Nonprofit Funding and Community Foundations

In Pennsylvania, we’ve recently seen the failure of our state’s political leadership become a threat to many local nonprofits that provide much-needed assistance to our friends and neighbors. The governor and the state Legislature have not yet agreed on a budget, which has frozen funding for nonprofits that depend on those dollars. Some nonprofits are almost entirely dependent on state funding for their operations. Others operate with little or no state funds. Which organizations will be affected, and how badly they will be affected, will depend in part on how long the impasse in Harrisburg drags on. Nevertheless, in prior budget impasses, the challenges to local communities have been significant.

When a state government fails its constituents, it is up to communities to sustain those in need. That’s where community foundations come in.

To begin to address this crisis in our region, Berks County Community Foundation partnered with a community bank to create an innovative approach that could ease the pain for a small number of local nonprofits. The bank agreed to lend the Community Foundation up to $2 million through a line of credit at a very low interest rate. We, in turn, will lend that money at the same rate to nonprofits that are not receiving their regular state funding. There will be a limit of $200,000 per organization. Repayment will be due within 90 days of the budget being signed. This is not meant to be long-term financing for nonprofits and it is not a grant program. It is available only to organizations exempt under section 501(c)(3) of the Internal Revenue Code and is not available to government agencies.

This is an unprecedented action by our Community Foundation. To my knowledge, it is unprecedented for any community foundation.

This accomplishment took a considerable effort by our staff and board to find the right bank to work with us and to draft the financial terms that would make this new program work. But they persevered and did it. We then used our database of contacts at local nonprofits to notify them directly about this opportunity. Once that was done, we used our media connections to help spread the word.

Only a few weeks after the budget crisis began, we’re ready to accept applications and we expect loan proceeds to be ready for disbursement by mid-September.

We believe that our involvement secured funding at a considerably lower rate than most nonprofits would be able to get on their own. We believe that the risks are minimal and that this action could help maintain important and needed community services.

For us, this program had special meaning beyond whether or not it eventually becomes an actual lifeline for our local nonprofits. If other organizations seek to emulate what we’ve done, I suspect there will be special meaning for them as well.

At Berks County Community Foundation, our mission is to promote philanthropy and improve the quality of life for the residents of Berks County. Some could say that, if we had not stepped up, we would have failed to live up to our mission.

Instead, we hope we are helping to sustain the local agencies that are improving the quality of life for many in Berks County. We also believe our program is helping to promote the importance of charitable giving. So we believe it fits our mission perfectly. Finally, it was just the right thing to do.

But it may be too early to congratulate ourselves. If the budget is passed soon, perhaps the loans we are prepared to provide will not be needed. But I think it’s unlikely that an agreement will soon be reached, so these funds might be the key to survival for some agencies. On the other hand, if this impasse lasts into December as some have suggested it could, Berks County and all of Pennsylvania will be facing a crisis far greater than anything $2 million can address.