Editorial: When it comes to nonprofits, Americans are out of our overheads

“We can create the possibility of a world that works for everyone, with no one and nothing left out.”

R. Buckminster Fuller, “Utopia, or Oblivion”

Call it: The 3 percent solution.

That number, according to fundraising activist Dan Pallotta, is the magical percentage of U.S. Gross Domestic Product that, if spent on the nonprofit sector, would be enough to effect meaningful social change in America.

Unfortunately, Pallotta says, the nonprofit sector has been stuck at 2 percent of the GDP for the past 40 years.

And the result of that 1 percent difference for such social problems as homelessness and addiction has been decades-long stasis.

Pallotta, a nonprofit advocate whose fundraising model of multi-day participatory events such as the Breast Cancer 3-Day walks have raised nearly $600 million for charities, was the featured guest at the Sept. 28 Sonoma Speaker Series event at Hanna Boys Center.

Pallotta, a proponent for infusing nonprofits with enough funds to attract and retain top fundraising talent – whose efforts would presumably pay for themselves, the nonprofit’s cause and then some, so the theory goes – is the author of the big-selling book, “Uncharitable: How Restraints on Nonprofits Undermine Their Potential” and the deliverer of a renowned TedTalk titled, “The Way We Think About Charity Is Dead Wrong,” that has received more than 4.5 million views.

Pallotta regularly talks about the surreal hypocrisy of how American society accepts the for-profit business model of spending money to make money, yet begrudges nonprofits that aren’t run on a shoestring budget.

“These social problems are massive in scale,” said Pallotta in his 2013 TedTalk. “Our organizations are tiny up against them and we have a belief system that keeps them tiny.”

He names the expectation of low compensation, an aversion to marketing and a resistance to risk taking among the attitudes society has about nonprofits that severely limits their potential. When it comes to nonprofits, he says, “overhead” has gotten a bad rap.

He says society is mistakenly attached to the theory that the less a nonprofit spends on fundraising, the more money there is available to the “cause.”

“Well that’s true if it’s a depressing world in which the pie cannot be made bigger,” said Pallotta to his Ted audience. “But (not) if it’s a logical world in which investing in fundraising actually raises more funds and make the pie bigger.”

Pallotta’s talk in Sonoma came at a fortuitous time. The economy is strong – meaning funds are often available to be raised – yet, with a strong jobs climate, comes an expectation from job seekers that wages fall in line with prosperity. The trend in increased wages is definitely taking place in the private sector – and few in the public sector would not expect it to reach them as well.

Pallotta traces the origins of the private-public dichotomy back to Puritan-era America, when Calvinist settlers had to reconcile their quest for profit in the New World with their Godly commitment to help others.

“Charity became an economic sanctuary where they could do penance for their profit-making tendencies,” Pallotta has said. “At 5 cents on the dollar.”

The result, he says, is that financial incentive “was exiled from the realm of helping others” and it’s been that way for 400 years. Adds Pallotta: “And nothing has intervened to say it’s counterproductive and it’s unfair.”

The vital and vibrant Sonoma Valley nonprofit community would surely agree, as multiple organizations embark on ambitious fundraising campaigns to allow themselves to remain viable in an age where need is on the increase – yet funding sources too often remain scarce.

It’s enough to make any nonprofit shy about having the audacity to think big. Yet, some are resolved.

The Pets Lifeline animal rescue agency just launched a $3.4 million capital campaign to fund sorely needed upgrades at its Eight Street East rescue center and further its goals of animal advocacy, education and community outreach.

And, while the Sonoma Valley Healthcare District operates the Sonoma Valley Hospital, the hospital still faces many of the same challenges of traditional nonprofits – using simple revenue to keep the doors open, yet fundraising to expand service. How many times have we heard about the high wages of hospital staff from critics who’d happily begrudge them the going rate in exchange for a couple hundred thousand dollars going back to the hospital – which last year was around $3 million in the red.

The Sonoma Valley Hospital Foundation’s – the nonprofit fundraising organization for the hospital – current $20 million capital campaign is for a top-shelf outpatient diagnostic center – a recognition by hospital officials that the gurneys of the future will be ridden by outpatients and those in need of emergency treatment. And only an ambitious fundraising drive – in response to ever-changing needs in the world of modern healthcare – is going to allow the hospital to stay in step with the times.

Pallotta would frame is as a problem that’s been 400 years in the making.

“This is what happens,” he warns, “when we confuse morality with frugality.”

Email Jason at jason.walsh@sonomanews.com.