GUEST POST: Are Nonprofits Good for Montana?

[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.

Nonprofit Employees

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.

 

Conclusion

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.

Posted: May 11, 2014 at 6:05 pm

This post was written by Greg Strandberg

39 thoughts on “GUEST POST: Are Nonprofits Good for Montana?

  1. In2it

    The profit motive is useful in many areas, not in others. I would not trust car manufacturing to not-for-profits. Competition drives them to make better products. On the other hand, the profit motive has destroyed the American health care system, making it the worst in the industrialized world. Profit-driven private health insurance must avoid sick people or be subsidized to serve us. the profit motive is the problem.

    I was thinking as I read it does this really need to be written? it’s like watching Police Academy 8.

  2. steve kelly

    Cowgirl,

    Oversimplification may suit your parochial bias for privatizing public forests and support for serial government lawbreaking in general, however, your premis and example offered are flawed.

    I’m not sure, but the Montana Wood Products Assn. may be a trade association, not a true non-profit. At least they don’t offer contributers a “tax-deductible” option on their website.

    The money laundered through foundations to non-profit groups is money not payed in taxes. As in politics, money has found a way to control the agenda of most groups regardless of their mission statement. The non-profit world is always two steps ahead of government, not because of the groups that provide goods and services, but because those wealthy doners are the same wealthy doners who finance poliltical campaigns and keep political parties alive and at each other’s throats. Understand the doner and you will better understand the non-profit mess government has created. It’s complicated.

    This may help. http://www.hks.harvard.edu/fs/phall/Powell%20Essay-Final%20-%20rev.pdf

    1. Greg Strandberg

      I will certainly remember that the next time I want someone to follow my link and then immediately close out that window in their browser.

      A journal article? I can see why the older generation is having such a hard time convincing young people that they know anything about the world anymore.

      1. In2it

        You know, that last sentence you wrote there is enough to make me immediately close out the browser window on you. You’ve got some powerful stupid to overcome there son.

  3. In2it

    High marginal tax rates and estate taxes were behind the movement of so much capital into foundations and not-fors. The impetus behind the taxation is to break up concentrated wealth, the enemy of democracy everywhere and always.The big foundations and trusts are nothing but beards for private fortunes. The recipients of their generosity themselves become beards for the private wealth concentrations.

    Example: Pew Charitable Trusts (I almost wrote “trysts”) are a beard for the Sun Oil fortune. Montana Wilderness Association and Trout Unlimited were voluntary associations of people with common altruistic purpose, and very little money. Pew Trusts and others lured MWA and TU into their orbit with grants that eventually corrupted them. Now those two former conservation groups are also beards for the Sun Oil Fortune.

    Maybe Greg has generally knocked on the door of a large problem here, but I don’t think he got close to the fire in the hearth: concentrated wealth that exited the tax-based economy. The not-for-profit world is a mixture of good and evil, like all of life, much good to be found where there is little money, like all of life. You will find correlation with the source of funding for a n-f-p and the degree of corruption. Little money, high purpose. Much money, hidden purpose.

  4. Dallas Reese

    Mr. Standberg is painting with a very broad brush. Many community based non-profits are small operations that do altruistic work with a limited scope and virtually no budget. These small non-profits rarely have paid staff, rely almost exclusively on volunteers and are funded by small, local donations and contributions to achieve their community based goals. Someone contributing $20, $40 or $100 to one of these groups, because the non-profit performs actions or services that the donor agrees with and can generally see, should be commended and get some benefit for their willingness to make the world a little better place.

    While I can appreciate the concerns raised by large national non-profits (especially 501-c-4 organizations and the tax exempt status of churches and hospitals that need to be included in that category) a distinction needs to be made between local community based non-profits that do good works and those that are “players” in the political arena.

    1. Greg Strandberg

      This is a good point, and there are many points that can be latched onto in this article to show that nonprofits do make quite a positive impact in many people’s lives.

      45,000 employees and $1.5 billion in wages here in Montana is pretty hard to argue with, when it comes to the benefits of those people to their local economies. And of course many people would rather give money to a nonprofit than to the government each year, especially when lots of these organizations fill roles the government can’t or won’t.

      What I think you’re getting at is what I think I’m getting at, and that’s when these organizations start flexing their political muscles.

      Of course you’re going to donate or support those organizations that see the world the way you do, but I worry they might become blinded to their original cause.

      I also wonder if some of those original causes ever want to be solved. I mean, we’ve been trying to “save the ______” forever, but they/it always seem to be in danger no matter how much money is thrown at it.

  5. DonH

    I sit on a board for a local little league, its a non profit. Its pretty much parents and family who raise a small pittance of money and spend an enormous amount of time busting butt so their kids can play baseball and softball. You paint with a really broad paint brush to include us in this witless diatribe. Instead of being such an idiot why don’t you try to volunteer some of your time to these small community non profits that you disdain so damn much and see if that doesn’t open your eyes and mind a wee bit?

  6. Dave Skinner

    Actually, I think Greg’s essay is the sanest thing posted here in quite some time. You may be a Dem, Greg, but at least you think stuff through.
    In2 got it partly right with his story on the cooptation of Pew, which is run by a matured Greenpeacer. I doubt very much that old man JN Pew would approve of how his fortune is being applied, however.
    Steve’s griping is because he can’t get some of that cashola. There are serious monies being pounded through the money laundry by the political “nonprofit” sector, all tax exempt, and all aimed at political ends.
    Then you have “nonprofit” hospitals, that are actually rather profitable, but rather than pay shareholders, they pay big salaries and build fancy infrastructure with the tax savings. There’s a lot of pet cause self-dealing there, youbetcha.
    The fact is, taxation has driven billions upon billions into the pet cause racket, into trusts that hold corporate stocks yet turn around and trash not the bigs, but the entrepreneurial little guys without the high powered attorneys on retainer.
    So — good on you for not thinking “nonprofit” is automatically good in and of itself.

    1. In2it

      Mr. Skinner, Given the results of Pew funding, it is safe to say that the old man would indeed be pleased. They have taken down one environmental group after another with their money. Groups like MWA and Trout Unlimited are in politicians’ Rolodex’s now as “go to,” just as Tester went to MWA and the Wildlife Federation to push his FJRA, the old Burns agenda in a new bottle. They were Pew-compromised, and so ready to collaborate with the Timber Lobby.

      You are too much sizzle, no steak. You seem to think that people are as their titles indicate. You need a bit of a forensic scientist in you to understand politics, to figure these people out, but it is not hard one you know that: Follow the money. When there is money, such as Pew money, people are never as they appear.

      1. Dave Skinner

        It’s all about maintaining the social license. Principled environmentalism is too radical for the monied “philanthropy” sector. Sure, the kooks can still scrape together the money for the lawsuits, acting as useful ideological buffers for those able to constrain their impulses and appear sane.
        The big difference is that those who write the checks, and those who cash them, understand that politics is an incremental game played best with a ratchet, not a suitcase nuke.
        I mean, the entire 501c3 environmental sector is all about maximizing effectiveness while dodging taxes. Effectively, it’s a great subsidy, a great political cloaking device.

  7. Jeff McGrath

    Dude seems clueless about all the non-Profits take zero taxpayer funds – and about all the corporate welfare and subsidies in the private industry. Even if I agreed with him, I couldn’t support someone this clueless.

  8. Mr. Sweeny

    So let me get this straight. Greg decided to run for office as a democrat. He started down the long road of fundraising and knocking on doors, not to mention newspaper adds, door flyers and district mailers. In hopes that he would be elected and could make a difference in his community. And a few weeks before the primary election he chose to submit an unsolicited, off topic opinion piece bashing nonprofits… Using a common teaparty misconception about how non profits work……in Missoula…. I don’t think Greg had any intention of getting elected. FYI: if my child had a special need or a mental illness I would rather the services they received came from a company that is guided by fulfilling their social mission instead of a profit first company. Just saying. VOTE WILLIS CURDY

    1. Abe Froman

      I haven’t been checking in here very regularly, did Greg apologize for the tantrum he threw when he believed cowgirls would not publish his rants?

  9. GalenMcK

    The world of nonprofit organizations is like all such worlds: greatly varied in nature, goals and approaches. To blindly lump churches with conservation organizations with animal shelters with thrift stores with professional associations and on, shows a level of disingenuousness typical of so many in the political arena these days. A lot less broad brush criticism and a whole lot more nuanced thinking would be appreciated.

  10. steve kelly

    Skinner,

    Where have you been all my life, my friend? You’re 24 years too late with that phony claim. I am a volunteer activist — have been since the celebrity mountain bike ride through the Swan Valley clearcuts in 1990. You must have something better to complain about. No? Care to defend the Governor?

        1. Dave Skinner

          Sorry, but everyone has their price. Even you.
          As for knowing Steve well, I have no desire. Never voted for him, that’s for sure.
          Celebrity bike ride with Carole King? Big whoopteedoo.

          1. Matthew Koehler

            Hello Dave: Just pointing out the fact that the 1990 celebrity bike ride Steve mentioned didn’t include Carole King. Rather, it was a 150-mile bicycle tour of the Swan Valley – organized to protest clearcutting in the area – and featured the Grateful Dead’s Bob Weir, John Oates (of Hall and Oates) and mountain biking icon Gary Fischer. I know, “Big whoopteedoo,” but at least you could get the facts right.

            1. Dave Skinner

              Lot of good the protest did, eh? Plum Creek slicked it all off anyway.
              Only decent song GD ever did was touch of gray.

          2. In2it

            Really, then. What is my price, Skinner?

            Your comments are petty and stupid, and you are backing away as you make them, looking for the exit. I trust we’ve heard the last of you, dog.

  11. Norma Duffy

    Nonprofits Have saved many a friend and family member Greg! I gotta say after coming here a little late after your post… I am not amused.

    Real Nonprofits exist in bountiful numbers that help people every day. They cover a lot of cracks Government doesn’t, to keep regular people from falling into Obscurity.

    AS with anything Human, there are some assholes out there that don’t do what they say…. the wheels of justice stopping those kind of snakeoil charities might be slow but they do get there do and roll of justice upon them, eventually. Better you had called the IRS, and pointed out the ones you thought worthless than to scare folks about donating. Your rant does not help here.

  12. In2it

    Good discussion here Cowgirl. You should publish more guest posts and anyway, maybe it is not just me, but does it rankle anyone else that Cowgirl had to tell us she did not agree with the content, as if she is some sort of fair arbiter and noble soul? People who you don’t agree with really spice this place up.

    More so than your usual noun, verb, and Tea Party rants.

    1. Greg Strandberg

      This post has certainly gotten people riled up, but there’s nothing wrong with that. Maybe we can think of issues in a new way.

      I hope we can have more posts like this. Perhaps if people put out a topic list we could see what’s the most popular. There’s already been the offer for just about anyone to write a guest post, so choose your topic and run with it.

      I’m sure there are lots of issues the papers are missing.

      1. In2it

        I think you goaded her/him/them into letting you write here. As I see it, and I am happy to be proven wrong, this website is a Democrat site, the purpose is to keep party loyalists occupied with the evildoers of the other party. Their motto should be “look there, not here,” “here” being the corruption of their own party. It’s a management tool.

        I don’t see guest posts in that situation, unless they are done by dittoheads You were the exception, and trust me, you’ll never get to do it again.

  13. Ben Darrow

    Boy I cannot wait until the primary is over and I don’t have any hesitation saying that either Heather or Willis Curdy is going to come out on top. Willis Curdy, for his terrific work for years for democrats in Missoula, would be my vote if I lived in the district.

    Really, this post is a joke — a complete waste of time. Sure, I could google a few things and provide links about its pros and cons or about how similar it is in style to all the other drivel that Greg throws at the wall, but really what would be the point.

    Montana has many terrific nonprofits — including some who fight hard for SNAP, and some with no staff who still make a difference — Greg doesn’t know what is going on in the trenches and he probably never will.

    The comparison to California is strikingly shallow; California has over 38 million people and 175,000 nonprofits, while MT has 10,000 nonprofits and 1 million people. That means we have over twice as many nonprofits per capita, and you can can see it in how nonprofits contribute to Montana’s economy.

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