[Note: This is a guest post from Greg Strandberg who is a candidate for Missoula’s. Strandberg is running for House District 98 against fellow democrats Heather Cahoon and Willis Curdy. Though I do not agree with the content of this post, it is here because voters deserve to know what those who are running for office really believe.]
I’ve said repeatedly on this site that nonprofits aren’t really worth much. This angers a lot of people.
Why is that? Why is it that we think nonprofits are such a good thing?
Think about that for a moment. I’m willing to bet you have no idea what a nonprofit is, what it does, or why on earth it wouldn’t be trying to make a profit.
It’s that last point that really gets me. I mean, if there’s no profit incentive, what incentive is there to do anything? After all, this isn’t communist China, right?
Let’s take a look at nonprofits and why you might want to think twice about them and their role in our national economy, and right here in Montana.
What are Nonprofits?
According to the National Center for Charitable Statistics, there were more than 1.4 million non-profit organizations in America in 2012. Of those, fewer than 950,000 were public charities while about 97,000 were private foundations. The other 365,000 were civil, fraternal and chamber of commerce organizations.
In 2010 9.2% of all the wages and salaries in the US were paid by nonprofits, and in 2012 they accounted for 5.5% of GDP.
One common problem you’ll find with nonprofits is their penchant for unbridled growth. They really can’t be blamed for this – it’s in their nature. After all, they can’t make a profit, no shareholders or owners can get that extra money, so it all has to be turned inward to the organization.
Because these organizations cannot make a profit they will continually have to grow, increase their fundraising, and push for the creation of evermore grants to pay for their operations.
Funding for Nonprofits
Another problem is funding. Funding for many nonprofits actually comes from the government in the form of grants. Yes, that’s taxpayer money being used. It becomes a little ironic when you think of environmental nonprofits holding up government environmental assessments.
Of course the government isn’t the only place nonprofits get their money. They get it from wealthy donors and even other charitable organizations. Yes, nonprofits will donate to other nonprofits, kind of like a virus that spreads, feeding on its host.
Now, the whole nonprofit relies upon that funding for existence. Without that funding they could go out of business, if an entity that was never in business can…well, you get the idea.
Here’s where it gets a little tricky though. If funding becomes unreliable then those nonprofits face the same problems that businesses do – budget problems which lead to staff layoffs and program cuts.
Sometimes the tax-exempt status itself can even come into jeopardy, a real no-no. I mean, pay taxes? C’mon! We’re helping people here, giving them what they want, and providing a service. Right, Bub – get in line behind all the other organizations on both sides of the aisle that claim the same thing.
Nonprofits aren’t going anywhere, either. Since 2000 their revenue has increased by 40% they’ve only employed more people. This is troubling.
From 2007 to 2009 nonprofits saw a 2% rise in the number of employees working for them. During the same time, for-profit organizations saw their employment numbers fall by 4%. With those kinds of numbers it’s no surprise why nonprofit employment is rising – those workers can’t find jobs anywhere else.
That trend in employment will only continue. In 2013, 44% of nonprofits expected their employee ranks to rise. That means more workers needing more salaries that come from ever more grant and donation money.
Of course there are pros and cons of working for nonprofits, just as there is for any type of job or industry. But what may offset nonprofit’s hiring ability during the recession is the ‘burn-out’ rate that many of those workers experience. After all, changing the world can be quite frustrating.
Add to that the lack of pay. Saving the whales or feeding the children probably won’t put much food on your own table, so the skill-level of nonprofit employees may be lower. After all, you get what you pay for, and if these individuals are working for less than they should it tells me two things – they’re selling themselves short, and if that’s the case, it isn’t a far jump to believe they’re selling others short as well.
Nonprofits and Competition
Hospitals and schools are two areas that nonprofits spend a lot of time working with. A prime concern, even in Washington, is that many of these nonprofit organizations are gaining an undue advantage over for-profit companies, even when the services of those nonprofits are no different from those given by for-profit companies.
What’s such a concern is how much tax revenue simply vanishes because nonprofits are doing the job for-profits used to, and perhaps should be doing.
So that brings up the question, are nonprofits competing with for-profit companies, and if so, is this fair? Since one is getting free money and the other isn’t, is this ethical or even legal?
Nonprofits in Montana
So what about nonprofits in Montana? Well, there are more than 2,000 nonprofit employers, according to the Montana Nonprofit Association, and they employ 45,000 people. What’s more, that creates $1.5 billion in wages each year.
But let’s hold on a second. Are these really the engines of economic growth that they sound like?
Most nonprofits in Montana don’t have a whole lot of money. In fact, 81% have less than $100,000 to throw around each year. When you factor in payroll, operating expenses, and other costs not associated with the actually recipient of the giving, well gosh, you just don’t have a whole lot of these organizations.
The number of nonprofits that actually pay wages and file a tax return each year are 253. Here’s what Susan Hay Patrick said on Montana Public Radio:
For whatever reason, people in Missoula have created lots of nonprofits – frankly, it’s too easy to do – but a great many of those organizations never get off the ground. They don’t hire staff, or raise enough money to really accomplish anything, but they’re still registered with the Secretary of State. Counting only the nonprofits that pay wages and file tax returns gives us the much more manageable number of 253.
Now, 253 is quite a step down from the 2,000 we saw earlier. So in that regard, employees working for most of these organizations aren’t even getting paid. I guess that can really help out local communities with volunteering efforts and standing around, but it sure doesn’t help that employee earn and income, pay taxes, and build our state. The opportunity costs are immense.
Thank God we’re not like California, however, where in 2008 there were more than 157,000 nonprofit organizations, Montana had just under 10,000 at the time.
Have Nonprofits Lost Their Way?
Nonprofits have lost their way. What once they were united in – helping the poor, saving the environment, or feeding the hungry – they now clash over while trying to please their own narrow-minded interest groups.
Pablo Eisenberg, a senior fellow at the Center for Public and Nonprofit Leadership at Georgetown Public Policy Institute, had this to say about nonprofits in 2013:
But most nonprofits continue to remain satisfied in pursuing their more-narrow agendas, whether related to the environment, education, or gay marriage. They show little concern about the ravages brought on the country by income inequality, homelessness, hunger, and unemployment. Their executives are rewarded by their insensitive boards only for the work they do on their narrow agendas. The indifference of political leadership to matters of poverty only reinforces the negligence of nonprofits.
Why would someone who’s typically been on the side of the nonprofits say such a thing? Probably because he’s smart enough to read the writing on the wall and see how nonprofits have become corrupted.
This is especially evident with their refusal to do anything regarding the massive food stamp cuts we saw months ago.
As Eisenberg says:
“It is an embarrassment to our country that the nonprofit organizations created to serve society, let alone the political system, are so little concerned about economic inequity and social justice. How did nonprofits lose their sense of decency?”
It’s true that some nonprofits tried to save our food stamps, but many gave a token resistance, if even that.
“Many followed the lead of Independent Sector and the National Council on Nonprofits,” Eisenberg says, “which put all of their energies into fighting to preserve charitable deductions.”
The board of directors these organizations have sure don’t help. Take a nonprofit focused on ending hunger. Many will have a board of directors made up of individuals that don’t know a thing about going hungry or solving that problem. But they sure know how to raise money, and when it comes to nonprofits, nothing is more important than that.
Perhaps most alarming is how these boards often push nonprofit executive directors around. So you’ve got someone that probably knows how the organization works being told what to do by people that only know how to ask for money.
Douglas LaBier, the director of the Center for Progressive Development in Washington, D.C., had this to say:
“One consequence is that nonprofit organizations recognize the need to become more efficient and focused; and need to apply management and fiscal practices from the for-profit realm. Such strategies are good steps when they work. But they can also create new, confusing conflicts for the organization as well, if new, “business-type” practices appear to contradict the organization’s mission and values. That can generate confusion or suspicion among staff regarding the leadership’s intent and trustworthiness.”
The truth of the matter is if you want to change the world, starting or working for a nonprofit is probably the worst thing you can do.
Far and away the best chance at change is with a for-profit company, one that has reliable sources of revenue and the debt and equity needed to grow.
What you have to figure is that many nonprofits would never want to work for a profit because this would wipe out their grant money, you know, that money taxpayers are footing?
Let’s take a look at two nonprofits in Montana and how they’ve been using that grant money.
The Wild West Institute
You’ve probably been hearing a lot from this organization lately, particularly in regard to Governor Bullock’s decision to do some fast-track logging in Montana, which is his right under the new Farm Bill.
The Wild West Institute has been making its presence known in the Missoulian, speaking out against this action. They’ve been quite vocal in their criticism of this ruling, but I’m left wondering what they expect to accomplish.
Well, that’s not too hard – just look at what nonprofits often do to get their way. Yep, they sue you, ensuring nothing gets done. Remember, these organizations aren’t driven by the profit-motive, so any thoughts of decreasing profits or stopping people from working and getting paid doesn’t really factor into their considerations.
Montana Wood Products Association
On the other side of the coin you’ve got the Montana Wood Products Association. Here’s another nonprofit, one receiving grant money from the government. And that grant money is being put into direct opposition with other grant money, that given to The Wild West Institute.
So now our tax dollars are being spent so two organizations can stand in the middle of the road blocking each other’s path while traffic around them comes to a halt. How is that good for Montana?
That’s the thing with nonprofits – they often don’t get a lot done but name-calling and finger-pointing. Government officials and for-profit companies are the ones actually doing things, not just talking about them.
As you can see, nonprofits make up quite a significant portion of our economy in America and in Montana.
At the same time, many are answering only to a narrow-minded board of directors, individuals more intent upon raising money than solving their goals. After all, solving them would ensure the organization would no longer need to exist. And then grant money would dry up.
It’s a Catch-22 for nonprofits, and should ensure they’ll be around for some time to come. I’m not sure that’s best for Montana.