As Hillary Clinton and Donald Trump develop their ideas for what they would do in the White House, all of us in the nonprofit world should be urging them to take a step that could make a huge difference to our work: create a federal office to better represent charities and the people they serve.
Given the vast and important reach of nonprofits in health, education, social services, and beyond — and the fact that one in 10 Americans works for a charitable institution — it’s puzzling that nonprofits have very limited representation within the federal government.
Most other major interests in society have representation at the federal level. Corporate America has advocates in the Commerce Department, workers have a voice through the Labor Department, farmers have the Agriculture Department. So it is curious and problematic that nonprofits have no single entity — not even a small one — to represent their concerns.
To be sure, nonprofits have allies within government: Nonprofit hospitals and nursing homes have a voice at the Department of Health and Human Services; the concerns of private universities are important to the Department of Education; arts organizations are aided by the National Endowment for the Arts. Moreover, the Internal Revenue Service (along with state attorneys general) regulates and monitors nonprofits. However, no office is in charge of strengthening the overall nonprofit world to better serve our society.
That means no unit of the federal government understands nonprofits or is able to speak up for their interests. As a result, the government often treats nonprofits poorly or ignores them.
About Us but Without Us
In the years following the September 11 attacks, the U.S. Treasury developed Anti-Terrorist Financing Guidelines to help protect charities from being exploited by terrorists. However, nonprofit concerns were not taken fully into account in developing the guidelines. While the Treasury Department made some accommodation to the concerns of nonprofit and foundation leaders in drafting the guidelines, according to former IRS official Marcus Owens, “the standards developed were, based on public comments, of questionable legal import and were difficult, as well as costly, to implement even by the most well-intentioned tax-exempt organization.”
A far more wide-reaching piece of legislation — the health-care overhaul — dealt with nonprofit issues only belatedly and still not comprehensively enough. The law passed in 2010 raised significant challenges for nonprofits as employers and providers of health care. Among the concerns were new requirements for businesses to provide health insurance for employees. This generated alarm among nonprofits, especially because of the law’s effect on health-care costs for small and midsize charities.
At the time of the bill’s passage, nonprofits reportedly spent almost 5 percent of their budgets on health care and insurance coverage. This represents a major cost for cash-strapped charities, particularly in an economic downturn. While nonprofit advocates eventually won some concessions, observers found that nonprofits were “left out,” at least from the initial conversation on the health law in Congress, despite the fact that charitable organizations are important employers.
More recently, nonprofits seemed to be somewhat of an afterthought as the Department of Labor developed new regulations regarding overtime pay.
With partisan gridlock crippling the legislative process, and presidents apt to turn more frequently to regulation to accomplish their goals in the years to come, it is critical that nonprofits have a stronger voice within government to ward off damaging regulations that don’t appropriately take their interests into account.
Enhanced representation for nonprofits would also better alert policy makers to the many ways that nonprofits can address difficult social problems. In times of high unemployment, government would get a good return on its investment by funneling money to nonprofits to increase employment. However, in the early stages of the Great Recession, as key policy makers tried to figure out how to put the unemployed back to work, it seems that there was little thought given to nonprofits as major employers.
Moreover, while government paid great attention to the financial problems of businesses during the economic downturn, it seemed largely to ignore the challenges that nonprofits were facing — challenges exacerbated by the government’s slowness in paying nonprofits what they were owed in contracts.
Policy makers, like many in our society, seem unaware of how nonprofits are actually funded to deliver services, underestimating the importance of government grants and payments and overstating the value of philanthropy. In fact, as the Urban Institute reports, government funds account for two to three times as much nonprofit income as philanthropy. Thus, when government is in a cutback mode, policy makers have typically exaggerated the ability of philanthropy to offset reduced government spending.
Plenty of government data on nonprofits is available; it’s just not gathered in any way that makes it easy for policy makers to find. It’s tucked away in the IRS, the Bureau of Labor Statistics, the Census Bureau, and elsewhere. There seems to be little effort by government offices to integrate data on nonprofits to better understand whether there might be untapped capacity among charitable organizations or significant problems in this important part of our economy.
One of the wisest solutions to this problem was suggested by Shirley Sagawa, who has served as a senior staff member in the White House, Congress, and the Corporation for National and Community Service. She noted that nonprofits are missing an agency like the Small Business Administration.
Created in 1932, this federal office works to help businesses attract financing, develop entrepreneurs, and learn how to get federal contracts, and it advocates for policies that help small businesses. The SBA does not directly invest in or make loans to small businesses. Rather, it coordinates programs that connect small-business owners to government and private resources and is designed to act as the “voice” for small businesses within government.
Start Small
To be sure, what nonprofits need, especially at the start, is not a massive new federal bureaucracy. A government office on nonprofits might be an entity of modest size — or perhaps just several well-placed staff members within the White House Domestic Policy Council or a similar body — with the capacity to develop information and research on nonprofits, including pulling together nonprofit data collected by other offices.
The main goal should be to create and carry out strategies for dealing with important nonprofit issues (such as regulations that fail to take into account nonprofit concerns) and to serve as an advocate for nonprofits, especially within government, where such a voice is missing.
The reason I suggest a small effort at the beginning is that it might be tricky to pass legislation in Congress to start a new unit. Many nonprofit and foundation leaders are reluctant to support any new legislation about nonprofits and philanthropy for fear it would become a magnet for unwanted provisions.
That’s why it may make sense to work toward the establishment of a nonprofit office incrementally through more limited, presidential action.
A succession of White House offices has focused on nonprofit issues. In the Obama White House, for example, the Office of Faith-Based and Neighborhood Partnerships is a central meeting place for similar units in federal agencies. It would also make sense to establish a White House office that coordinates the foundation liaisons that many federal agencies have installed to seek private money to support government goals.
Of course, the downside of these White House offices is that they tend to come and go with changes in administrations, and there is not the kind of institutional capacity and memory that would be gained from a more permanent home.
Political scientists have found that interest groups are important movers in establishing new governmental structures. So it is likely that a new government office on nonprofits will be established only if nonprofit and foundation leaders actively advocate for it.
As a new presidential administration is about to take office, now is the time for leaders who favor a government office for nonprofits to speak up.
Alan J. Abramson is a professor in the Schar School of Policy and Government at George Mason University. This article draws on his chapter in a new edition of the book Nonprofits and Government: Collaboration and Conflict (Urban Institute/Rowman and Littlefield).
