Art DeMonte, executive director of the
Great Lakes Entrepreneur’s Quest (GLEQ), can tell you from experience why non-profit foundations are vital for economic growth. "Two years ago, we were on the verge of going out of operations until the Ann and Carman Adams Fund stepped up to be a lifesaver."
Since 2000, the Ann Arbor-based non-profit organization has run a unique statewide coaching and education program for entrepreneurs involved in high-growth business ventures. The financial assistance "raised the vision of GLEQ," says DeMonte.
Investing in Michigan’s economyTo date, the Ann and Carman Adams Fund, which targets organizations that foster entrepreneurship in Southeast Michigan, has given over $1 million to non-profits like the GLEQ, according to Mariam Noland, president of the Detroit-based
Community Foundation for Southeastern Michigan, which administers the fund. Foundations like it are the fuel that drives many non-profit engines. By funding smaller organizations with a similar vision, these charitable groups often expand the reach of their own mission.
Many of the Community Foundation’s 800-plus funds are endowed, meaning the principal stays permanent and is invested to generate an earnings stream to support the work of non-profits in perpetuity. This becomes particularly important in slow economies. "Foundations play a role in good and bad times. We don’t rely on annual contributions," explains Noland. "What we’re able to do is step in when things are bad, to help non-profits, which need predictable capital."
Non-profits often bump up against the universal roadblock of funding shortages, so they turn to foundations, which help fill the gap. "Non-profits often have difficulty getting early-stage funding," Ms. Noland continues. "We don’t need to make a return, so we can take a higher risk position. We get these organizations ready to secure private dollars from community banks and private enterprise. This puts them in a position to make their case."
Consistent funding for non-profits enables a longer-term approach to economic growth - advantages not always enjoyed by government and business. Elections can bring about changes in leadership and direction, compromising governments’ ability to execute long-term strategy. Businesses need to provide good periodic rates of return to their shareholders, which triggers a focus on short-term results.
The funds that kept the GLEQ afloat ensured the continuation of its free programs like educational seminars, mentoring, and business plan coaching, - provided by local business experts to about 100 aspiring or existing start-up companies annually. Ultimately, the companies participate in business plan competitions judged by professional investors. And these efforts have paid off. In 2006, 10 of the 61 awardees who shared in the first $100 million plus allocation from the
21st Century Jobs Fund – a state-organized fund committed to economic diversification and job growth in Michigan –were GLEQ alumni.
The value created by non-profits isn’t found in the typical performance metrics of profitability and shareholder returns, but rather in returns to society. "The GLEQ is completely agnostic. It’s not influenced by the profit motive, but by what will give the highest quality of service in the most economical way," says DeMonte. "This can really only be executed in a 501c(3) sort of way."
Investing in Michigan’s culture"The state is recruiting businesses which are made up of people, and people are looking for a good quality of life," says Barbara Kratchman, interim president of
ArtServe Michigan, a non-profit arts and culture support and advocacy group. She has just returned from a meeting with the state budget director to tout the benefits of arts and culture for the area.
"If we don’t have a strong cultural community, cities won’t thrive in the way we would like them to." Kratchman sees arts and culture as inextricably linked to economic prosperity. And she isn’t alone. Governor Granholm’s
Cool Cities initiative recognizes that in order to attract young workers and the businesses that rely on their talents, Michigan must invest in its cultural foundations. Unfortunately, when public dollars are tight, these are the first programs to be pushed aside. This is where non-profits like ArtServe Michigan step in.
"When you’re trying to induce people to come to Michigan, it’s important they know what amenities are there," says Ms. Kratchman. "Arts education is important to the full education of every person. It helps people develop problem-solving skills, job development skills, teaches different cultures, and stimulates brain cells. Statistics show that students involved with arts do better and stay in school."
Even in hard times, people like John C. Austin are making the case that communities thrive when their citizens are well educated. Austin, a senior fellow at the
Brookings Institution and vice president of the Michigan State Board of Education, says, "Every community needs to organize its resources to make post-secondary education a key economic strategy."
To that end, in 2006 the state implemented the Michigan Merit Curriculum - a new set of requirements, including arts education, for high school in order to better prepare the state’s graduates for college.
As an illustration of how non-profits can partner with government to achieve growth through better education, Ms. Kratchman says that ArtServe Michigan, "worked with the Michigan Department of Education to ensure there would be an arts credit in the new mandated curriculum. We are very proud that a small organization like us was able to take the lead and effect change."
The Great Lakes Regional Economic Initiative is another case of how non-profits, businesses, and governments can pull together to push for economic growth. Conceived in 2005, the initiative is a multi-year collaborative effort between the Brookings Institution and public and private sector entities to develop and execute a three-part action plan to address how to strengthen the Great Lakes regional economy.
The 2006 report,
The Vital Center: A Federal-State Compact to Renew the Great Lakes Region, co-authored by Mr. Austin, director of the initiative, puts forth economic analysis and policy recommendations. In brief, these focus on concrete methods for raising educational levels, supporting entrepreneurship and R&D, remaking employee benefit policies, and reinvigorating metropolitan areas. These recommendations will be disseminated and promoted to governors and members of Congress, in an effort to create legislation that will turn them into reality.
According to Mr. Austin, the initiative has already met with some success. It has garnered significant support from a network of 3-4,000 stakeholders --members of Congress, governors, state and local officials, universities, businesses, and non-profits-- all of whom are actively promoting its ideas. Furthermore, the analysis and policy recommendations will inform 2008 presidential candidates about what matters most to the Great Lakes region –12 critical swing states that have decided past elections.
The initiative’s focus is on broader state, regional, and national policies because, "as we succeed in seeing Federal research and development dollars flow to the region, if we remake housing and transportation policy, we’ll see tangible kick-outs for Southeast Michigan," says Austin. This will reinforce the agenda of community leaders like
Detroit Renaissance, the
Detroit Regional Chamber, and the Community Foundation for Southeastern Michigan. "Hopefully [this will] raise more philanthropic resources to support new economy ventures and things that help diversify the economy."
Non-profits are critical for shaping Michigan’s economy, Austin believes, because "the philanthropies can seed good research and good analysis that helps us understand where we stand economically and what might be done. That can inform thoughtful public policy development. It’s a unique role. It couldn’t be done without the support of the philanthropies in the region, so it’s incredibly valuable."
Tanya C. Muzumdar is a freelance writer.
Photos:
Art DeMonte
Mariam Nolund - Photograph courtesy of Community Foundation of Southeastern Michigan
John Austin
Photographs by Peter Schottenfels - All Rights Reserved