Building the Nonprofit Ecosystem

Building the Nonprofit Ecosystem

A Briefing Paper for

INsights @ Delmar DivINe

October 25, 2022

Prepared by Barry Rosenberg, MSW

Director, Center for Human Service Leadership

Although nonprofits represent about 5% of United States GDP and 10% of the American work-force, the needs of nonprofits are often marginalized, if not actually undermined. Most human service organizations educate, advocate, form coalitions, and many lobby, on behalf of their clients, cause and community needs. However, beyond pressing for more funding, few nonprofits engage in policy work or collective action addressing the needs, strength and vitality of the nonprofit world itself. Yet, the nonprofit industry faces challenges and threats on many fronts, beyond just financial resources. In contrast, industries such as coal and big pharma demonstrate focused and oft-successful advocacy around their priorities and needs. How the nonprofit ecosystem be strengthened?

Issues, Challenges, Threats, & Opportunities Facing Nonprofits

• Tax law and IRS regulation including the efforts to enact a Universal Charitable Deduction, proposals to increase minimum foundation and donor-advised fund spending rates, and the potential for increased IRS scrutiny, with increased funding under the Inflation Reduction Act of 2022.
• Efforts to repeal the Johnson Amendment (prohibits nonprofit partisan political activity) might subject organizations to political pressure to endorse or even contribute to candidates.
• Cash-starved municipalities have and might attempt to alter or eliminate property tax exemptions or pressure nonprofits to negotiate payments in lieu of taxes (PILOTS).
• Government contracting reform including full-cost funding and timely contract payments.
• Foundation grant processes such as full-cost and unrestricted funding, multi-year support, simplified applications and reporting.
• Even prior to pandemic-triggered labor dynamics, the sector faced severe challenges finding qualified employees in numerous areas such as mental health, nursing and fund development. An aging executive corps requires a larger leadership pipeline. Government funded and nonprofit workforce development options include public-service college loan forgiveness and paid internships to promote nonprofit careers. For example, New Mexico offers grants to provide stipends of up to $2,000 per semester to early childhood professionals enrolled in higher education.
• There is limited region-specific data needed for organizational management, benchmarking and sectoral advocacy, such as compensation levels and extent of nonprofit financial risk.
• Parity with for-profits. Legislation that provides benefits such as business tax credits (e.g. against retirement contributions or employer-provided transportation) could include or extend equivalent provisions to nonprofits.
• Nonprofit access to City, County and State allocations of ARPA & other funds. For example, a local, cross-sector collaboration won a $25 million Build Back Better grant. Honolulu used $30 million in ARPA funds to assist organizations negatively affected by the pandemic.
• Collective action can strengthen the sector on issues such as advancing diversity, equity & inclusion, competing for national grants, reducing burdensome legal provisions, supporting minority-led nonprofits, promoting philanthropy & impact investing, and instituting shared leadership models and community-centric philanthropy.
• In the face of high-stress, lonely, executive roles, collectivity can provide community, emotional support, a sounding board and promote innovation and collaboration.

Organizations and Efforts to Strengthen the Sector (Illustrative)

Independent Sector, a membership-based coalition of nonprofits, foundations and corporations focuses on policy advocacy, education, trust in civil society, promoting volunteerism and principles of ethical nonprofit governance.

The National Council of Nonprofits, through a network of 42 state associations with 25,000 organizational members works to champion, inform and connect organizations to achieve policy and funding success. It provides resources and its newsletter carries detailed information about legislation at all government levels, funding and management issues.

The Urban Institute’s Center on Nonprofits and Philanthropy and George Mason University’s Center on Nonprofits, Philanthropy, and Social Enterprise are undertaking a study to better understand strengths, weaknesses, changes and needs of the social sector infrastructure.

National Human Services Assembly, undertaking the “National Reframing Human Services Initiative” to build broader and deeper public support for human services.

Locally, Nonprofit Missouri was formed in 2010, as an affiliate of the National Council of Nonprofits, to coordinate state-level advocacy and promote nonprofit capacity building through convening, training and research. It published a Nonprofit Landscape Report and a Salary Report. However it has struggled to sustain momentum, define direction, attract dues-paying nonprofits and develop a financial model.

Locally, public – private partnerships (Missouri Arts Council, Regional Arts Commission, major funders and arts organizations) meet regularly and address industry issues such as research to document the economic impact of the arts and coordinated legislation (pending) for allocations of City and County ARPA funds. In response to the pandemic, the Missouri Arts Safety Alliance provided best practices and technical assistance. It led advocacy to have art venues treated like restaurants and other public-facing venues regarding regulations on social distancing, masking etc. Missouri ArtSafe certified organizations that adhered to best COVID safety practices in order to assure the public.

President Biden issued an Executive Order (March 30, 2021) to strengthen the nonprofit sector and its partnership with the Federal government, and established a White House Office on the Nonprofit Sector, an Inter-Agency Council and Advisory Board. A second Executive Order (Feb. 14, 2021) established the White House Office of Faith-Based and Neighborhood Partnerships.

H.R. 7587, the Nonprofit Sector Strength and Partnership Act of 2022, introduced in April, seeks to strengthen the partnership between the Federal Government and nonprofits. It is given a 1% chance of passage.

Although locally, there are numerous organizations and networks that work on strengthening specific fields of service (e.g. early childhood education, community development, philanthropy), there are limited efforts focused broadly on the sector. Those, such as university programs, focus primarily on education and training. The Regional Data Alliance published St. Louis Regional Nonprofit Indicators and promotes data sharing.

September 9, 2022