The following is the response from the LWVUS to the LWVCT Memo on Sustainability of the LWV vs Current Financial Structure. The response hightlights the areas of agreement with the LWVCT memo and the ways the LWVUS has addressed these concerns in recent years. The response also includes the points of disagreements and references two analyses that formed the basis for several non-PMP decisions in the 2011 budget and the proposed budgets for 2012-2013 and 2013-2014.
LWVCT Memo on Sustainability of the LWV vs Current Financial Structure
LWVUS agrees with LWVCT on the following points, and has been addressing each as follows:
1. There should not be a continuous increase in PMP.
- This is what prompted the previous and current LWVUS Boards to commit to initiate a financial review during the current biennium, of which looking at alternative financial relationships with state and local Leagues was a major part.
- Of the options discussed by state attendees at Council 2011, a COLA was the preferred choice for determining League payments to LWVUS, because (a) it is a national indicator and not driven by the financial needs of LWVUS (b) it is announced well in advance of League budget season and (c) it does not always go up, remaining flat in some years.
2. It is vitally important to look at the larger financial picture of LWVUS/EF – and the League as a whole.
- In summer - fall 2010, staff and Board reviewed the revenue streams available to all levels of League, which resulted in an integrated graphic depiction.
- In winter 2010-2011, staff undertook an analysis entitled “Reviewing the Funding Model for LWVUS/LWVEF” that was presented to the Board and Budget Committee in January 2011.
- Some of the key points of both were explained to Council 2011 attendees as part of the budget presentation. Small group conversations and “voting” were provided as means of getting feedback on the PMP and related financial issues.
- A major finding, which was emphasized at Council, is that all levels of League (not just LWVUS) need to be more intentional – and strategic – about raising funds from sources other than member dues.
3. One possible source of new revenue is to operate “business ventures” or “earned income”.
- This was given serious consideration by staff during their winter 2010-2011 analysis, including consultation with our lawyer on tax implications and with non-profit business development specialists.
- Staff identified several areas that appeared to best match our mission/programmatic work, with the possibility of being profitable – a debates certification system, poll worker training institute, citizens’ academies, etc.
- The advice obtained was that creating a new business is risky for nonprofits, for a variety of both financial and other reasons related to mission and priorities. Careful analysis, including market research and assessment of opportunity costs, is needed before any decision is made. In addition, any new business takes upfront capital to launch and promote, and usually several years before it yields a profit (if it ever does).
- The Board in 2011 decided not to undertake such a venture at this time.
- In the past, LWVUS has experimented with “affinity programs” where member receive “value” by getting better rates on credit cards and so forth. Our experience was that not enough members took advantage of these offers to make them cost effective.
4. Other types of revenue should be investigated.
- The 2010-2011 analysis showed that the most likely area where additional investment would yield increased revenue is in obtaining major and planned gifts from individual donors – whether members or not. That is the reason that the current 2011-12 budget includes funds from Reserves for an additional full time professional major donor development officer and a part-time assistant.
- The Board realized that at least 2 years were needed to realize results. Consequently, those positions are continued in both years of the proposed budget, with the salary costs to be covered by the funds to be raised. If it turns out that increased outreach and cultivation does not achieve the stretch goals identified, the staffing level in this area will be reduced.
- Another area that we are exploring is cost sharing – or fee for service. This is an approach used by some other organizations, and is similar to that being used increasingly by all levels of government, where those entities wanting a service pay something for it. This is the approach we are using to offset a portion of the cost of the “On Your Ballot” software for VOTE411.
- All levels of League are encouraged to look at the possible non-dues types of revenue that they might pursue.
5. It is always important to review expenses and cut costs wherever possible.
- This has been the management philosophy for many years, and many of the direct costs (phone, copiers, audit costs, IT support, etc.) have been reduced significantly.
- In the proposed budget alone, the following cost savings have been achieved:
- network support costs - $6,860 by rebidding the network support contract.
- administrative operations postage costs - $5,000 through tighter cost controls.
- general liability insurance premiums - $8,047 by rebidding the contract.
- website hosting costs - $8,000 by rebidding the hosting contract.
- mailing list manager software support costs - $4,225 by switching platforms.
- salaries and benefits --- $2,674 by filling some vacant staff positions with lower-paid staff.
6. It is a useful practice to compare oneself to other similar organizations.
- Staff have done this many times over the years, looking at such things as funding sources, dues levels, recruitment and training programs, website and social media practices, etc.
- However, we always face the challenge that other organizations have dissimilarities with us as well. For example, the League of Conservation Voters is able to raise more money than we are because its board of directors includes individuals selected to serve because of their fundraising connections and personal giving abilities, and because the number of foundations and major donors who support environmental issues is much larger than those who support good government and democracy issues.
LWVUS Disagrees with LWVCT’s analysis in the following ways:
1. Concerning who is responsible for paying PMP
- Although calculated on the basis of an amount per individual member, the actual financial obligation to LWVUS and the state Leagues is from each local League as an organization – not from the members themselves.
- Long-standing policy exists to allow up to one-half of the PMP level owed to be paid out of a League’s Education Fund.
- 99 Leagues currently do that
- Leagues can raise funds for their activities through any number of means (events, donors, sponsors, etc.) and hence do not need to raise the dues paid by members.
2. Concerning whether direct marketing is a cost-effective means of raising funds
- It is certainly true that direct marketing – particularly direct mail – is an expensive way to raise money. However, it is a well-known tool used by many organizations.
- It works. There is NO other way that LWVUS/EF could raise approximately $2.5 million a year, every year. Although the net raised is a much smaller number (roughly $738,152 in year 1 and $899,143 in year 2 of the proposed budget), that amount of revenue would not be possible from any other source.
- The cost-effectiveness of direct mail - as measured by the amount of money it takes to attract and get funds from a new donor – can vary by organization and by year and message. By many measures, the LWVUS has met, if not exceeded, nonprofit direct marketing standards of performance for many years. For example, typically an organization takes 24 months to recoup the cost of acquiring a new donor through direct mail. Over the past five years, the LWVUS has recouped its costs within 12 to 18 months. From another perspective, in the early 2000’s, the LWVUS spent on average $23 to acquire a new donor, well within direct marketing standards. That cost fluctuated in this range throughout the decade, and over the past two years the cost per donor has been under $5, a direct marketing feat!
- When effectiveness is measured by the number of either new people who respond to our mailings or those who renew, recent LWVUS response rates significantly exceed nonprofit direct marketing standards. Our recent mailings focusing on voter protection and money in politics have had response rates for new donors in the range of 1.4% to 2.5% – when the direct marketing average is under 1% . For current donors our response rates are around 4%, in line with direct marketing standards, and recent appeals have had a record breaking 6.28% response rate.
- Another benefit of direct marketing is that it provides a compelling narrative about the programmatic work of the League to a large audience (over 2.5 million people annually) who may not have heard of us otherwise.
3. Concerning the relationship of individual members to the work of the national League
- Although it is true that most members join the League to become more active in the civic life of their community, rather than state or national affairs, our recent focus groups showed us that most people understand that the League is a national organization with a long history, based in suffrage, and a good reputation. That gives an imprimatur to a member’s local work that joining a purely local organization would not provide.
- Our direct marketing donors do so primarily because they see and appreciate the role of the League as a national organization working at the federal level and providing support to a network of state and local affiliates.
- Regarding the tangible “value” provided to League members, to the extent we can extrapolate from our extensive testing of member and nonmember donor behaviors in the direct marketing context, we see that individuals do not contribute or renew dues to receive tangible benefits such as a magazine, products, or other consumer services. Rather donations, and in many cases dues renewals, are made to support the work of the organization and its continued strength as a citizens’ voice for nonpartisanship and civil discourse.
- The LWVUS’s member-donors (members who contribute to LWVUS through its direct marketing program) tell us they contribute, in part, because they appreciate the services – technical support, training, advocacy and press assistance, etc. – which LWVUS provides to their state and local Leagues.
4. Concerning a proposed PMP moratorium
- The types of LWVUS analyses suggested by LWVCT have already been performed, and are reflected in current and proposed budget and operational approaches.
- Revenue decisions should be related to mission priorities. Indefinitely freezing any source of revenue is not a responsible budget tool. It is not consistent with the League position about how governmental budget decisions at any level should be made.
- It is also not consistent with the League approach of making decisions every two years at Convention, based on what the delegates want to see LWVUS accomplish.
- PMP is only a quarter of LWVUS/EF funds, but it provides the seed money that allows LWVUS/EF Board and staff to raise the other 75%.
- A significant amount of the funds raised externally are returned to individual state and local Leagues as described below.
LWVUS/EF Resources Provided to State and Local Leagues
1. Pass-through grant funds.
- In the current year alone, 41 state and local Leagues have received grants to support their work on voter protection, redistricting, high school voter registration, judicial diversity, and citizen exchanges.
- Other Leagues may not have received grants, either because of the focus of the grant program or because they chose not to apply.
2. Membership and Leadership Development program (MLD, previously called the MRI).
- In the last fiscal year, the LWVEF Leaders for Leadership Fund (now being renamed the Fund for Local League Growth) contributed approximately $100,000 for training and assistance benefitting Leagues in 32 states. In 2012, 41 states will have this kind of support from LWVUS.
3. Advocacy and other technology tools.
- LWVUS has been providing technology such as SALSA either for free, or at lower cost than an individual League could obtain it on its own.
4. Advice and assistance on an extremely wide variety of League and substantive issues.
- More than a year ago, LWVUS undertook an analysis of its own financial resources and options, and to some extent, of state and local Leagues. We have also been assessing League operations and visibility. These analyses have guided many of our financial decisions, particularly concerning areas where further investment might increase revenue and/or League-wide capacity.
- PMP provides the seed money by which LWVUS/EF can raise all the other resources needed to perform our national functions, as well as provide a range of types of support to state and local Leagues. As a result, LWVUS does not support a PMP moratorium.
- The LWVUS Board is happy to entertain ideas for revenue streams not yet identified, and particularly any that allow a sharing of revenue between various levels of the League.