Nonprofit Policy Trends under President Obama

December 17, 2009

Over the past year, the Obama Administration has ushered into the American political dynamic a number of changes in how government, at least at the federal level, does business. Some changes reflect shifts in government’s relationship to the nonprofit sector, a few trends meriting special attention:
1. Intermediaries: In contrast to the business world’s interest in disintermediation, the desire to “cut out the middleman” between businesses and consumers, the federal government under the Obama Administration, as well as its predecessor administration, has generated or increased the size of a number of programs explicitly designed to run through nonprofit intermediaries.  Reliance on intermediaries to design and deliver federal program resources may be seen in a number of programs:

  • The Social Innovation Fund: The Corporation for National and Community Service (CNCS) will run the Fund through private regrantmaking institutions, largely foundations, to find and bankroll innovative nonprofits worthy of replication and expansion.
  • The Strengthening Communities Fund: A creation of the stimulus, SCF replaces the Bush era Compassion Capital Fund by funneling resources through regional and national intermediaries to build the capacities of poverty-fighting and job creation organizations.
  • NeighborWorks: Although the Neighborhood Reinvestment Corporation dba/NeighborWorks has existed for some decades, the Obama Administration has continued the practice of the last congress of allowing NW to administer a large part of the nation’s foreclosure counseling assistance in response to the subprime (and now conventional) mortgage foreclosure crisis.
  • Living Cities: The Obama Administration has actually increased support to community development corporations through the Local Initiatives Support Corporation, Enterprise Community Partners, and Habitat for Humanity through Living Cities, the new name of the National Community Development Initiative.
  • Youthbuild: Working with a network of affiliate organizations and others that follow its model, Youthbuild provides comprehensive implementation technical assistance to a wide range of groups providing construction job training to young people with support from the Department of Labor.

In theory, intermediaries give government experienced partners for meeting social goals and, as in the case of the Social Innovation Fund and Living Cities, access to private grantmakers whose dollars will add to the limited federal dollar pools. On the downside, however, the off-loading of governmental decisions to private entities, whether nonprofit or for-profit, reduces community grantees’ access to government decision-makers and potentially some aspects of government transparency and accountability. Foundations are very excited by the prospect of joining government as implementation partners, but they have to be aware of the likelihood that government will expect them to ante up big, not just to sit at the table, but to keep their seats, eventually with the possibility that constituencies may demand levels of transparency and administrative redress that violate the opaqueness of many private and community foundations.
2. Volunteers: Although the Serve America Act originated in the U.S. Senate with the cosponsorship of the late Ted Kennedy joined by Utah’s Orrin Hatch, the Obama Administration was enthusiastic about the quadrupling of AmeriCorps-type community service opportunities from the get-go. Major advisors to the incoming administration were closely associated with the America Forward group, many of whose key leaders were active promoters of expanded service opportunities. Few people seem to remember a similar kind of expansion of community service promoted under the Bush Administration as Freedom Corps under the leadership of John Bridgeland. Under the Obama Administration, Bridgeland has reappeared as an enthusiastic promoter of expanding stipended volunteerism, even suggesting that volunteerism could be seen as a strategy for combating Great Recession joblessness (even though the demographic profile of people signing up for AmeriCorps, for example, is hardly one of poverty-stricken, jobless families a la the Works Progress Administration or the Civilian Conservation Corps of the Great Depression).
These expanded service programs—the Social Innovation Fund, the Volunteer Generation Fund, and the Nonprofit Capacity Building Initiative—are all lodged at the Corporation for National and Community Service. Although the Corporation functions in some ways like a default “department of nonprofits” for the administration, its primary mission is the promotion of volunteerism, not the building of the nonprofit sector. As a result, even though Corporation staff offer nominally supportive statements about wanting to build and strengthen nonprofit sector institutions, the palpable mission there is one of promoting volunteerism and only secondarily building and strengthening nonprofits—or nonprofit employment. Through AmeriCorps, nonprofits have access to many highly motivated young people who will work for below-living-wage pay for a short time and then cycle on. As a mechanism for building the idea of a nonprofit sector that offers decently paid career path opportunities, AmeriCorps compensation levels don’t do the trick. Moreover, the idea that in the nonprofit sector, all that’s required for the delivery of quality services is a lot of heart and caring, with only a modicum of professional skill training, further undermines the notion that nonprofits constitute a viable career option.
In fact, findings from a study to be published in the January/February 2010 Journal of Economics and Business lead the authors to this conclusion: “Our findings corroborate the view that organizations that use volunteer labor view them as substitutes to lower paid labor, and would increase the use of volunteer labor as the minimum wage increases.” In other words, for some, perhaps many, nonprofit organizations, volunteers are seen as substitutes for rather than supplements to paid staff. The over 61 million Americans counted by the Bureau of Labor Statistics who volunteer some time for nonprofits do so in many cases as expressions of their civic and community engagement, a reflection of one of the strongest democratic purposes of the nonprofit sector. But that doesn’t mean that their civic engagement necessarily leads to a strengthened nonprofit sector. Promoting below-minimum-wage jobs as a nonprofit staff mainstay may in some subsectors actually be counterproductive.
3. Employers: There are 15 million people who work for nonprofit establishments, two thirds of which employ 25 people or less. That statistic caught President Obama’s Council of Economic Advisors flatfooted when they were pitching ideas for how to assist small for-profit businesses in maintaining affordable health insurance for their employees. The head of the Council promised to get back to nonprofit leaders who pointed out the White House’s omission of 560,000 or so nonprofit establishments that might need help in providing health insurance to their paid employees. If it weren’t for the diligence of a few senators, such as Kerry, Snowe, Schumer, Cantwell, and Lincoln, and for the indomitable Betty McCollum in the House, the health insurance challenges facing small nonprofit employers would be a policy outlier, leaving many nonprofit sectors potentially exposed and vulnerable.
But does this suggest some larger blind spots about the nonprofit sector? One problem may be in seeing or appropriately valuing small(er) nonprofits.  According to statistics from the Urban Institute’s National Center for Charitable Statistics, well over 90 percent of nonprofits as of a couple of years ago were below $1 million in annual revenues and $1 million in total assets. The bulk of the nonprofit sector is made up of small, very small organizations. Is that bad? Not from this vantage point. There’s no inherent magic that makes small nonprofits more or less successful than larger nonprofits. But size and scale does mean that nonprofits have to offer more generalized or commodified products and services adaptable to multiple audiences and constituencies. Would the needs of the families of Mexican-American window-washers killed as a result of the attacks on the World Trade Center have been as effectively protected if there had not been the small, focused group, Asociación Tepeyac? Would the needs of Filipina domestic workers in New York City get the attention and advocacy they deserve without the presence of Damayan Migrant Workers Association?
To the extent that the administration has been attentive to the needs of the broad range of the nonprofit sector, the attention has been quite focused on organizations with national scope and visibility, such as City Year, Teach for America, and others that have been replicated and expanded on a national scale. Many of the program initiatives of the administration, such as the Social Innovation Fund at the Corporation for National and Community Service and the Promise Neighborhoods program at the Department of Education, appear to tilt strongly toward organizations with high profiles and plentiful resources (or access to such resources). The one initiative that was clearly focused on smaller organizations, the Nonprofit Capacity Building Initiative, built into the Serve America Act due to the advocacy of the National Council of Nonprofits and others, got a zero in President Obama’s FY2010 CNCS budget request, and despite having been reinserted by congressional appropriators at the legislation’s recommended level of $5 million a year, just got cut to a measly $1 million, with nary a peep of protest from the White House’s nonprofit mavens. In a recession in which small nonprofits are at risk of survival due to sharply diminished levels of charitable giving, the relatively limited concern from the White House—which is focused on nonprofits that can absorb and deploy three quarters of a million community service placements or ante up big resources to make programs like Promise Neighborhoods work—probably makes smaller nonprofits a bit queasy.
In light of these Obama Administration shifts in the federal posture toward nonprofits, what should nonprofits that are less well served by these trends begin to think about as their strategies for engagement at the federal level?
The advocacy agenda for the vast majority of the nonprofit sector might include the following touchpoints:

  • Federal capital infusions directed to smaller, community-based nonprofits that are unlikely to come to the table with bulging assets and funders, to build the role of nonprofits in areas unlikely to be well served by the larger national groups
  • A shift in federal posture toward nonprofits toward a stance that doesn’t cast nonprofits as predominantly vehicles for volunteerism or stipended volunteerism, but as a sector of the economy that provides decent jobs, career paths, and quality programs and services
  • A commitment to capacity-building resources that support smaller, community-based nonprofits, including a recapitalization and expansion of the Nonprofit Capacity Building Initiative and a revived commitment to capacity-building training and assistance to community-based nonprofits through HUD (for Community Housing Development Organizations), the Department of Health and Human Services (through expanding the Strengthening Communities Fund and making sure its assistance reaches smaller, community-based groups), and other agencies
  • Parity with for-profits in health care reform and other arenas where small nonprofit employers need assistance and usually get short shrift or no shrift at all in federal policy
  • A commitment to rebuilding federal agency staff and administrative capacities (particularly in HUD and USAID, both less than admirably supported under the Bush Administration) so that they do not have to off-load many of their federal program implementation responsibilities to intermediaries and regrantors
  • New resource commitments to the Bureau of Labor Statistics, the Department of the Census, and the Internal Revenue Service for vastly expanded research and data collection on the conditions, finances, and programs of the nonprofit sector comparable to the research and analysis done by these agencies on for-profit industries and sectors
  • Expanded stimulus and post-stimulus funding for job-creating programs administered or delivered by nonprofits (such as community health centers, weatherization, and housing development), which, despite some obstacles, are demonstrating quality nonprofit service delivery
  • Expanded support for nonprofits in general, as nonprofits during the pre-recession run-up showed a significantly faster rate of job creation than the private sector did
  • Federal support for state government budgets, as budget cuts at the state level undermine nonprofit service delivery and lend themselves to state level cannibalization of federal funds that are funneled through state agencies

To this point, nonprofits during the Obama era have tended to focus on specific programs—the Social Innovation Fund, the Promise Neighborhoods program, and others—rather than examine the broader meaning of the suite of Obama Administration initiatives for the nonprofit sector as a whole. After just about a year in power, the Obama Administration deserves more than ad seriatim program advocacy by the nonprofit sector. Nonprofits ought to take stock of how the administration really conceives of nonprofits and envisions building a healthier, more sustainable sector.

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Rick Cohen


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