Showing posts with label #nonprofitalmanac. Show all posts
Showing posts with label #nonprofitalmanac. Show all posts

The cosmology of private resources for public benefit

Neil deGrasse Tyson has brought back Carl Sagan's Cosmos. When this television show first aired 30 years ago, most people knew nothing about space and the images shown had never been seen before. It's a different task to bring this program back today. Everyone on earth under the age of 45 has only lived during a time of space exploration. Yet the program still delights, because our knowledge has advanced and we can see both the magnificence of the whole and wonder at all we don't know.

When I dove into the numbers from The Urban Institute's Nonprofit Almanac 2012 yesterday I made a classic mistake - one I'm usually telling others to avoid. I got lost in the numbers that were presented, and failed to step back and ask "Is what is being counted here what really matters?" "What are we not asking, what do we not know?"

The data that the Almanac presents are important and they raise a number of important questions, including and going beyond those I posted. But they do not represent all the ways we use private resources for public benefit and their meaning and implications will always be limited taken out of this broader context. As commenters on the post reminded me - what about DAFs? There are tens of billions of dollars in donor advised funds - yet they are nowhere in the Almanac.

This is important because DAFs have been with us for decades, and we still don't count them. The questions I raised about political funding - which are attributable to a much more recent phenomenon of explosive "dark money" flowing through organizations chartered as nonprofits - is nowhere to be seen. These flows matter, but you'd never know to think about them from the data presented. This is similarly true with funding from impact investments, and with the many types of social businesses, hybrid enterprises, and "for benefit" corporations putting those funds to work.

In the very first Blueprint (2010) I shared my attempt at showing the different, but related and mutually influential, sources of funding and enterprises that make up a more complete universe of how we use private resources for public benefit. I argued then, and am still arguing today, that we need to consider the funding and the enterprises as part of interconnected space (we've dubbed it the social economy) in order to really understand who's doing what, if revenue is growing or declining, and where the boundaries of different sectors should be drawn. Here's a version of that picture (taken from the Blueprint 2012 and used in just about every speech I've given since 2010)

The galaxies represent the enterprises of nonprofits, political giving and impact investing. The spaceman represents you and me (Americans). The money we deploy to pursue our visions of "public benefit" can go to any or all of those galaxies - we choose whether it's nonprofit charitable giving or political funding or investing. The only way to really understanding the pieces is to understand the whole. Unfortunately, we still focus independently on the different galaxies. The Urban Institute studies nonprofits. The Global Impact Investing Exchange studies impact investing. The FEC, political campaigns and television networks track political spending. Others are beginning to track the sharing economy. It's time to pull them all into one map.

I've used this graphic so often I hate it. I've spent five years trying to map the changes in this universe - it's high time we all started working to map the fullness of these phenomenon. If Neil deGrasse Tyson can bring back Carl Sagan's Cosmos, surely we can update our understanding of how we use private money for public benefit - and track the data accordingly.

We need data on nonprofits, benefit businesses, and politically active social nonprofits in one place, tracked over time, so we can answer questions such as - "Is there more or less money involved?" "More or fewer enterprises?" "Who does what?" and, most important, "How should we monitor, oversee, provide incentives for, and regulate all of this?"

More of everything except foundations and credit unions

There are 31 subsections of the 501 (c) section of the U.S. tax code. This is the section, and its many subsections, that categorize tax exempt organizations - usually described as nonprofits. The largest subsection (by far) is 501 (c) (3) - which includes "religious, charitable, and similar organizations"* and its further subdivision, which includes private foundations.

Other subsections include (c) (4) - Civic leagues and social welfare organizations; (c) (5) - Labor, agricultural and horticulture organizations; (c) (6) - Business leagues, chambers of commerce, real estate boards, and trade boards; (c) (13) - Cemetery companies; (c) (19) - War veterans organizations; (c) (21) Black lung benefits trusts; and (c) (40) Religious and Apostolic organizations. 

Note Section 501 (c) does not include all churches or associations of churches, as these need not register with the IRS.

Recent headlines about the just released 2012 Nonprofit Almanac are focusing on the growth of nonprofit organizations - you can view highlights of the report here. Headlines include the breakneck pace of nonprofit formation in the last few years - which has been truly astounding. For example, from my read of the Urban Institute's data:

  • Only two categories (of the 31) of nonprofits got smaller in number between 2010 and 2012 - private foundations and credit unions. The number of private foundations dropped from 101,690 to 98,746.  The number of credit unions dropped from 2,816 to 2,472.
  • Every other category grew. Some enormously. In two years:
    • The number of 501 (c) (3) nonprofits increased by 260%, from 366,086 to 958,740
    • The number of 501 (c) (4) nonprofits almost tripled, from 30,225 to 86,916
    • 501 (c) (5)s increased from 22,327 to 46,812 (200% growth)
    • 501 (c) (6)s grew in number from 36,442 to 63,998 (175% growth)
    • Cemetery companies (c) (13) tripled - from 2,635 to 8,173
    • Organizations not classified in any of the 30 subsections grew from 395 to 126,461. I can't even calculate that percentage increase!
Some will look at these data and say, perhaps, hey we're not bowling alone anymore! After all, the number of social and recreational clubs ((c) (7)s) grew from 19,835 to 47,210.

Others will point to changes in public funding for services, the aging of the population, the return of veterans from two wars (Veteran organizations grew from 8,449 to 32,286) to explain some of the growth. The Affordable Care Act had an impact on hospitals and insurance companies and the recession of 2008 played some role.

I wonder if the classification or reporting systems changed, as the type of growth noted above - in a two year time frame - is astounding. I couldn't find an answer to this question in the study - would love details if anyone knows more about this.

I grew up in the Watergate era and was taught to follow the money. How is the growth in C4s, C5s, and C6s linked to the growth in funding for independent expenditures in political campaigns? This is the question I'd like answered. I've argued for years that the Citizens United case of 2010 was going to change the face of the nonprofit sector. By my math, the three types of nonprofits most effected by that Supreme Court decision (C4, 5, and 6) increased in number, collectively, by 108,692 newly registered organizations in 24 months. Given that every other category of organization but two also grew, and C3s grew by more than 250%, this represents a smaller percentage than in 2010. Is their growth simply in line with overall expansion? The real question is about the money they attract - is it an exclusive new source of funding for these three types of organizations?  Will the rate of growth in these organizations track other changes or take on a life of its own?

*Language from The Urban Institute's Nonprofit Almanac 2012, just released.