The tough economy means charitable giving is down, and many non-profits are struggling to stay afloat. At the same time, budget cuts in states and cities are rolling back services, creating an even greater demand for the work of nonprofit organizations. We’ll consider a number of new challenges non-profits are facing close to home and across the U.S.

Guests

  • Chuck Bean Executive Director, Nonprofit Roundtable of Greater Washington
  • Stacy Palmer Editor, "Chronicle of Philanthropy"
  • Tim Delaney President and CEO of the National Council of Nonprofits

Transcript

  • 12:06:50

    MR. KOJO NNAMDIFrom WAMU 88.5 at American University in Washington, welcome to "The Kojo Nnamdi Show," connecting your neighborhood with the world. We all know money doesn't grow on trees. Problem is, it hasn't been growing anywhere lately. Budget cuts have hit state and city services across the country hard. The public safety -- public health safety net provided by nonprofit groups is stretched thin as charitable organizations deal with increased demand and budget woes of their own.

  • 12:07:27

    MR. KOJO NNAMDIIn Virginia, a new wrinkle emerged in January when Atty. Gen. Ken Cuccinelli ruled that the commonwealth's constitution forbids state funding for charitable organizations. Nonprofits, state agencies and lawmakers are trying to figure out what's next. Joining us by telephone from Richmond, Va., is Rosalind Helderman, a reporter with The Washington Post who covers state government in Virginia. Ros, thank you so much for joining us.

  • 12:07:55

    MS. ROSALIND HELDERMANThanks so much for having me.

  • 12:07:56

    NNAMDIA ban on giving state money to charitable organizations is pretty clearly spelled out in Virginia's state constitution. Had it just been ignored until this January?

  • 12:08:07

    HELDERMANWell, the short answer is basically yes. Lawmakers have for many years given money to nonprofit groups in a variety of ways. One way has been to characterize some of them as cultural and historic organizations and thus not really charitable organizations as defined in the constitution. But basically, no one really ever asks the question, and so no one ever got this answer.

  • 12:08:33

    NNAMDIAtty. Gen. Ken Cuccinelli didn't just wake up one morning and decide to look into this because he had nothing else to do. How did a blog helped bring this ruling about?

  • 12:08:44

    HELDERMANThat's right. There's a libertarian activist in Virginia who writes for a blog. His name is Norman Leahy. He's very smart about state government issues, and he had raised this issue over the last several years. He was in the Richmond area. He contacted his own local delegate, a doctor in the Richmond area, John O'Bannon, and convinced John O'Bannon to request an opinion of the attorney general. And when the attorney general gets an opinion from a lawmaker, the law says he responds to it.

  • 12:09:17

    NNAMDIHow many organizations are affected by this ruling?

  • 12:09:20

    HELDERMANWe're still trying to figure that out. The original opinion related to two organizations that the governor had requested money for, the Virginia Food Banks and a group in the Hampton Roads area called Operation Smile. That issue was dealt with. He had requested the money, and the general assembly simply didn't appropriate it. So they dealt with those two.

  • 12:09:41

    HELDERMANIt later came out that as soon as the attorney general's opinion came, the governor's chief of staff sent an e-mail to all state agencies asking them to scrub their budgets and figure out what other organizations this could affect. They came up with dozens and dozens and dozens, and they're reviewing them one by one to see if they're constitutional.

  • 12:10:00

    NNAMDIDozens and dozens and dozens, it's my understanding that the list ran 890 pages.

  • 12:10:06

    HELDERMANThat's correct. Some of the entities on that list, I think, were organizations that were not actually nonprofit. No one really thought they were, but, yes, it was 890 pages, was the original list that they started with to start whittling it down.

  • 12:10:21

    NNAMDII should point out that as recently as 2008, Virginia doled out more than $27 million to some 300 groups around the state. That funding, however, largely dried up as the recession led to deep state budget cuts. But a lot of nonprofits had hoped state dollars would return as the economy improved -- improves. That said, some groups, Ros, have already found a way around this. What have organizations in Virginia done to keep their funding?

  • 12:10:46

    HELDERMANYeah, that's right. The 300 you were referring to were largely cultural organizations, like symphonies and ballets and historic sites, and that has dried up with the economy. What's not dried up or not entirely has been funding to groups like free clinics and community health organizations that are part of the public health safety net. And I think everyone or at least the general assembly, the governor and the attorney general, all agree that money is pretty necessary.

  • 12:11:16

    HELDERMANAnd so they've been working on sort of a workaround. The attorney general has said if the state can write a contract with a nonprofit in which the group is providing some particular service that's being paid for, that's OK. What is not OK is just a direct grant -- here you go, here's some money.

  • 12:11:32

    NNAMDICultural organizations are trying to figure out what this ruling means for them. What's the outlook for those groups?

  • 12:11:38

    HELDERMANNot so great seems to be the word. I mean, I think that the lesson of the health groups is that if lawmakers want to make it happen, they can probably find a way to legally do so. What hurts the cultural groups is that there are a lot of legislators who do not in fact think that that's an appropriate use of state money, anyhow, and so they're not going to be particularly looking for the workaround.

  • 12:12:01

    NNAMDIThis is not an issue that breaks down along party lines. Why are legislators on both sides of the aisle worried about this?

  • 12:12:09

    HELDERMANWell, I think it's because, first of all, a lot of those groups are located in people's districts. They do good work in those districts, and, you know, some of the legislators have long relationships with them. I would think of former delegate Vince Callahan, a Republican from Fairfax County, who for years and years was able to secure large amounts of state funding for Wolf Trap, an educational program run by Wolf Trap. So I think that's one reason.

  • 12:12:34

    NNAMDIWe're talking with Ros Helderman. She's a reporter with The Washington Post who covers state government in Virginia. And we're talking about charitable giving. Joining us in studio is Chuck Bean. He is the Nonprofit Roundtable of Greater Washington's executive director. He has the -- he has led the organization since its inception in 2002. Chuck Bean, good to have you with us.

  • 12:12:58

    MR. CHUCK BEANThank you, Kojo. Good to be here.

  • 12:12:59

    NNAMDIAlso with us is Stacy Palmer. She is the editor of The Chronicle of Philanthropy. She's served as a top editor since the newspaper was founded in 1988 and has overseen the development of its website, philanthropy.com, and Philanthropy Careers. Stacy, thank you for joining us.

  • 12:13:14

    MS. STACY PALMERHappy to be with you.

  • 12:13:16

    NNAMDIAlso with us is Tim Delaney. He's president and CEO of the National Council of Nonprofits. That's a national, state and local network that operates through 36 state associations across the country. Tim, thank you for joining us.

  • 12:13:28

    MR. TIM DELANEYDelighted to be here. Thank you.

  • 12:13:30

    NNAMDITim, Virginia no longer has a state association as a part of your organization. Why is that, and how does it connect to this ruling, if at all?

  • 12:13:38

    DELANEYI don't think it's directly related to the ruling. However, as you point out, the former state association in Virginia is no more, and it's really because of the economy. The economy has been wicked. We all see how it has hurt the for-profit market, but what too many Americans are unaware of and certainly policymakers don't fully appreciate is the extent to which our governments rely upon nonprofits to deliver services, and our communities desperately rely upon it.

  • 12:14:14

    DELANEYAs the unemployment rate has doubled in America from around 4 to 5 percent to around 10 percent, it's almost double the amount of demand on our services. At the same time, the foundation giving has been down. Individual giving has plummeted. Corporate donations have almost evaporated. And then, we've also incurred a lot of problems with governments not paying on the contracts that they owe nonprofits.

  • 12:14:35

    NNAMDISo this is not a unique situation we're talking about in Virginia?

  • 12:14:39

    DELANEYNo, it is not. It is a nationwide phenomenon.

  • 12:14:43

    NNAMDITo what extent -- what stumbling blocks are you coming across -- legal stumbling blocks that nonprofits face in terms of funding?

  • 12:14:51

    DELANEYWell, the legal stumbling blocks...

  • 12:14:54

    NNAMDISimilar to the one in Virginia, if at all?

  • 12:14:57

    DELANEYVirginia, I think, is rather unique. And there, the attorney general has read the state law very narrowly and has, I think, read it fairly because the constitution says it...

  • 12:15:12

    NNAMDIIt is what it is. (laugh)

  • 12:15:13

    DELANEYIt is what it is. And they don't want to just have any lawmaker handing out free money to anybody, but not just to charities, also not to for-profits. But what the attorneys general and courts and many other states have done is to say let's look at these gift clause provisions or anti-gift clauses and make sure that the public is receiving some sort of benefit.

  • 12:15:35

    DELANEYSo I would actually encourage the attorney general of Virginia to take the extra step that all the other state attorneys general and courts across the country have done to say let's look at the public value. Do we really want to have the taxpayers of Virginia to have to be replacing all these nonprofit groups that have been going under because the state is not paying on contracts?

  • 12:15:56

    NNAMDIWe're talking about charitable giving and nonprofits, and inviting your calls. 800-433-8850. Do you think that states and cities should support charitable organizations? Why, or why not? 800-433-8850. Or you can go to our website, kojoshow.org. Join the conversation there. Send us a tweet, @kojoshow, or e-mail to kojo@wamu.org. Chuck Bean -- and I should remind listeners or tell listeners that Chuck Bean serves on WAMU's community council.

  • 12:16:24

    NNAMDIAnd, Chuck, that's relevant because this may be a question of semantics, but what's the difference between a charity and a nonprofit, relevant because it's my understanding that WAMU is a nonprofit but not a charity?

  • 12:16:37

    BEANWell, a charity is a 501 (c)(3) nonprofit organization that it's a corporation. You know, that really means it's a public benefit corporation. It's there to provide a benefit to the public. You know, WAMU is part of American University. American University in that case is the nonprofit organization and is providing a public benefit to the citizens of Washington D.C., just as is Martha's Table in D.C. and UCM in Virginia and other organizations throughout the region.

  • 12:17:05

    NNAMDISo there's no difference between a nonprofit and a charity?

  • 12:17:08

    BEANWell, a charity would be a looser term, and a nonprofit organization or a 501 (c)(3) would be the more increasingly precise term.

  • 12:17:16

    NNAMDIStacy, states and cities may think private donors will step in to fill the void if they cut funding for programs. Is that actually happening?

  • 12:17:25

    PALMERNo. As Tim mentioned, there's been a real drop in the amount that individuals are able to give, even though they're trying to be as generous as possible. This economy has hit so many people hard that we see a real drop in giving. We're starting to see somewhat of a comeback in 2011 and it’s certainly better than it was, but it's not strong. So the idea that government is huge in comparison to what private philanthropy is, so it's just not really feasible to have all of that made up by private gifts.

  • 12:17:53

    NNAMDIAgain, you can join the conversation at 800-433-8850. How has the economic downturn impacted your charitable giving choices? 800-433-8850 is the number to call. Chuck, 85 percent of nonprofit leaders expect to see more demand for services this year. About half of them don't think they can fully meet the need. How have nonprofits kept pace with demand in the wake of the recession?

  • 12:18:21

    BEANThat is it, Kojo. Times are tough, and needs are growing. And I think it really comes down to partnerships to answer your question. You know, there's a saying in real estate that it's all about location, location, location. Well, in today's economy, I think it's got to be all about partnerships, partnerships, partnerships. But in this case, it's really got to be about partnerships between nonprofits and government. And there's some steps forward throughout the region, and partnerships with government, I think the step -- I think, in Virginia, it's a step backward.

  • 12:18:50

    NNAMDITim Delaney?

  • 12:18:52

    DELANEYI just want to amplify on what Stacy and Chuck have just said, and that is let's go back and look at the data and the partnership between nonprofits and government. Because nonprofits are local and involved in the communities, they don't have to go with -- through all the procurement laws and all the hiring laws and everything else that government does. They're much more facile and can meet local community needs.

  • 12:19:17

    DELANEYAnd the data shows that 29 percent of the revenue from the -- for the entire nonprofit sector collectively, 29 percent comes from government contracts. Only 1 percent comes from foundations. And so policymakers are saying, gee, we want to cut the amount of money that's going to provide direct services for our communities. They're, in fact, expecting foundations and nonprofits to just come up with money that doesn't exist to replace what government has taken away, and that is hurting people in communities.

  • 12:19:49

    NNAMDIWe're going to take a short break. When we come back, we will continue this conversation on charitable giving and invite your calls. If you work for or if you volunteer with a nonprofit, how has the economy impacted your work? Call us at 800-433-8850 or shoot us an e-mail to kojo@wamu.org. I'm Kojo Nnamdi.

  • 12:22:04

    NNAMDIWelcome back to our conversation on charitable giving. We're talking with Tim Delaney. He is the president and CEO of the National Council of Nonprofits. That's a national state and local network that operates through 36 state associations across the country. Stacy Palmer is the editor of the Chronicle of Philanthropy. She has served as the top editor since the newspaper was founded in 1988 and has overseen the development of its website -- websites, philanthropy.com and Philanthropy Careers.

  • 12:22:32

    NNAMDIAnd Chuck Bean is the Nonprofit Roundtable of Greater Washington's executive director, who has led the organization since it's inception in 2002. If you work or volunteer with a nonprofit, how has the economy impacted your work? You can call us at 800-433-8850. Or what do you take into account when you decide where to donate your hard-earned money? 800-433-8850.

  • 12:22:57

    NNAMDIChuck Bean, 85 percent of nonprofit leaders expect to see more demand for services this year. About half of them don't think they can fully meet their need. How have nonprofits kept pace with demand in the wake of the recession?

  • 12:23:09

    BEANYeah, Kojo, we're seeing that on the ground, you know, the Route 1 Corridor in Fairfax with United Community Ministries. You know, a few years ago, people return an average of 15 times for emergency food. Now, that number is up to 38. Here, from Volunteers of America, the Chesapeake region, and they work from Baltimore to Richmond, and they're seeing the highest demand for services in its 115 years.

  • 12:23:34

    BEANYou know, in this economy, everybody is being asked to do more with less, and I really think that points to partnerships. But there comes a point when we can only do less with less. And we're seeing that in -- on the ground with foreclosure counselors, we're seeing that with -- WAMU had a story this morning about 10,000 District teens will not be serving this summer compared to last summer. And, you know, we're getting to a point where less means less.

  • 12:24:01

    NNAMDISome cities are trying, Tim, to make money off of nonprofits. What are they doing in Boston, for example?

  • 12:24:09

    DELANEYWell, the elected officials in Boston have decided that it is to their advantage to try to take money from nonprofit missions, money that can be used in local communities by imposing, really, through a coercive system, a mandatory voluntary payment in lieu of taxes process. And you might think, well, how can that be a mandatory voluntary program? Well, there's already a voluntary program in place that if organizations wanna pay extra into the government to provide support for local governments that have been suffering from this economy as well. We certainly don't deny that.

  • 12:24:50

    DELANEYBut to then impose upon them a requirement that is contrary to state law in Massachusetts and contrary to state law in all the other states, that nonprofit charitable property is tax exempt, to then come around that and try to evade what state law says by saying, you have to pay this, by then sending them a simulated tax bill to, right now, the largest 40 nonprofits, and then they're gonna be expanding out beyond that in the next year, nonprofits are going under right now, such as the State Association of Virginia. And so, to then impose upon them a tax on top of everything else when, legally, we are tax exempt doesn't make sense.

  • 12:25:32

    NNAMDIHere is Lucia in Silver Spring, Md. Lucia, you're on the air. Go ahead, please.

  • 12:25:38

    LUCIAHi, Kojo. I actually used to work for a nonprofit actually in downtown D.C., and it was a homeless shelter. And not only because of the economy they laid me off but, because it was a homeless shelter, what saddens me the most is the fact that they cut the food for the homeless. So for me, that was, like, I could care less, like I could find another job, but they cut the food that were feeding over 250 homeless people on a daily basis.

  • 12:26:07

    NNAMDIAnd so that was your major concern?

  • 12:26:10

    LUCIAYeah. So, like, sometimes, like, we don't think about, you know, the little people that are actually hurting, you know? Professionals like us, we can find another job in other locations. But the bigger picture is that still the managers of these nonprofits make all this money, yet they cut the people that are benefiting from their services.

  • 12:26:33

    NNAMDIChuck Bean, care to comment on that, the salaries paid to executives of nonprofits?

  • 12:26:38

    BEANWell, to respond to the cuts, there's gonna be a number of tools that nonprofits are gonna look at. One, or course, is gonna be taking a line of credit. It might be freezing salaries, they're gonna look for streamlining operations. I think the last thing that any nonprofit wants to do is reduce its programs or reduce its staff. What I see in our members, though, is there's competition for the brightest minds to come up with the most ingenious programs in a really challenging environment.

  • 12:27:11

    NNAMDIThank you very much for your call, Lucia. You, too, can call us. Tim, you wanted to say something?

  • 12:27:15

    DELANEYYeah. I just wanted to add to what Chuck said. The Urban Institute last year worked with us, at the National Council of Nonprofits, on our state associations in doing the nation's first comprehensive analysis of government contracts. And, in the course of doing that, the Urban Institute did a terrific job of documenting the impact of the recession on nonprofits and found that the action that nonprofit boards and leadership take is the first thing that gets cut are services and salaries to nonprofit employees.

  • 12:27:51

    DELANEYThey freeze or reduce the employee salaries, then they reduce a number of employees, then they reduce their benefits, and the very last thing that they do is they reduce their programs and services to the broader community. So we are mission based. But many policy makers assume that nonprofits are all volunteer when, in fact, we're 10 percent of the American workforce. We are a huge portion of our (unintelligible).

  • 12:28:14

    NNAMDIAnd the notion that executives or workers in nonprofit organizations do not feel the effects of the recession in their own compensation is a false notion.

  • 12:28:24

    DELANEYAbsolutely. An example, the State Association of Virginia, that exists no more, had three employees. It no longer has three employees. So that's more services not being provided, and its employment losses whenever -- all policymakers talk about wanting create jobs but forgetting that nonprofits are a great place for job creation.

  • 12:28:47

    NNAMDIStacy Palmer, are nonprofits and philanthropic organizations finding ways to, in effect, reinvent themselves as a result of financial challenges they're facing?

  • 12:28:56

    PALMERAbsolutely. The smartest groups are finding ways to be as innovative as possible. We're seeing a growing number of mergers of organizations to eliminate some of the duplication and the overhead, and that's really a tough thing for organizations to do, but a lot of them are trying to do that. They're trying to really reduce some of the problems that have gotten in the way of being able to provide services. So I think, you know, the smart organizations are doing that but, sadly, not all are. And as many as 100,000 nonprofits may evaporate in the next year or two.

  • 12:29:27

    NNAMDIWe got this email from Joe in Baltimore. "It seems that mostly conservatives want to go after nonprofits, but they should actually endorse all and any kind of nonprofits for doing much of the work the government would normally do or be forced to do." How do you feel about that, Chuck Bean?

  • 12:29:44

    BEANWell, I think, you know, what -- regardless of your, you know, political ideology or affiliation, you know, it's all about the results that we see on the ground. And, you know, the combination of the street-level expertise that non-profits experience, the non-profits -- that non-profits have combined with the regional government is what makes our region a better place.

  • 12:30:05

    NNAMDII'd really like to hear how members of our audience feel about this. Do you think that states and cities should support non-profit organizations even in difficult budgetary times? Call us at 800-433-8850. Tell us why you think states and cities should support them or why you think they should not, especially in difficult economic times. 800-433-8850 is the number to call, or you can go to our website, kojoshow.org, make your argument there, or send us a tweet, @kojoshow.

  • 12:30:36

    NNAMDIChuck Bean, a proposed sales tax in D.C. was dropped from the approved city budget. Are we seeing any other examples of fees or taxes being imposed on non-profits locally?

  • 12:30:48

    BEANWell, as Tim said, this idea comes about once in a while, whether it's called sales tax or whether it's a payment in lieu of taxes. But, you know, the bottom line is that new fees will equal less, less services. So it's talked about, but I don't think it has a life in the District, and I don't see it in other jurisdictions in the region.

  • 12:31:09

    NNAMDIWe got an email from Suzanne who writes, "Under deputy director of the District Alliance for Safe Housing or DASH, we are D.C. non-profit that provides safe housing and related resources for victims of domestic violence. In fiscal 2010, we served over 600 victims of domestic violence and their children through our housing programs, but we're unable to serve approximately 530 victims and children. The population we serve is particularly impacted by the economic downturn."

  • 12:31:38

    NNAMDI"Nationally, shelters facing local funding cuts reported an 80 percent rise in women seeking services because of increased abuse due to financial issues and job loss. DASH is relying on our partnerships with other organizations, volunteer support, and cutting back on resources that are already spread thin in order for us to meet that need." How widespread is that, Tim Delaney?

  • 12:32:02

    DELANEYIt's very widespread. And that's what's so unfortunate is that many of our policymakers look at cutting their own cost and look at the dollars and cents, and will frame things in terms of support for non-profits and charities when, in fact, we encourage them to look at the investment in the broader community and looking at the community needs. And it's lot less expensive to invest the money through non-profits to deliver the services than for government to go out and create one more agency to do -- duplicate what non-profits have been doing through the support of the general public, which then reduces things for taxpayers.

  • 12:32:43

    NNAMDISame question to you, Chuck Bean...

  • 12:32:44

    BEANYeah.

  • 12:32:44

    NNAMDI...and you, too, Stacey Palmer.

  • 12:32:46

    BEANYou know, I think the input from DASH, is instructive. You said it was a 80 percent rise. And that 80 percent rise in demand what's happening is they've -- these victim services agencies have sustained a 25 percent reduction in local funding. You know, to put a face on it, one day last fall in the District, these organizations served 247 victims of domestic violence in housing, but they were forced to turn away 37 domestic violence victims due to lack of resources. So these are 37 women and children that didn't get the help they need because the resources were not there.

  • 12:33:22

    NNAMDIWhen Suzanne says that we're relying on partnerships with other organizations, volunteer support, and cutting back on resources that are already spread thin, is this a way in which, Stacey Palmer, non-profits are, so to speak, reinventing themselves?

  • 12:33:35

    PALMERAbsolutely. So sometimes that work is very effective and non-profits are being created and able to, you know, really reduce their cost and serve more, but at a certain point, they're gonna break. They can't possibly serve as many people. And the fact that they had to turn people away means they had no other choice. Most non-profits want to do everything they possibly can to help people. So, clearly, they need to get the message out that they're not able to. And that's one of the difficult things in this bad economy.

  • 12:34:01

    PALMERThere are so many things going on that non-profits haven't been able to get to voice out the message that this kind of thing is happening in community across community. And so while it's great that you're calling attention to this, I don't think it's something that we hear discussed nearly enough. And non-profits don't have as active a voice as I think they'd like to in getting that word out to legislators, to the public, that they need support.

  • 12:34:23

    NNAMDIAre you on agreement with this notion that this is not being sufficiently discussed? Would you like to discuss it? Call us at 800-433-8850. Here is Shirley in Alexandria, Va. Shirley, you're on the air. Go ahead, please.

  • 12:34:36

    SHIRLEYHi. I wanted to find out if you all could do a little deeper discussion about how you get communities to start making really tough decisions about where the government funding goes. I think it's great to talk about raising more money and the need for community to support organizations. But right now, it's pretty clear that it's not there. The money is not there. And it seems to me that community needs to start grappling a little more with: do they wanna support shelters versus food pantries versus domestic violence versus whatever other, you know, there are so many different issues out there, so many of them get government funding.

  • 12:35:13

    SHIRLEYYou know, do you wanna just give everyone a 10 percent cut, do you wanna just eliminate some programs and say, you know, we, as a community, we're not gonna provide money for that anymore. I think, you know, how do you get the community to really grapple with that.

  • 12:35:28

    NNAMDIHow do you prioritize, Chuck Bean, and how do you get a community to prioritize? A lot of attention is focused on so-called social safety net groups that provide health and emergency services, but there are arts groups under pressure as well. People here are hurting financially, can't afford maybe to buy theater tickets. How do you prioritize who gets funding and who doesn't?

  • 12:35:53

    BEANYou know, at some level, the answer to their question is dependent upon the jurisdiction. Arlington is gonna have a set of values, Alexandria, Montgomery, Prince Georges, the District, and they were only gonna arrive at that through engagement with our elected officials. And, you know, that's why we believe that non-profit leaders need to be at the table. The criteria that I would throw out would be what's the return? What's the social return on investment? What do we get out of this? What is also the leverage?

  • 12:36:19

    BEANIf we get a investment from a local government, can that leverage a foundation grant and individual giving and can those in turn in -- leverage some volunteer resources, some in-kind resources? And the diversification of leverage, I think, is the genius of the non-profit organization.

  • 12:36:37

    NNAMDIHas there been an ongoing discussion, Stacey Palmer, in the philanthropic community, if you will, especially in difficult economic times about where priority should lie?

  • 12:36:47

    PALMERAbsolutely. And one of the things a lot of foundations are talking about is what they can do to help government become more efficient and effective because they realize that if they can make things run better in government, then that will help them. There is no way that their own donations can come close to supporting these things. I think even the Big Gates Foundation has said that, you know, they couldn't even keep the California schools operating for more than a month or so with their money.

  • 12:37:12

    PALMERSo, you know, it's not it's not there, but many of them are working on ways to make government a lot more effective. They usually used to not get near that kind of thing, but they're really looking at ways to help on that front.

  • 12:37:23

    NNAMDITim, here's this email we got from Jared, which you can include in your response. Jared writes, "I'm a muralist who's had the great fortune to work with Teardrops to Rainbows, a 501C3, dedicated to helping families with pediatric cancer. While they continue to assist families by providing necessary funds for a variety of needs, they've had to pull back on their aesthetic goals of enhancing hospital rooms with art work for the children. They help real people with real problems, and states need to continue assistance groups such as this because it's simply the right thing to do." That's the email from Jared. I suspect some people would quibble on the priority of enhancing hospital rooms with art work for the children.

  • 12:38:03

    DELANEYAnd I would actually encourage the quibbling, because as we quibble, that means that we're gonna be having more voices in this debate, in this broader community discussion, which ties into Shirley's question earlier on about pitting...

  • 12:38:19

    NNAMDIChoices.

  • 12:38:20

    DELANEYChoices and pitting one group versus another versus another versus another. And that's really a model of scarcity in which people are assuming that we have to be cutting each other's throats and cutting everything. The National Council of Nonprofits has adopted a public policy agenda that is on our website -- people can read the whole thing -- but part of our position is that we oppose arbitrary and across-the-board budget cuts at any level of government. We then worked through our state associations to inform policymakers that they impact the proposals on communities.

  • 12:38:54

    DELANEYWhat we are encouraging people to do is to lift their own voices to let policymakers understand these are not simply dollar and cents issues. These are human survival issues. This is about the ability of individuals in our communities and their quality of life. Whether you wanna have a painting in a hospital room or whether you wanna have more domestic violence shelters, those are healthy discussion. But we need to be having more community voices and helping policymakers understand this is not about giving money to non-profits. This is about serving community needs.

  • 12:39:35

    NNAMDIAnd, Shirley, thank you very much for your call. We move on to Terry in Fairfax, Va. Terry, you're on the air. Go ahead, please.

  • 12:39:43

    TERRYThank you, Kojo, for taking my call. I wanna applaud the work of the nonprofits, but I've got -- I feel like the structure itself may need some improvement. I for one feel that certainly donations to nonprofits should be tax-exempt. But what I've got an issue is that I personally feel that nonprofits should pay taxes like for-profit industries. And in that -- because they use the same social -- I mean, the streets and fire and rescue and police services serve them as well as the rest of community.

  • 12:40:18

    TERRYAnd I think that that would give more funding to the municipalities and the government agencies, which then, in turn, says, be more efficient with their services. And I feel like sometimes we've got redundant profits -- nonprofits that would be better served if it was streamlined and not so many doing the same thing. And I would include places of worship along with that. I mean, I know it's a radical thought, but…

  • 12:40:47

    NNAMDIWell, it is a suggestion that has been made in other places. When we talked about Boston earlier, Tim Delaney, it says because of the high concentration of academic, medical and other nonprofits in Boston, more than half of Boston's land is exempt from property taxes. And I suspect somebody like Terry would make the argument, well, how is the city going to move ahead if it can't tax half of its land?

  • 12:41:12

    DELANEYWell, and, in fact, what Boston has done when it's talked about half of its land is taken up with tax-exempt property, it does highlight the academic institutions and the health care institutions that are nonprofit. But it really doesn't disclose or talk about all the government land. The federal government owns land there. The state capital and all the state buildings are located in Boston, all of Boston's parks and all of Boston's city property.

  • 12:41:40

    DELANEYAnd so the city gets a little bit loose there when it's talking about what it's trying to do and overlooks the real amount of land out there. What also gets lost is the extent to which governments often trying to recruit businesses to come into an area. Well, then give businesses tax exemptions in exchange for locating their business in this community rather than that community. And so there's a lot of tax-exempt property out there.

  • 12:42:08

    NNAMDIGot to take a short break. If you have called, stay on the line. We'll get to your call. We still have a few lines open at 800-433-8850. How has the economic downturn impacted your charitable giving choices? Call us, 800-433-8850. Send us a tweet @kojoshow, email to kojo@wamu.org. Or join us -- join the conversation at our website, kojoshow.org. I'm Kojo Nnamdi.

  • 12:44:30

    NNAMDIWelcome back to our conversation on charitable giving. We're talking with Chuck Bean. He is the Nonprofit Roundtable of Greater Washington's executive director. He's led the organization since its inception in 2002. He's also a member of WAMU's Community Council. Also with us in studio is Stacy Palmer, editor of The Chronicle of Philanthropy. She's served as the top editor since the newspaper was founded in 1988. She's also overseeing the development of its website, philanthropy.com and Philanthropy Careers.

  • 12:45:00

    NNAMDIAnd Tim Delaney is the president and CEO of the National Council of Nonprofits. That's a national state and local network that operates through 36-state associations across the country. We're taking your calls at 800-433-8850. Here is Clint in Vienna, Va. Clint, you're on the air. Go ahead, please.

  • 12:45:20

    CLINTYes. I think the need for support of nonprofits at the local level is greatly increased by the proposal at the national level to reduce the tax deductibility of donating to charities. And I'd like to hear your panel talk about that. I know there's been some outreach by the nonprofit community to the White House. The Gang of Six senators, supposedly, is about to propose this, and I believe the budget cutting panel already did. So I did sign a petition on this, but I haven't seen a whole lot of attention paid to this, and it seems like a major threat particularly to smaller nonprofits.

  • 12:45:55

    NNAMDIStacy Palmer?

  • 12:45:57

    PALMERCongress has been thinking about a lot of different ways to look at the charitable deduction especially as part of deficit reduction. And so one of the proposals that's on the table is to reduce deductibility for people who are very affluent. So most people who give to local nonprofits are probably not gonna be affected by it. They're talking about, you know, hitting people who are at that $250,000 level or more.

  • 12:46:20

    PALMERBut there are some other proposals to completely scrap the charitable deduction and replace it with some kind of a credit, like they do in England. So there are a whole bunch of ideas, and the odds are that, in some ways, people are gonna raise questions about whether the tax reduction is fair. Does it benefit mostly wealthy people? Does it really help nonprofits? Which nonprofits benefit the most? So I think this is gonna be front and center of the kind of conversation people are gonna have over the next year.

  • 12:46:44

    NNAMDIClint, thank you very much for your call. We move on to Nancy in Reston, Va. Nancy, you're on the air. Go ahead, please.

  • 12:46:54

    NANCYYes. Thank you. I'm interested in knowing what the comparison difference is in pay between, at the top level, the executives at the nonprofits. I know that a lot of them make, you know, hundreds of thousands of dollars versus the private sector. And then also, you know, like the Karl Rove's group or the -- you know, those types of political influence people that -- I think they are considered nonprofit in there also. And they're doing a lot of political influence peddling, so.

  • 12:47:27

    NNAMDIOK. Nancy, I'm gonna put you on hold because Rita in Ellicott City, Md., has a call that makes a distinction between, well, one nonprofit and another. Here is Rita. Rita, you're on the air. Go ahead, please.

  • 12:47:42

    RITAOK. Yeah. I was just going -- I was just about to hang up 'cause I said, oh, that's -- Nancy just brought up that a nonprofit is -- basically it's -- there's a difference between a nonprofit and a charity. And nonprofits, they're just -- they're saying that they're not going to be generating additional money, basically, profit. And so things such as, in the past -- I don't know their status now, but like BlueCross, CareFirst and Kaiser Permanente have been considered nonprofits, and originally maybe because they were pooling things to share the burden of health care. It makes sense, but...

  • 12:48:17

    NNAMDIHere's another reason we have to make that distinction, Nancy and Rita. We got an email from Leonardo in Washington who says, "Please continue to dispel the myth that nonprofit executives make loads of money. My mother was an executive at a regional nonprofit based in Texas. And though she was consistently one of the highest paid employees, she never made money hand over fist. Perhaps executives in large nonprofits with offices on K Street make large sums. But that's like saying you, Kojo, must be rich because I know Rush Limbaugh made millions from his radio show over the past few years.

  • 12:48:53

    NNAMDI"Probably 90 percent of all nonprofits are small and need the funds from public resources to provide the services to fill in gaps that government programs leave." Well, Leonardo, I am rich. I am rich because of the content of this broadcast, because it has producers and mostly because we get attention from listeners like you. But in terms of financial riches, I would not say so. And I guess a distinction, therefore, has to be made, Tim Delaney, between what our callers were saying, our small nonprofits and larger organizations.

  • 12:49:26

    DELANEYAbsolutely. And there's also needs to be a distinction drawn and I believe it was both Nancy and Rita who were talking about the different types of nonprofits. Under the IRS clarification of the various provisions of the tax law, we have 27 different nonprofit types of organizations. We have the 501 (c)(3), which is charity, and then we have all the other 501 family members, 501 (c)(1) s, 501 (c)(8) s, 501 (c)(6) s, et cetera. And those are not tax deductible. The only ones that has tax deductibility are the 501 (c) s.

  • 12:50:10

    DELANEYSo Karl Rove's groups and those that are politically active that the Citizens United case dealt with, those are the 501 (c)(4)s and others that are not tax exempt and tax deductible with their contributions, which is a lot -- I'm an attorney and it's a lot of legal gobbledygook. But the fact of the matter is there's a big distinction between a 501 (c)(3) charity, which cannot engage in any political partisan activities, and so they are not making a lot of money.

  • 12:50:45

    DELANEYIn terms of the distinction between what the private sector has paid and what the nonprofit sector has paid, all the research shows that nonprofits are not paid as much. They are a small handful of very large nonprofit insurers or health care groups that do make a fair amount of money. If you're the head of Harvard University or you're the head of John Hopkins University Hospital or institutions like that, they could go to the private sector and make bundles more but they still make more than most nonprofit executives. That's what winds up in the paper, not the day-to-day person who's working at a nonprofit.

  • 12:51:24

    NNAMDINancy, thank you so much for your call.

  • 12:51:27

    NANCYThank you.

  • 12:51:28

    NNAMDIThe U.S. isn't the only country struggling to fund nonprofits. I'd like to hear your responses to this because the British are testing a pilot program that it calls a Social Impact Bond. It's a contract, basically, that allows the governments to try to pay for outcomes they want to have. And in this pilot, the specific outcome is cutting the number of ex-convicts who return to crime right now in Britain. Over half the men released from short prison terms end up back behind bars within a year.

  • 12:51:54

    NNAMDIInstead of paying charities upfront, as it usually does, the British government asked a nonprofit to manage rehab programs at one prison. The group raised $8 million from private investors fund services like emotional counseling, drug therapy and job training for 3,000 short-term inmates. The government doesn't pay a penny unless the plan works, and the repeat offending rate has to fall by at least 10 percent over four years before the investors collect. The better results, the better the payout of the 13.5 percent annual return for the investors. Are we seeing similar projects in the U.S., Stacy Palmer?

  • 12:52:32

    PALMERAbsolutely. There's a lot of interest in this idea. President Obama included $100 million in his budget to test the idea. Massachusetts is looking at -- everybody is looking at the idea in part because people wanna make sure that nonprofits are performing well. And I think throughout this conversation, we've talked about the need for them, but it's very important that they demonstrate that they're getting results, and that's one of the appeals of this idea. It's also a good at way to test an idea that might not work.

  • 12:52:57

    PALMERSo if the nonprofit doesn't succeed in making those results, then it doesn't get the money from government and it will have to find those money from private investors. One of the downsides of the idea is that it aims really at the problems that are easiest to solve, to measure, those kinds of things. And it doesn't really give any incentive to deal with the toughest problems in society.

  • 12:53:16

    NNAMDISo the people who are currently investing in social investment funds of some kind can invest directly into nonprofits as private investors in those nonprofits, and after a few years, if there was demonstration of success, see a return on their investment.

  • 12:53:31

    PALMERAbsolutely, that's the idea. They haven't really worked out all the details of this. But it might be that a foundation might put money into something like that or even you could do it as part of your own investment strategy.

  • 12:53:41

    NNAMDIChuck Bean, what do you think about that?

  • 12:53:42

    BEANYou know, now is the time for any kind of innovation and it may need to be outcomes-focused. As Stacy said, this could really lead to looking at the easiest problems. And, you know, in our sector, if you will, we call that creaming, taking the people where you can get the results and that's means not serving everybody. So, you know, if we're gonna be creaming that means the people most able to work out their mortgage, that's what the foreclosure councilor would look at in this scenario rather than anybody that needs help through the door. We talked about the victims of domestic services. You know, we need to be helping everybody is the ethic within the non-profit sector.

  • 12:54:16

    NNAMDITim Delaney.

  • 12:54:17

    DELANEYWell, I would just ask people -- I would certainly concur with Chuck's observation that now is the time to be innovative. But let's not be so innovative that we are imposing significant problems on the broader community. Again, looking at the research that Urban Institute did last year, documented that among human service non-profits across the nation, 68 percent of them reported that when government turn to them to provide services in the community, government did not pay the full cost of the contracted services.

  • 12:54:48

    DELANEYAt the same time that non-profits are not being paid on time and are not being paid the full amount, we have our defense contractors that are getting paid premiums on programs that are not delivering, that are not useful, and they are getting bonuses and they are getting paid on time whereas non-profits are not. Let's hold everybody accountable and not just focus all the energy on non-profit saying something's wrong with non-profits. Let's look at the broader contractual system.

  • 12:55:15

    NNAMDIHere's Arial (sp?) in Bethesda, Maryland. Arial, you're on the air. Go ahead, please.

  • 12:55:21

    ARIALHi. I just wanted to say that while I understand that non-profit need all sources of help they can get, and the tax -- the various tax exemptions and tax privileges that they receive are really problematic because it makes it very difficult to know what non-profits are getting what level of subsidies. And at least in a perfect world, it would make much more sense to sort of tax everyone evenly and distribute government funds to these organizations through direct expenditures. So it would be clear really what was being funded and at what level because these tax subsidies are really so hard to quantify and tell who's getting how much from.

  • 12:56:03

    NNAMDIStacey Palmer?

  • 12:56:06

    PALMERThere are arguments for rethinking things, and I think as the tax overhaul debate gets under way, which I expect we'll be having in Washington, those kinds of questions will be asked in trying to figure out what's most effective and most efficient. But one thing that all donors need to think about is there's nothing wrong with asking a non-profit for as much information as possible. You don't have to give to anybody. You just need to ask for that information. And any non-profit that isn't willing to tell you as much as it knows is probably not one you want to support.

  • 12:56:33

    NNAMDITim, you spent yesterday lobbying on Capitol Hill. What kind of reception did you get?

  • 12:56:39

    DELANEYFor the most part, very supportive because non-profits were not in there saying, give us money. Non-profits were in there saying, when you're working on job creation programs, remember that we're 10 percent of the American workforce. We're larger than the construction, the real estate, and manufacturing industries combined. We're huge and yet we're forgotten. We were forgotten in the House version of the health care reform bill. Ten percent of the American workforce left out.

  • 12:57:05

    DELANEYWe have to then go up there and remind them that we are significant, and then they amended the health reform law. We also -- were up talking about charitable giving incentives. And we were hearing that they do not want to erode those or take those away. So we got a very good reception. We've discovered over time that it's always nice and warm receptions in terms of patting us on the head and saying, good job, keep it up, and then when it's time to actually pass legislation, that's when we get forgotten. So that's why non-profits, and everyone who's on their boards receiving services need to get involved.

  • 12:57:44

    NNAMDISpeaking of who's on their boards in response to the question we asked, where do you donate your money, how do you decide, Julia says, "Personal connections matter the most." Katie says she gives to the non-profit. She's on the boards, though, "because they know how to bug me most directly." Well, you don't have to be on the board of a non-profit to get information about that non-profit. There are a variety of sources for that information, but that's a conversation for another time. Chuck Bean, thank you for joining us.

  • 12:58:11

    BEANThanks, Kojo.

  • 12:58:12

    NNAMDIChuck Bean is the Nonprofit Roundtable of Greater Washington's executive director. Tim Delaney, thank you for joining us.

  • 12:58:17

    DELANEYDelighted to be here, Kojo.

  • 12:58:18

    NNAMDITim is the president and CEO of the National Council of Nonprofits. Stacey Palmer, thank you for joining us.

  • 12:58:23

    PALMERThank you.

  • 12:58:23

    NNAMDIStacey is the editor of "The Chronicle of Philanthropy." Thank you all for listening. I'm Kojo Nnamdi.

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