Saturday, December 15, 2007

A Study In Non Profit Deficit Financing

It has been widely reported (here/here/here) that the state Republican party has seen better days. Most soundbites sound something like this:

In the last year, the party has plunged deeper and deeper into debt.
The party has become less and less relevant in Maryland's political landscape.
We have completely inappropriate involvement of key GOP staffers in the removal
of a duly elected County GOP Chairman. We have a party that was virtually
absent during the most recent special session. And we have budget issues that
seem to be only the tip of the iceberg.

And things seem like they are only about to get worse. Sources tell me
that Jim Pelura has virtually cut off the entire Executive Committee from
the day-to-day operations of the party. They also tell me that Pelura is backed
only by a small fraction of Central Committee leaders.
The thought that any donations made to the party would be spent on debt service, rather than helping candidates, doesn't sit well with some Republicans. Jimmy Braswell has talked of organizing an entity to receive donations that would be entirely and directly allocated to candidates, and the maligned Citizens For Better Government PAC seeks to raise and disperse nearly half a million dollars for the next election cycle.

Political parties, PAC's, and other electoral organizations operate very similarly to the children's charities you see on television. You know, the ones that promise "$.85 of every dollar goes directly to our cause", and so forth. If the Maryland GOP had to make the same quote, it would be "$.06 of every dollar goes to funding political efforts"!

However, the mentality of how non-profits operate may need revision. Note an excerpt from a recent survey in The Economist:

Arguably the biggest problem is the way that foundations make grants
to organisations they support. Whereas Carnegie was willing to invest for the
long term, more recently foundations have tended to chop and change, says
Mr Fleischman. Melissa Berman of Rockefeller Philanthropy Advisors argues
that there is too much emphasis on funding individual programmes and too little
on the sustainability of the non-profit organisation running the
programme.Overheads are seen as a bad thing, and grants tend to be short-term.
The point to consider is the goal of such organizations--to maximize total philanthropy, not efficiency. Let's shift focus to the MD GOP. Pennies per dollar being spent on political activities may not be the best indicator of successful the party is. That said, 6 pennies per dollar is not a very favorable number at all.

So how do we fix it? The first step is to focus on the state party organization. The party has existing name recognition, infrastructure, and networks. Groups such as Citizens For Better Government are simply wasting resources by re-inventing the wheel and trying to persuade why their group is the proper conduit for electing Republican candidates. If we are unhappy with leadership, we need to change the leadership--not challenge the organization.

For the long term, the party would do well to adjust its mindset toward long-term thinking. Politics tend to be cyclical, and political donors fickle. Rather than spend all the money received, it would seem wise to invest that money for profit. Why not?! Defenders of the Republican party today argue that money is always going to be tight after such a sweeping political defeat. Yet, avoiding another sweeping defeat is contingent upon recruiting candidates for the next cycle. If the party could liquidate invested assets at times like these, thereby ensuring continuity in its efforts, the mission would be better served.

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