worth repeating is that this specific strategic error (we used to call it “chasing the money” in our practice) is probably the single most common mistake you will see in the nonprofit sector, where agencies all too often waste their time and resources applying for grant funds they have no chance of receiving. Well, that and the fact that half of the States appear to be making the same mistake with the national foreclosure settlement funds…

You can pick up the original story on the Huffington Post Business page if you want to, but the basic idea is that a portion of the settlement reached on the foreclosure crisis is discretionary, meaning that the different states will be sharing $2.7 billion in funds that they don’t, technically, have to spend on foreclosure-related costs. Since this money is arriving at a time when a number of state and local governments are trying to deal with massive budget deficits (and possible bankruptcy), a number of them are considering using these funds for more immediate needs – much as they did with the tobacco company settlement funds a decade or so ago…

Now, I’m not suggesting that the states shouldn’t be given the discretion to spend their discretionary funds however they want. And I’m not claiming to be an expert on public policy, especially state-level fiscal policy. But if history tells us anything about economic crises, it’s that you can’t save your way out of them. Using those funds to help people who are being foreclosed out of their homes (their actual residences, not investment properties or vacation homes) should, in theory, return several times that many dollars into the state’s economy, whereas spending the same amount of money to reduce your budget deficit will get people writing unkind stories about you on news sites and convince your constituents that you don’t care about them – and it won’t fix your state’s economy anyway…

I can’t really fault the governors – or other local officials – for wanting to spend any available discretionary funds on balancing their budgets; in an economic crisis the natural response is to concentrate funds on the immediate expenses. But if two unknown management consultants in a small office in Santa Monica can tell you why this is a bad idea, it’s hard to believe that no one in any of the applicable state capitals has brought this up. Let’s just hope somebody is listening…