Privatization: Part 5

By Todd Cohen

Growing demand and the lack of a financial payoff leave nonprofits with critical challenges, says Peter Goldberg, president and CEO of the Milwaukee-based Alliance for Children and Families.

“The nonprofit sector clearly has become the sector of choice for the delivery of what used to be public-sector services,” he says. “But we’re being asked too often to deliver them in a way that forces us to either take a loss or use non-public-sector money to subsidize and supplement the delivery of public-sector services.”

Government contracting also has increased government “ownership” of a growing number of nonprofits that find a bigger share of their budgets dependent on public funds, he says.

And as its contractor, he says, nonprofits may find it tough to also be government’s conscience.

So nonprofits need to “reassert and strengthen our advocacy capacities,” Goldberg says. “We’re going to have to figure out how to be more muscular in the court of public opinion and the battle for the hearts and minds of the American public.”

While nonprofit leaders may have overestimated how much the profit motive would drive the delivery of community-based services, concern about competition remains a big issue among the 300 member agencies of Lutheran Services in America, says Jill Schumann, president and CEO of Baltimore-based Lutheran Services in America.

“In an environment of contracting resources, the question is how much redundant capacity can a community afford in order to provide various kinds of services,” she says. “People are just trying to hang in and keep providing the services.”

Stephen Rathgeb Smith, a professor of public affairs at the University of Washington, says declining public dollars, plus a push by the Bush administration to direct more of those funds to faith-based charities, could force secular nonprofits to adapt through cutbacks, consolidations and mergers.

Larger nonprofits actually could have an edge over for-profit providers and smaller nonprofits, he says, because they have the resources and ability to “cross-subsidize” services with private donations, investment income and special-events revenue.

“It’s a very tough environment out there now,” he says.

In the face of new “intersections” of personal and community responsibility, competition and cooperation, public and private funding, and “entitlement, empowerment and engagement,” Schumann says, nonprofits need to renew what makes them distinct.

“Nonprofits embody ‘organized neighborliness,’” she says, citing a report on ethics by Independent Sector in Washington, D.C. “Organized neighborliness occurs through institutions that have governance structures representing the community, that are engaged in public trust, and that really create a different fabric of care than a purely marketplace-driven approach does.”

Other stories in series:

Part 1: Social-services market adapts to lessons of outsourcing.

Part 2: For-profit firms turned to nonprofits to deliver social services. 

Part 3: Outsourced social services fall short of expectations. 

Part 4:Drive for profits can create gaps in delivery of social services.

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