Did Hull House make a mistake by aggressively pursuing government dollars?
Last week, the Jane Addams Hull House Association, an icon of Chicago history, announced that it was closing its doors and filing for bankruptcy. "Reliance on shrinking government funds doomed Hull House," reported the headlines in the Chicago Tribune. Truth or fiction?
Hull House was founded in 1889 by Nobel Prize winner Jane Addams. Like many other non-profit, community-based human service organizations founded a century ago, for most of its history, funding came from the generosity of a core of donors dedicated to its mission along with contributions from foundations and the United Way. The Boards of Directors of these organizations thought government funding undesirable because of the many restrictions that came with the money.
In the 1990s, the dynamics began to change. First, government coffers opened up. Welfare reform freed up new money for child care, job training, and other programs for low income families. The State of Illinois B.H. consent decree forced the State Legislature to approve large increases in spending for child welfare programs. State revenues kept increasing every year due to a booming economy. As a result, strong advocacy led to the creation of new programs for people in need of community support. The Jewish Federation of Metropolitan Chicago played a very active role in building the human service infrastructure at the state level we know today.
Community-based human service providers, many wanting to expand but stymied by flat private fundraising, were in a good position to secure these new dollars. Republican Governors traditionally chose non-profit, community-based human service organizations over state employees. Governors Edgar and Ryan reached out to recruit the agencies as partners. For their part, the agency executive directors were willing to accept the rules and paperwork in return for predictable funding streams that allowed them to reach more people by growing their programs and their staff. Furthermore, in the 1990s, government funding more than covered both service and administrative costs and provided funds for research and other needed infrastructure investments.
Hull House, like many other non-profit human service organizations, began to diversify its funding streams. The Board hired Gordon Johnson, who previously had been director of the Illinois Department of Children and Family Services. He moved the agency towards government funded foster care work. According to the Chicago Tribune, by the end of FY2001, when Director Johnson retired, total funding from all sources had increased to $40 million from $9 million.
In 2000, Clarence Wood became the CEO with a promise to bring more private dollars into the organization. That never materialized. By the time Hull House filed for bankruptcy last week, less than 10 percent of its budget came from private fundraising.
There were earlier signs that Hull House was in trouble. In 2002, Hull House froze its pension plan and began to defer pension contributions. By 2009, it had defaulted on its pension plan. There were challenges with meeting payroll.
Why it is, though, that Hull House is now in bankruptcy? Did Hull House leadership make a strategic mistake by expanding with government dollars?
Certainly, the shrinking state funds did not help. Over the past 10 years, the State cut funding to human services by $4.4 billion. Child welfare spending was protected from cuts because of the B.H. court consent decree but other programs provided by Hull House—domestic violence, child care, substance abuse—saw funding cuts at the very time requests for help were going up.
Another challenge for Hull House was the state's pattern of delayed payments. The state now takes six months or longer to pay bills. At the end of December, there was a backlog of $4.273 billion in delayed payments. One consequence is that venders like Hull House have to extend their lines of credit, which means that private dollars must be raised to pay increased borrowing costs.
Certainly, the government has not been a "good partner" over the past few years.
But what if Hull House had chosen to avoid government funds, keeping its budget at the $9 million level it was in 1990? The more than 60,000 children, families, and community groups that now receive foster care, domestic violence, early childhood development, and job training services might not have received the quality services they received this year. Multiply that number over twenty years and you see how impressive Hull House's reach has been for the past two decades. Not partnering with government might have kept Hull House alive but at a tremendous cost.
The bankruptcy of Hull House is big news because Hull House is Chicago's history. Many other less well-known human service organizations are also facing the possibility of closing their doors over the next year.
This brings me to two questions I can't answer.
Why is it that some non-profit, community-based human services organizations were able to expand with government funds without putting their future in jeopardy? Certainly, the partner agencies of the Jewish Federation of Metropolitan Chicago fit that category. The chief executive of one child welfare agency commented that today "in order to survive, it takes a lot in the area of fundraising, continuing to trim and divest, and a real strong leadership team in order to carry it all out." The right balance between private fundraising and government dollars is part but not all of the answer.
The most troubling question, though, is what is going to happen to the children, adults, and families that depend on Hull House? Other human service agencies are circling to pick up the government contracts that cover costs. But, even if some programs continue, there is no promise that the new agencies will serve current clients or keep current Hull House staff.