Is now the time to give up government grants?

At a time when our national government seems bent on converting as many people as possible into government wards through free money and programs, many nonprofits are discussing ways they can reduce their dependency on government grants. 

Historically, the motivation to fund nonprofit ventures by the government has been highly politicized, i.e. the funding mirrored a current administration's own interests and/or motives. Whether that is good or bad is a matter of personal judgment, but it is a fact. 

Savvy nonprofit funding managers watch the trends and new nonprofits spring up like weeds in an abandoned field whenever the focus changes, waiting to access the "new money". 

The problem with that mindset is that when an administration goes out of power, the funding for their priorities usually goes with them. For example, a quick look at the grants.gov website shows many new grant openings related to setting up the health exchanges required by the Affordable Care Act. This legislation is still highly politicized, and remains a target for reform or repeal. If there is a significant change in Washington in the next two to four years, the funding for health exchanges will change as well. The general economic condition of the country is also a defining factor. When times are good, the government tends to commit more funds to grants. When they are bad, the funding goes away.  

The problem facing far too many nonprofits is that their whole existence depends on some level of government funding.  Efforts to reduce their dependency on government funding generally fall far short of replacing the federal dollars, and so the system perpetuates itself.  

At present, the prevailing attitudes in Washington seem to be favoring maximizing the amount of personal and business wealth that can be removed from the private sector and transferred to the federal coffers. With the historical trends in mind, that would seem to indicate now is the time to step up your efforts to apply to any and all Federal offering that you can even remotely write a program to access. 

The problem is, we do seem to have a bit of a problem with paying the government's bills. Grant funding is discretionary spending, and that is currently the most probable avenue for shifting money to pay those bills. The backlash against the current administration's penchant for awarding funding to its favored causes instead of paying down existing debt is growing. As a matter of practical economics, even if the current party stays in power in 2014 and 2016, there may simply not be enough inflow to continue to keep the floodgates of public funding fully open. 

Now is not the best time to change your funding strategies, but now may be the only time you have to diversify your funding sources.  Accessing more foundation and corporate funding and cultivating major gifts could lessen the shock when the Federal funding slows to a trickle.