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b) a maturing of the Smithsonian's earned income markets, leading to slowed growth rates for such income; notably, a maturing of Magazine readership, coupled with increasingly fierce competition for Magazine advertising;

c) a like decline in Smithsonian shop income due to the probable imposition of an Unrestricted Business Income Tax;

d) rapidly rising costs associated with many Smithsonian activities, from salaries and benefits to travel expenses as well as research and exhibition materials; in particular, lack of competitive salaries endangers the ability to attract and keep top scholars and administrators;

e) a shift in national economic climate leading to reductions in corporate philanthropy, one of the Smithsonian's chief sources of private sector support to date; and

f) an increasingly competitive environment, as more and more non-profit organizations in higher education and other fields face the same fiscal constraints and are already capable of seeking and attracting additional private sector support.

The Smithsonian's development activities have not historically been structured to operate most effectively in the current philanthropic environment. Specifically,

a) decentralization has increased development activity and fund-raising success but has not changed historic emphasis on short-term, project-specific funding needs;

b) at present, major funding comes primarily from corporations and foundations, due to the uses for which funding is sought; and

c) the Smithsonian has focused almost exclusively on current use, project-specific -- as opposed to endowment -- fund raising.

[[underlined]] Opportunity for Advancement [[/underlined]]

Given the above environmental factors and the fact that the current Smithsonian development system is not designed to address those factors in the future despite many fund-raising successes to date, there is a critical need to position the Institution's development activities in a proactive stance. The Office of Membership and Development's recent reorganization, with the new structure to be fully operational by March 1990, provides the base upon which the following elements can be initiated to increase the Smithsonian's fundraising sophistication:

a) an increased focus on cultivation and solicitation of individuals; nationally, individuals are by far a greater source of philanthropy than corporations and foundations;

b) implementation of a Smithsonian-wide endowment opportunities menu, enabling the Institution to meet both short- and long-term needs while