The charitable nonprofit sector of the economy is substantial, employing about 10% of the workforce and contributing about 6% of GDP. To better understand how charitable nonprofits work with legislatures and the states, we sat down on this episode with David Thompson, vice president of public policy for the National Council of Nonprofits, the nation’s largest network of nonprofit organizations.
The charitable nonprofit sector of the economy is substantial, employing about 10% of the workforce and contributing about 6% of GDP.
To better understand how charitable nonprofits work with legislatures and the states, we sat down with David Thompson, vice president of public policy for the National Council of Nonprofits, the nation’s largest network of nonprofit organizations.
Thompson explained the role of charitable nonprofits in our communities and how state government and nonprofits work together to address any number of challenges, and specifically the value of community-based organizations when it comes to helping government implement programs.
He also noted a challenge that charitable nonprofits have in common with state government—a shortage of workers—and ways government and the nonprofit sector can advance policies to try to address those shortages.
Thompson also invited legislators around the country to join the National Nonprofit Legislative Caucus. For more information or to be added to the caucus for future communications, please contact the office of Maryland Senator Cheryl Kagan or Tiffany Carter at the National Council of Nonprofits.
Ed: Hello and welcome to “Our American States,” a podcast from the National Conference of State Legislatures. I’m your host Ed Smith.
DT: We are public servants dedicated to the public good. So, we are mission focused as opposed to profit focused or even political focused.
Ed: That was David Thompson, vice president of Public Policy for the National Council of Nonprofits, the nation’s largest network of nonprofit organizations. I sat down with David to talk about the role of charitable nonprofits in our communities and how state government and nonprofits work together to address any number of challenges. The charitable nonprofit sector of the economy is substantial, David points out, employing about 10% of the workforce and contributing about 6% of GDP. He discussed the value of community-based organizations when it comes to helping government implement programs. He also noted the challenge charitable nonprofits have in common with state government--a shortage of workers--and ways government and the nonprofit sector can advance policies to try to address those shortages.
Here is our discussion.
David thanks for coming on the show.
DT: Hey Ed. Thanks for having me.
Ed: Well David why don’t we start off with you telling us a little bit about the National Council of Nonprofits or NCN and your role there.
DT: Sure. We are a 30-plus year organization and think of us sort of like NCSL in that we are border-to-border, state-to-state. We got folks in Alaska to Florida and Maine to Hawaii and just about everywhere in between. Organization of state associations of nonprofits. You’re there in the Denver area. Colorado Nonprofits is a great organization. A lot of good state associations of nonprofits. And their function is our function, which is capacity building, guidance, government best practices as transparencies and accountability. All of those things plus public policy. My piece of the action is public policy. And what’s unique about us in this area is that when we talk about public policy, we do legislative, executive and judicial and at the federal, state and local levels. If you’ve ever heard the expression the actions in the states, that’s us because we are based in Washington, D.C., but we recognize that people out in the real world are doing the real stuff and we respect that.
Ed: Well, there’s plenty of action in the states, that’s for sure. Now let me ask you about this notion of nonprofits because this is a big umbrella term. In fact, you and I both work with nonprofits. And people hear NGO or charity, but here we are talking very specifically about this area of charitable nonprofits and can you define that for us and what makes those organizations distinct?
DT: Sure. Let me tell you what we are not talking about. NGOs. When someone uses the phrase NGO, non-governmental organizations, they are international folks. You may hear the phrase not for profits. Either they are from New York, they are an accountant or they are just misspeaking. Charitable nonprofits, we use the term charitable nonprofits because nonprofit there are 28 different subsets of tax exempt and nonprofits under the federal Internal Revenue code. Charitable nonprofits, those are the 501(c)3. Those are the local Salvation Army and your church and typically big Eds and Meds--higher education and hospitals--and your storefront children’s dance studio or the group home for troubled youth. A wide variety. Most distinctive feature is we are tax-exempt and we’re dedicated to the community. Everyone listening is probably a public servant. We see ourselves as public servants as well. We share that in common, that we are dedicated to our communities and the public.
Ed: How big a sector is the charitable nonprofit sector and why should this matter to state government and legislators in particular, other than being supportive of organizations that do good work in the community, of course?
DT: There you go. Well that last one is a good reason, but ah charitable nonprofit sector is quite big 1.3 or 1.6 million depending on how you count them. Twelve and a half billion employees mostly have come back to work since the pandemic. We are 10% of the workforce. We are 6% of the gross domestic product. Most importantly, we are in every community. Frequently we are first responders, but also, we are eyes and ears in the community that legislators can know if you call a nonprofit you are going to find out exactly what’s happening in the community. Governments can remove barriers. Charitable nonprofits are the go-to groups for when you have a need to bring the community together. Charitable nonprofits can be the neutral convening place and we generally don’t have the agenda. We are not profit motivated. We are not politically motivated. We are a safe haven from a lot of the bad stuff going on and a lot of the suspicions in the communities.
Ed: So, as you noted, a lot of the people who listen to this podcast are public servants and I think that they know generally that governments partner with charitable nonprofits. But maybe you could just walk through the reasons why they do that. What the role is and give us a couple of examples.
DT: You are asking my favorite question. Thank you. Why partner with charitable nonprofits. One I’ve already said. We have parallel perspectives. We are public servants dedicated to the public good. So, we are mission focused as opposed to profit focused or even political focused. We tend to be more efficient and effective whether we are smaller organizations that are in working in the grassroots who are in touch with the actual needs in the community. We tend to be more flexible. We are more nimble than a government operation. It doesn’t take a state law for us to change what we are doing. Ah something that I think is important to note is that we are accountable and transparent. The culture of the charitable nonprofit community is that we have to earn trust every day so our reporting that we do. The informational tax returns we file are much more transparent, much more invasive than the for-profit community would ever tolerate. And we are of the community. Charitable nonprofits tend to be, I think I used the phrase storefront organizations engaged with people. We live there. We work there.
Some examples small nonprofit group homes of troubled youth rather than people in jail, putting the kids in jail or in big institutions. Nonprofits can be the local entities that serve the community and serve governmental policies, but we do it in a more humane way and frequently more effective way. Another good example, great grants to the arts. We don’t really want to have political art on our walls. We want things that are artistic, innovative, creative and not stressing a partisan perspective. Art can be controversial but not for partisan political reasons. So just another good example that grants in the arts need to be, tend to be separate as a good insulation from the partisan pressures.
Ed: Well, as someone who has spent a decade as the arts editor of a newspaper, I am certainly very familiar with that, a very important role that plays in the art world. Let’s talk about a few things you really would like all the 7,000 plus legislators in this country to know about charitable nonprofits.
DT: First off, the positive. We are partners, common focus, common goals. Partners in government. We have the same priority so we are both interested in the well-being of our communities, identifying problems, creating solutions. Charitable nonprofits are problem solvers in the community. And if a lawmaker is looking for a problem that needs to be addressed through legislation and so forth, all you have to do is talk to any of your local nonprofits and they will tell you what are the barriers, what’s working well and that sort of thing. So, partnerships as opposed to adversary relationship is critical. Another is that charitable nonprofits are independent from government. Like road builders, we provide services on behalf of governments, but we are not subsidiaries of government. We can be hired by government to provide services, but we remain independent. And that’s on purpose. We need to be able to speak truth to power and we need to be able to engage in our community without being seen as beholden to whoever is in charge right now. A third quick item I will point out is that we have overhead. If we have a building, we literally have a roof on it and administrative costs regularly challenged questions. Are you--using the roadbuilder again--when you are hiring a roadbuilder, you are usually not asking about their administrative costs and things like that. Charitable nonprofits, we get a lot of questions and pushback about overhead whether it’s called overhead or administrative costs, indirect costs. Those are things that are legitimate and real. We have to have accountants audit information for grants and things. Going back to the first point recognizing that we can work in partnership in solving problems. We ask that you recognize also that we have costs to do that. The same as everybody else.
Ed: Yeah, excellent point. What are some of the common problems that elected officials and nonprofits sort of both face together and can solve together. What are some of the specific areas.
DT: We are talking in 2023 so let me answer with two areas where we collectively are making some tremendous progress on common problems. One of them is the workforce shortage. I read the five daily updates from NCSL and workforce shortages at the government level are severe. Charitable nonprofits have the exact same challenges and if you ask an executive director of a local nonprofit what keeps you up at night, it’s not having the staff. Not being able to hire the staff. I’m going to say ours is a little worse than state government because ya’ll are hiring our people away. But we still have a shared problem. This year we’ve seen some great progress in terms of helping build the pipeline for social workers, nurses, teachers and childcare workers. A large share I’m not sure if it is 50% or more, a large share of the childcare providers in this country, the organizations where you take your child to drop off before going to work, are run by charitable nonprofits. Several states--I know Utah was big in this--have enacted tax incentives to help promote people coming to work at daycare centers and that’s helping more people go to work. So those are some common challenges and some common solutions that are working.
Another area is government grants and contracting reform. I’m going to share a word with you Ed. Complexification. You remember in “The Graduate” it was plastics. Now the word is complexification. We can design the perfect, simple grant making process that works for everyone and over time it will get worse. The standard contract for New York City reportedly has been built for 150 years and a colleague once said that if you ever read through the standard contract, you will walk take a stroll through every mayoral scandal from the last 150 years. Well, they just add something on top of on top of on top of to the point where the thing is internally inconsistent but everyone just kind of nudges and winks and says that’s just the way it is. The pandemic demonstrated that the government grants and process systems are not working well for governments or for nonprofits. And lots of activities in a lot of states have been devoted to this. Kentucky passed a grant streamlining process. The West Coast states are all engaged in some good stuff as well as North Carolina. It’s not make it simple, make it easy, open the doors for scandal. It’s the opposite. Let’s identify the low-hanging fruit. The duplication. The multiple all its the exact same thing. Cut out duplication. Reduce the unnecessary paperwork and things like that. And this is key in the era we are living in. How do we reduce barriers to access so that organizations that have never been able never had the capacity to apply for a government grant. To perform a grant or to report on it can come up with the training, the ability to engage in their community with government grants. That’s important because that can bring in philanthropy to help. That can bring in government funding to some extent to help and also nonprofit’s commitment to identifying the challenges in the grant system. Removing them but maintaining transparency and accountability. And I’m not saying let’s just put the blinders on and hope for the best. It’s lets identify the stupid together and get rid of it and put it in the smart.
Ed: Thanks David. We will be right back after this short break.
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I’m back with David Thompson. Following up on your last remarks, I cannot tell you how often the workforce issue has come up in the last year when I interview people about a lot of different policy issues. Now let me ask you about funding. Some nonprofits get some or most of their funding from the government. At times, some elected officials have urged them to diversify their funding sources. I wonder what the perspective is from the nonprofit sector on that issue.
DT: Let me give you a flippant answer first and then I’ll try to get back to the extent that I can get back to serious. No one has ever asked Boeing to hold bake sales to build bombers. They are building the bombers for the federal government for a specific purpose and they are probably getting cost plus plus, but no one is asking Boeing to diversify its resources and get donations to pay for the extra bombs.
Ed: I think that’s a pretty good answer but go ahead.
DT: Similarly, roadbuilders my favorite example. No one is asking roadbuilders to seek donations of extra asphalt or concrete for the bridge or whatever. Some people refer to government funded nonprofits. If we flip it around, that it’s actually nonprofit dependent governments. There are a lot of professions, social workers is the key one where governments will have a handful of social workers at the local level or the state level. But generally, they hire charitable nonprofits to provide the interaction with homeless people, the troubled youth, the mental health. You know the wide variety of where social workers work and typically, they are hiring the nonprofit to do what the state statute says is the state’s responsibility in this area. So, we should be seen I believe as contractors providing the services on behalf of government. We see it that way. Unfortunately, we are usually reimbursed at lower levels than actual costs. Quiet people will question the overhead as in a legitimate cost which we have great trouble with or we will get paid late in which case we are subsidizing and getting loans and things. So, this is an area of great need for attention, but also saying that nonprofits ought to be raising money to fund the project programs that the government legislators have said is a priority is a cost of challenge.
Ed: I think that’s a great explanation. Now I want to ask you about another issue and that’s politics and policy for nonprofits. What’s the role there for nonprofits advocating for certain policy positions?
DT: I’ll jump to the easier one that charitable nonprofits are prohibited from engaging in partisan election related activities. The statute itself says we may not endorse or oppose candidates for public office or extend resources to support or oppose candidates. Candidates for public office is key and that’s a clear rule. Clear bright line and most of us know what that means. Unfortunately, if you ask people to define policy, they will define it as politics. Or if you ask them to define politics, they will define it as policy. Or ask them abortion and guns or gun control or gun rights. Those are considered highly political issues. If you are talking legislation before a state legislature, it’s a public policy issue. There may be politics involved certainly but those two the politics involved and sometimes the positions align with one part in the political party or another quite often. But to be talking about abortion or guns or environment or road paving, those are public policy issues, public policy debates. And of course, charitable nonprofits can engage in the public policy debate. To do so does not mean we’ve shifted over into politics. And there is a great deal of confusion on the subject. 501(c)3 charitable nonprofits cannot engage in partisan election related activity. But remember I said there are 28 other types of nonprofits. Other nonprofits include social welfare organizations, labor unions, chambers of commerce. They don’t have the same restrictions. We refer to ourselves as charitable nonprofits. We refer to them as noncharitable nonprofits. People will use the phrase partisan nonprofits. We are nonpartisan nonprofits. A lot of lingo, a lot of language arguments within our world. We have a lot more important things to do than talk about these labels and so forth, but sometimes talking just a minute or two helps us cut through some clutter so thanks for asking.
Ed: With that, it’s time to wrap up and I wonder what closing thoughts you might have for our audience legislators and staff and others interested in state policy.
DT: First let me give a pitch and then answer your question. All legislators interested in promoting the work of charitable nonprofits to help remove barriers and streamline operations so that your local nonprofits can be either more effective. All are invited to join the Nonprofit State Legislative Caucus. It is bipartisan. It is any and every state involved. Hopefully we can get you a link to how to connect with that on the NCSL website. But the reason for joining that caucus is the same reason it would be my closing comment is that charitable nonprofits operate in every community. We are not partisan so we are a good go to place whether it’s your local storefront nonprofit foodbank or the YMCA or YWCA. They are in touch with your constituents. Sometimes they know them better than you do. Sometimes they know better than we do. What is happening. What people really care about. So, it’s a great place and if you are invited to go to a site tour or engage in an activity, please do because we are a community of optimists. In politics and in elections sometimes things get nasty. Charitable nonprofits we are missioned focused. And like I say we are a community of optimists. We may be trying the cure of cancer today when they fail but tomorrow, we’re going to come back and try again. We tend to be a more positive upbeat group of folks so come on over and come hangout.
Ed: Well, I love closing on an up note and an optimistic note. David, thank you so much for walking us through this. I think this is some great information for our audience and I’m sure they are going to appreciate it. Take care.
DT: It’s been a pleasure. Thanks Ed.
Ed: I’ve been speaking with David Thompson, vice president of Public Policy for the National Council of Nonprofits, about the role of charitable nonprofits in our communities. Thanks for listening.
You can check out all the podcasts from the National Conference of State Legislatures by searching for NCSL podcasts wherever you get your podcasts. Tim Storey, NCSL’s CEO, hosts “Legislatures: The Inside Storey” where he focuses on leadership and legislatures. The “Our American States” podcast dives into some of the most challenging public policy issues facing legislators. On “Across the Aisle” host Kelley Griffin tells stories of bipartisanship. Also check out our special series “Building Democracy” on the history of legislatures.