Economists have found that seed money from the government “crowds in” private giving, meaning that collaborative funding goes further than private or public funding on its own. And collaboration isn’t limited to giving money, since governments and organizations can share other resources to spread social value with less expenditure.
In Los Angeles, for example, the city has partnered with Homeboy Industries, a non-profit that runs the largest gang intervention program in Los Angeles County. Since 2008, the city has spent more than $600,000 on shirts and uniforms from Homeboy’s printing shop; in 2011, it awarded Homeboy a contract to open a diner in City Hall. This cooperation validates Homeboy’s good works, and builds demand and exposure for the non-profit’s social programs. Meanwhile, Homeboy has evolved into a de facto re-entry program for the county, as about 85 percent of the 12,000 former gang members Homeboy helps counsel and train annually are on probation or parole.
Not all attempts at collaboration have been this successful. Charter schools have had to fight, in and out of court, for access to classrooms and facilities. In the county, a competitive bid process for community providers of substance abuse programs for eligible probationers languished for over a year after funds were allocated. According to testimony before the Little Hoover Commission, organizations equipped to meet these needs have been waiting for the county to issue a “request for proposal.” Such bureaucratic inertia is difficult to accept.
If done right, public partnership with non-profits is not just more cost-effective, it can also be more effective. Private organizations have much lower overhead than government programs; less bureaucracy means greater responsiveness. Non-profits cannot rely on automatic sources of funding – donations have to be justified by measurable results. The disciplining effects of the marketplace do not apply to our vast network of city-run social services agencies.
The charter school movement is a good example. The Alliance for College-Ready Public Schools is a private organization that administers 22 L.A. charter schools. Despite receiving less public money per pupil than other public schools, the alliance reports a 2012 graduation rate of 94 percent compared with 67 percent school districtwide.
The alternative? In Detroit, more than 130 individuals committed more than $330 million to rescue the Detroit Institute of Arts and to help resolve the underfunding of that city’s pension systems. We cannot wait until a similar disaster looms before finding ways to stimulate the philanthropic potential which the 2020 Commission believes is lacking in our city.
David A. Schwarz is a partner at Irell & Manella.