Part 4c: Decentralized into Chaos: The Three Causes of Civic Fractionation (#3)

Part 4c  – An Introductory Essay Series (Click here to start at the beginning!)

ffThis post continues from Part 4b, which delves into the reasons why we have such a fractured and tough to understand, civic environment. Here, I get into the third reason:

An Outsize Role for Nongovernmental Organizations in Service Delivery

 

An Outsize Role for Nongovernmental Organizations in Service Delivery

The other challenge is that you can’t just look at government when it comes to “government” service delivery in in the United States.

I had the opportunity to attend a Harvard Kennedy School executive education program in 2017 called Senior Executives in State and Local Government. This is a wonderful program that takes place over three weeks on the campus of Harvard Kennedy School. It is designed to educate leaders in state and local government, with a couple of philanthropy people thrown in to the mix because of the role we play (more on that later). Early on in the program, Faculty Chair David King laid it out this way:

  • According to the Heritage Foundation’s 2017 Index of Economic Freedom, at 26%, total tax revenue as a percentage of GDP in the United States is far lower than other industrialized nations.[1] Denmark’s is 50.9%, France’s is 45.2%, Germany is at 36.1%.

In fact, the United States sits between Bulgaria at 26.5% and Zimbabwe at 25.1, as you can see here:

GDPHowever, the United States ranks 10th out of all nations on the 2016 Human Development Index.[2] It falls right behind Norway, Australia, Switzerland and the Netherlands.

HDI

How can this be? Where does the missing 10%-24% in revenue come from to help with quality of life?

The answer?

In the United States, a great deal of service delivery is outsourced to the most robust nonprofit and charitable sector in the world.

In a paper shared at the 2012 Altruism and Charitable Giving conference at the Paris School of Economics (co-chaired by Thomas Piketty and Emmanuel Saez), Duke Professor Charles T. Clotfelter writes in Charitable Giving and Tax Policy in the U.S.,

Compared to other advanced countries, the United States has developed a distinctive approach to meeting social needs. It relies less on direct government provision and compulsory taxation and more on voluntary provision…. In contrast to its stingy public provision, however, the United States tends to be a leader when it comes to private provision, expenditures controlled by individuals rather than the government, some of which is subsidized by the government through tax breaks….

Indeed, the American record of giving and volunteering has been celebrated as often as its weak government safety net has been decried. From this laudatory perspective, the generosity of spirit revealed by the country’s high rate of charitable giving is inextricably wedded to the country’s historical reliance on non-governmental organizations to address social problems and provide collective goods. Political scientist Lester Salamon sees in this model a tension between two seemingly contradictory principles” honored by Americans: individualism and solidarity.

In Ohio, where I live and work, currently has 98,459 nonprofit organizations, according to a recent check of TaxExemptWorld.com. That number reflects both the funders (charitable foundations) and the funded (nonprofit organizations).  This sector plays an enormous role in service delivery in this country. According to Philanthropy Roundtable, 10.6% of the United States workforce is employed in the nonprofit sector.

In my community of Toledo, Ohio with a population of 279,676 and a county population of 433,689, we have over 3000 tax exempt nonprofit organizations. The exact count for the county is 3,275, according to my latest search on Taxexemptworld.com.  My foundation recently commissioned a study by Lourdes University on local after school programming (tutoring and mentoring services). The study counted a total of 170 organizations based on their self-reported filings to the IRS.

There is nothing to stop the nonprofit organizations from growing. While many are doing important work, the way in which they proliferate means that the public has an incredibly confusing time sorting out which ones are necessary, and delivering efficient, evidence-based services, and which are not. When you last gave to charity, did you do any research to figure out the answers to these questions?

There are so many nonprofits that they are frequently not aware of each other. In the last several years, my community’s lack of a runaway shelter for youth became broadly apparent to those who work in law enforcement, the courts and the social services sector. This lack of a safe place for our community’s most vulnerable youth, who often flee situations of abuse and neglect, contributed to our region’s unfortunate status as one of the top 5 recruitment sites for human trafficking in the U.S.

So in the last 18 months, 3 different organizations popped up, independently, with the intent to create one.

But do we really need three? Is this the most efficient way to use public and private resources? Can they each be strong and sustainable? Probably not.  But in most communities, there is no effective, centralized data or information source that corrals all of them.

This past year, my community foundation convened a meeting to discuss that report on after school programming. At one point, a librarian raised her hand and said, “Parents frequently ask me for referrals to organizations that provide tutoring after schools. It would be great if I could get a list of the strong programs.” All I could think was that when the librarians – masters of information – cannot find locate information, we have a big, big problem.

Dr.  Joel Orosz, a longtime grantmaker at the W.K. Kellogg Foundation, has shared this great observation about the fractured state of the nonprofit sector:

“The great glory of the nonprofit sector is that anyone can look at any problem and say, ‘I’m going to start an organization to fix that.’ I mean that’s how Habitat for Humanity started. That’s how Doctors Without Borders started; all the great nonprofits. So that’s a great glory of the nonprofit sector. The great curse of the nonprofit sector is that anyone could look at any problem and say, ‘I’m going to start an organization to fix that’ … We’re over two million nonprofit organizations now — many of which are overlapping in what they do, others of which leave big gaps that they should be covering. All of whom are tripping over each other fundraising. One of these days, people might sit down and say, ‘Now, wait a minute. Why are there six organizations in my community all dedicated to homelessness relief and yet people are still homeless? What’s going on here?’ So we need to find some way to keep the sector open to social entrepreneurs, but to make sure that they don’t start the seventh or the eighth homelessness relief organization in town. Because if six didn’t solve it, seven won’t solve it either.”[3]

I see this problem every day in my work at the community foundation. I provide many stories about the problems created by this complexity later on.

Both government and the charitable sector have similar dynamics. They are both responsible for the delivery of services, an important purpose for any government. They are both rapidly proliferating and compounding the condition of civic fractionation.

Public service delivery is not understandable for the average person in the United States, whether you are talking about government or the nonprofit sector.

The thickness and density of these intertwined sectors creates many problems, chief of which being that the people cannot easily hold either of them accountable.  It is hard to understand if they are acting fairly. It is difficult to understand if they are working effectively.  It’s hard to understand how they work at all unless you focus all of your time on that.

And that is a major problem for a democracy that is by, for and of the people.

 

[1] Index of Economic Freedom, Heritage Foundation (2017), available at http://www.heritage.org/index/explore?view=by-variables

[2] http://hdr.undp.org/en/content/human-development-report-2014 at 159.

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