IntroductionThe nonprofit organizations of civil society are separate from, but deeply interactive with, both the market and the state. Nonprofits have in common that they are voluntary and self-governing, may not distribute profits, and serve public purposes as well as the common goals of their members. These organizations are even more diverse than the titles we use for them: nonprofit, nongovernmental, civil society, philanthropic, tax-exempt, charities, voluntary associations, civic sector organizations, third sector organizations, independent sector organizations, and social sector organizations. "Nonprofit organization" is the generic term used in this chapter. The nonprofit sector includes religious congregations, universities, hospitals, environmental groups, art museums, youth recreation associations, civil rights groups, community development organizations, labor unions, political parties, social clubs, and many more. Nonprofits play prominent social, economic, and political roles in society as service providers, employers, and advocates. They also play the less visible, but increasingly recognized, roles of fostering community engagement and civic participation, enhancing the quality of life, and promoting and preserving civic and religious values. Scholars are beginning to document the central role that formal and informal nonprofit organizations play in creating the glue that holds communities together and the avenues they provide for civic participation (Etzioni 1993; Verba, Schlozman, and Brady 1995). Voluntary associations are identified as central to prosperous and successful democracies. They help to build the networks of trust and reciprocity, the social capital, that allows democratic societies to function effectively (Putnam 1993; Walzer 1991). Cooperative activities may bring together people with divergent opinions who learn to work together on issues of mutual interest or for the common good. Citizens participate in democratic governance by joining together to accomplish public purposes, voice their concerns to government, and monitor the impact of business, government, and nonprofit activities on the public. Nonprofits also serve to mediate opposing social forces-in the arts and religion, for example, as described in chapter eight, "Clash of Values: The State, Religion, and the Arts," by Robert Wuthnow. All of these activities require the freedom to associate, deliberate, and act in the public sphere. Voluntary entities exert a profound cumulative effect on the quality of life and play a variety of roles in most countries where they are permitted to operate. Chapter ten, "Government-Nonprofit Relations in International Perspective," by Lester Salamon, examines the ongoing debate over the appropriate roles of government and nongovernmental, voluntary organizations overseas. Nonprofits are also significant actors at the global level in areas such as environmental protection, human rights, conflict resolution, relief, economic development, and religious activities. As a group, nonprofits are heterogeneous. They reflect common aspirations but sharp differences as well. Their impacts can be positive or negative, confrontational or conciliatory, depending on their activities and the perspective of the analyst. Thus, the interaction between government and nonprofit organizations in civil society is complex, but it is also dynamic, ebbing and flowing with shifts in policy, political administrations, and social norms. What Are Nonprofit Organizations? Nonprofit organizations in the United States are defined and regulated primarily under the federal tax code. They are formal organizations that do not distribute profits and are exempt from federal taxes by virtue of being organized for public purposes described in the revenue code. All nonprofit organizations with revenues of $5,000 or more, except religious groups, are required to register with the Internal Revenue Service (IRS). Organizations with revenues of more than $25,000 are required to file an annual Form 990 (or Form 990PF for private foundations) with the IRS. Form 990 provides the basis for most financial data on nonprofit organizations. Those nonprofit organizations that serve broad public purposes and are organized for educational, religious, scientific, literary, relief of poverty, and other activities for the public benefit are eligible to apply for charitable status under section 501(c)(3) of the tax code. Charitable status permits organizations to receive tax-deductible contributions. This group of nonprofits serves the broad public, accounts for the majority of tax-exempt organizations, and is the focus of most chapters in this book. Mutual membership organizations such as labor unions, recreation clubs, credit unions, and political parties are also tax-exempt, nonprofit organizations that play important roles, but they are not central to this book. Even within the charitable portion of the nonprofit sector, the organizations are extremely diverse. They vary greatly in missions, origin, structure, size, and financial means. Their diversity confounds attempts to understand them and build adequate theory. Research over the past two decades has made progress in measuring the scope of the formal organizations, but little has been accomplished in measuring the informal groups, coalitions, and religious organizations. There is also a dearth of information on the direct and indirect contributions of nonprofit groups to society. Scope of Nonprofit Organizations in the United States The nonprofit sector in the United States is characterized by the diversity of organizations and activities, the concentration of resources in a small number of organizations, and the fragmented nature of activities that vary in scale and by geographic area. There were approximately 1.5 million tax-exempt nonprofit organizations in 1996. Among them are 1.2 million organizations registered with the Internal Revenue Service and an additional 266,000 religious congregations of all types (see table I.1 in printed copy). There are probably millions more small formal and informal associations (with less than $5,000 in revenues) that are not required to register with the IRS (Smith 1994). Among registered nonprofits in 1996 were 654,000 "charitable" organizations eligible to receive tax-deductible contributions. This group includes traditional charities-hospitals, universities, soup kitchens, etc.-that make up over half of registered nonprofit organizations. In addition to the "charitable" organizations, there are approximately 140,000 public-serving social welfare organizations that are tax exempt under IRS section 501(c)(4). Most of those organizations may not receive tax-deductible gifts; many elect to do substantial lobbying. In chapter nine, "Nonprofit Advocacy and Political Participation," Elizabeth Reid discusses nonprofits as politically active organizations, highlighting the representative and participatory functions of nonprofit advocacy. Other types of tax-exempt organizations primarily serve their members; for example, business leagues, social and recreational clubs, war veterans' organizations, cemetery companies, labor unions, benevolent life insurance associations, and credit unions. Donations to those organizations are not tax-deductible. While all of these groups potentially contribute to the social fabric of the country, we know most about the "charitable" 501(c)(3) organizations and the "social welfare" 501(c)(4) organizations that make up the majority of formal nonprofit organizations. I focus on them because of their public-serving nature (see table I.2 in printed copy). Types of Organizations The variety of nonprofit organizations is evident in the categories of the National Taxonomy of Exempt Entities (NTEE) developed by the National Center for Charitable Statistics to classify all nonprofit organizations (Stevenson 1997). The NTEE includes 9 major groups, 26 categories, and over 600 subcategories. The major groups are:
The active charitable nonprofits (excluding private foundations) include only about 4 percent with expenses of more than $10 million a year. This group of approximately 6,770 organizations holds more than three-quarters of the assets and is responsible for almost 80 percent of the expenditures of the nonprofit sector. In contrast, almost 41 percent of organizations (72,447) have expenses of less than $100,000, only about 0.6 percent of the total expenses for the field (see figure I.1 in printed copy). The assets of philanthropic foundations are also highly concentrated in the largest foundations. Hospitals and higher education institutions account for a disproportionate share of the assets, expenses, and employment in the nonprofit sector. Hospitals make up 2.8 percent of organizations but more than 46 percent of expenditures. Private colleges and universities are about 1.4 percent of organizations but account for over 12 percent of expenses. Human service organizations, in contrast, account for over a third of active charities but expend only about 13 percent of the resources (see figure I.2 in printed copy). Aggregate national statistics do not reveal a great deal about the majority of nonprofit organizations. Regional Variation There are regional and state differences in the numbers, types, finances, and growth of nonprofit organizations. The numbers tend to vary with the population levels. California, Texas, and New York have the largest numbers of nonprofits. The growth rates for nonprofits tend to be higher for states that have rapidly growing populations. Sparsely populated states, however, have among the highest density levels of nonprofits. Vermont, for example, had a density of 15 organizations per 10,000 people compared to five for Texas and almost seven nationally (see figure I.3 in printed copy). The Northeast has proportionately more arts, culture, and humanities organizations; the Midwest more human services; and the West more environmental groups. The Northeast, with about one-fifth of the population, is home to almost a quarter of nonprofit organizations that account for almost a third of the expenditures of the sector (see table I.4 in printed copy). These data are suggestive of the varied regional cultures of philanthropy described by Julian Wolpert in his research. Some areas have higher rates of giving and stronger civic and nonprofit infrastructures than others. Wealthier areas have larger numbers of nonprofit organizations that provide amenities such as recreation, private schools, and art activities (Wolpert 1993). Cultural differences appear to affect the types of organizations and their financial strength in each region. The portrait of the nonprofit sector that emerges is one of disparate groups, thinly and unevenly spread across the states with a great range of missions and activities. As a whole, their increasing economic strength raises their visibility, but most are community-based and not well known outside of their neighborhoods. They are growing in number, but they are still only a small fraction (about 5 percent) of the approximately 24 million business, government, and nonprofit entities in the country. Because the fiscal capacity of states and cities varies just as widely as the nonprofit sector, the effect of future shifts in governmental decisionmaking and spending on charitable organizations cannot be projected across the board. Likewise, the effect of devolution or other policy trends on different types of nonprofits cannot be uniformly considered. Some organizations will be offered new opportunities to partner with government, and some will be stuck with expanded service responsibilities and decreased funding. Nonprofit Activities The wide variety of nonprofit organizations reflected in the NTEE highlights their diversity and suggests a range of activities they undertake. They produce and display art, culture, and music; generate knowledge through research and education; protect consumers, the environment, and animals; promote health; prevent and treat diseases; provide housing, food, and clothing; promote international understanding; provide international aid and relief; create community social and economic infrastructure; advocate for and against public policies that affect civil rights, gun control, abortion, and other issues; provide services and funding to other nonprofit groups; transmit religious values and traditions; provide solidarity, recreation, and services to members and others; promote and transmit civic, family, and economic values; educate and register voters; and try to meet virtually every human need. This long laundry list gives some sense of the difficulty of defining and describing the nonprofit sector. It also makes clear that voluntary organizations do many things that are also done by governments and businesses. There are no sharp boundaries between the sectors. There are, however, some distinctive activities, including religious worship, membership activities, and government monitoring, that are overwhelmingly accomplished in the nonprofit sector, as well as activities more likely to be undertaken by nonprofits than by either government or business. Eighty-six percent of museums, botanical gardens, and zoological gardens, for example, are nonprofit. Some activities are more evenly divided between government and nonprofits, for example, social services where approximately 58 percent of providers are nonprofits. Business, government, and nonprofits sometimes undertake the same or similar programs or services, such as child care, hospital care, and research. They collaborate or cooperate in providing services such as low-income housing. Some small businesses fear incursions by nonprofits into commercial areas, while nonprofit leaders voice concern about the conversions of nonprofit hospitals and health maintenance organizations into for-profit businesses. Nonprofits have a long history of pioneering programs that were subsequently taken over by other sectors. In chapter two, "Meeting Social Needs: Comparing the Resources of the Independent Sector and Government," C. Eugene Steuerle and Virginia Hodgkinson illustrate the overlap of service functions in an analysis of the capacity of nonprofits and the government to serve the public. Chapter three, "The Nonprofit Sector and the Federal Budget," by Alan Abramson, Lester Salamon, and C. Eugene Steuerle, demonstrates the similar roles of the nonprofit and government sectors, outlining how changes in federal spending since the 1980s have affected areas of interest to nonprofit organizations. Primary education, kindergartens, and disease control were popularized by nonprofits and taken over by government when demand outpaced the ability of nonprofit providers to supply services. Recreation programs pioneered by nonprofits were picked up by businesses and developed into profitable enterprises. Some nonprofits have the characteristics of business corporations or of government programs, and a small number of organizations do change from one type of organization to another. Governments set up nonprofit corporations to carry out some public programs, for example, the Corporation for Public Broadcasting. Nonprofits may create profit-making subsidiaries (which pay taxes on earned income) to subsidize their charitable activities. A few give up their tax-exempt status when their missions can be accomplished more effectively as business corporations or when economic incentives make it profitable for them to become businesses. The conversion of nonprofit hospitals to for-profit businesses is a recent example. Conversions raise questions about whether it is in the public interest for business to take over hospitals and certain other types of services, but as long as the assets are reserved for charitable purposes and some form of community service is maintained, the current barriers to conversion are minimal. John Goddeeris and Burton Weisbrod discuss in chapter seven, "Why Not For-Profit? Conversions and Public Policy," the growing trend toward conversion of organizational form. The overlapping and complementary nature of the three sectors provides useful flexibility for American society. Public-serving activities are not restricted to government but can be undertaken through multiple avenues. Diverse publics with different tastes and needs organize to meet perceived needs. Social entrepreneurs implement their visions through nonprofit organizations, but the alternatives they develop sometimes find their way into the public or business sectors. ROLES OF NONPROFIT ORGANIZATIONS Why do nonprofits exist? Scholars answer that question in different ways, depending on their disciplines and orientations. Economic theories include the notions of "market failure," "government failure," and "nonprofit failure" as ways of explaining the public services delivered by nonprofits, and the partnership of government with the nonprofit sector in financing a variety of public services. Market failure is based on the concept that there are desired services or collective "goods" that do not have sufficient potential for profit to attract business providers. Market failure is also precipitated by insufficient information on the quality of services, which may lead consumers to turn to nonprofit providers that are perceived as trustworthy because they do not have a profit motive. Similarly, government failure to implies that there are public services that government will not provide for reasons that may include the cost or the limited constituency that desires the service (Weisbrod 1988; Hansman 1987). "Nonprofit failure" explains the nonprofit-government partnership as resulting from the need of nonprofits to finance services demanded by the public through governments. In this theory, nonprofits are the preferred providers of services, and government action only becomes necessary when nonprofits are unable to meet perceived needs (Salamon 1995). In chapter one, "Complementary, Supplementary, or Adversarial? A Theoretical and Historical Examination of Nonprofit-Government Relations in the United States," Dennis Young reviews current economic theories as they relate to the historical relationship between government and nonprofit organizations. Scholars also look to history and to the religious roots of charity, altruism, and social justice to explain the giving and volunteering that characterize involvement in nonprofit organizations and rights-oriented social movements as well as the helping behaviors so evident in religious organizations (Payton 1988; Wuthnow 1991; O'Connell 1997). Political scientists view the role of the nonprofit sector in terms of providing avenues of civic participation and representation of interests in the pluralistic, political system of a heterogeneous society. Diverse values and interests are aggregated through associations and represented to the political system through political advocacy and lobbying of the government by many nonprofit groups (Berry 1984; Douglass 1987; Verba, Schlozman, and Brady 1995). Roger Lohmann builds on the idea of the Commons as the civic arena in this book on the nonprofit sector (Lohmann 1992). Communitarians view voluntary organizations in more organic terms, as the precursors of government and the market and thus as among the most basic of social relationships that connect people and create communities. Those relationships became more complex over time and evolved into the state and the market (Etzioni 1993). Robert Putnam and others use the concepts of social capital and civil society in a basically communitarian framework (Putnam 1993; Walzer 1991). The variety of explanations and approaches is appropriate for this multifaceted array of organizations. Each theory brings insights and facilitates clearer understanding of nonprofit organizations. The following chapters will borrow from these approaches to provide a broad, descriptive look at some of the major roles played by nonprofit organizations. We use a civil society approach to look at the role of nonprofits in generating the social capital that links people to their communities and to others. The social capital role includes fostering civic values and participation, monitoring government, and informing public policy through education, research, and analysis. We use an economic perspective to look at the creation of income, jobs, and knowledge, as well as service provision and economic development. We employ a religious perspective to look at the role of nonprofits in alleviating poverty and promoting and maintaining religious values and beliefs. Social Capital Nonprofit organizations, regardless of origin, create networks and relationships that connect people to each other and to institutions quite apart from the organization's primary purposes. Those relationships build social capital, the cooperative networks that permit individuals to work together for mutual goals. Recent research by Robert Putnam and others suggests that relationships such as those fostered by choral societies, bowling leagues, and other community associations build the trust and cooperation that is essential for the effective functioning of society, politics, and economy (Putnam 1993). Other research shows that political and civic engagement is related to feelings of efficacy and the belief that participation in community activities leads to worthwhile outcomes (Pew Research Center for the People and the Press 1997). Nonprofit organizations use volunteers as members of boards of directors, in staff management and service positions, as fundraisers, and in many other capacities. Volunteers bring expertise from business, government, and the community to bear on local, national, and international problems. Volunteer experiences enhance civic engagement and diffusion of expertise as people of various backgrounds learn about the needs of their communities and others, and to act together to solve them. Volunteering also harnesses the enthusiasm of young and old and adds meaning to their lives. People who are involved in youth groups, churches, and other voluntary activities when young are more likely to give, volunteer, and be engaged in civic life in adulthood (Hodgkinson and Weitzman 1996a). Those who are involved in their communities are also more likely to be healthy and happy (Seligman 1991). Of genuine concern is whether there is a participation gap in the United States, particularly among poor people, who are generally not as involved in voluntary associations and often do not have the resources, opportunities, and skills to make their needs known in the political system (Verba, Schlozman, and Brady 1995). Some of the most profound social changes of this century have been promoted through a combination of research, public education, advocacy, legislation, and litigation fostered by nonprofit organizations, usually working in coalitions with religious and other groups, sometimes in cooperation with government and business interests. Civil rights groups, in collaboration with religious and other organizations, attacked racial segregation in this country through direct action, lobbying, advocacy, litigation, and public education. Environmental groups used research, public education, advocacy, and litigation in their pioneering efforts to reduce air and water pollution and protect the environment and wildlife. Mother Against Drunk Driving used a variety of tools, including public education, to create a major change in public perception about the consequences of drinking and driving. Anti-smoking groups fostered research and used the results to educate the public about the negative impacts of tobacco smoking on health. The women's movement continues to use public education and advocacy to promote equity and rights for women in the workplace and control over reproductive choices, while the anti-abortion movement focuses public attention on the religious and ethical values that they feel should guide those choices. Groups in California successfully organized to collect signatures and put on the ballot measures to cut public spending and overturn affirmative action in that state. Not all civic activities are designed to introduce change. Some groups aim to conserve or protect from outside forces values that they espouse, or try to prevent the erosion of values they cherish or advantages they enjoy. The National Rifle Association, for example, promotes gun ownership and lobbies against legislation that would limit the availability of guns. As Wuthnow's chapter illustrates, the most deeply felt controversies over values are played out in the nonprofit sector-around religious beliefs, artistic expression, personal responsibility, and individual rights. Nonprofits express conflicts over competing values long before they reach the political system. In extremely divisive cases such as racial segregation and access to abortion, the issues involve legislative and judicial battles at the national, state, and local levels over long periods of time. Policy Many nonprofit efforts inform and influence domestic social and economic policies as well as international affairs. Much police activity involves nonpartisan research, writing, evaluation, and demonstration projects. Some groups try to influence executive agencies, others, the legislative branch. Think tanks and universities conduct research and evaluations and make that information available to policymakers through publications, news media, forums, and individual conversations. Nonprofit advocacy groups try to educate the public and encourage individuals to contact their representatives directly or to sign petitions for or against certain positions. Some nonprofits also try to influence public policy through demonstrations, sit-ins, parades, and boycotts. Grantmaking foundations and other nonprofits try to influence public policy by demonstrating the efficacy of alternative approaches to public issues such as economic development or teen pregnancy. They may conduct experimental programs, evaluate the results, and communicate them to public authorities. Religious Religious organizations serve the spiritual needs of their members and promote and preserve the group's religious doctrines and values. Sacramental activities and membership serving activities such as child care and counseling are often supplemented by social services, crisis care, and advocacy activities (Printz 1997; Hodgkinson and Weitzman 1993; Cnaan 1997). Religious congregations also impart civic skills to members who learn to organize and collaborate for common ends. Black churches are well known for their political work, particularly around civil rights (Harris 1994). Catholic churches are vocal in opposition to birth control and abortion. Certain Christian churches support conservative political positions on issues such as abortion, gay rights, and family values. Religious congregations are also among the most forceful advocates for peace, social justice, and policies that protect the poor. The separation of church and state in the United States results in most religious entities falling outside of the government regulatory framework for nonprofit organizations. Houses of worship and closely aligned entities enjoy the benefits of tax exemption and deductible contributions but are not required to register or report to the IRS, although many do for a variety of reasons. A preliminary sorting of the IRS files indicates that a substantial proportion of nonprofits have religious roots or affiliations (Pollak 1997). Faith-based nonprofits and religious congregations are caught in a political crossfire right now. At the same time that they are being touted both by liberals and conservatives as ideal vehicles for assessing and serving the public's needs, the convergence of religion and government in new partnerships and new (as well as old) funding pattern is making many groups uncomfortable. Service Nonprofits of all types provide services that may be offered to the whole community, to members only, to governments, to businesses, and to other nonprofits. The services may be free or require a fee, such as a tuition payment. Voluntary labor, donations, direct and indirect government grants, and payments provide a complex mix of revenues for nonprofits (see table 2.3 in printed copy, chapter two, this volume). Nonprofits overlap with business and governments as service providers, for example, in education and medical care. They may be contractors to governments and businesses (providing preschool programs or drug abuse treatment), be collaborators with governments (maintaining national and regional parks or preventing diseases), or act in lieu of government (accreditation or consumer protection). In chapter five, "Government Financing of Nonprofit Activity," Steven Rathgeb Smith examines the many ways in which government funds nonprofit activity and considers the potential impact of this financing on the organizational culture of nonprofits and the services they provide. Governments may use nonprofits to undertake activities that require reaching local populations with culturally sensitive materials or to avoid building up staff for short-term projects. Nonprofits provide a way for governments to devolve programs to state and local authorities and provide services without incurring government salary scales and bureaucratic red tape. Chapter six, "Nonprofits and Devolution: What Do We Know?" by Carol J. De Vita, summarizes the current research on devolution and its probable effects on nonprofit organizations. Nonprofits also interact with and provide a variety of services for the business sector. They collaborate with business in promoting quality of life in areas where firms operate. Donations to and contracts with cultural organizations, child care, and recreation groups underwrite amenity services that attract and hold corporate employees. Environmental groups help to level the playing field for socially responsible behavior by demanding, for example, that all competitors within an industry clean up pollutants. Collaboration between voluntary groups and businesses develops when industries benefit from the educational and advocacy campaigns of nonprofits, as in disease prevention and anti-smoking campaigns that benefit life insurance companies. Nonprofit business associations provide information, research, and advocacy services for member corporations. They monitor the health industries and the impact of legislation and regulation on corporate activities. They may provide low-cost insurance or cooperative buying opportunities. Similar nonprofit associations provide such services for groups of nonprofits, health-related nonprofits, philanthropic foundations, colleges and universities, symphonies, museums, and others. While nonprofit organizations have historically played the role of service providers for the public, competition with for-profit companies is becoming an increasingly serious issue for them. As government turns more to the market to contract out for (what it assumes will be) more efficient sources of service, nonprofits may be excluded from new opportunities resulting from welfare reform and other shifts in government spending. Economic Nonprofits also play an economic role that is becoming better known through research that documents the contributions to the economy of nonprofit employment and the goods and services produced. The growing number of nonprofit organizations with their increased role as employers (especially in hospitals, private universities, and multipurpose organizations like the American Red Cross, Catholic Charities, and others) adds significantly to the national income. The nonprofit sector employs over 10 million people plus another 5.5 million full-time equivalent volunteers. It generated annual funds estimated at $550 billion in 1996. An estimated 6.5 percent of national income originates in the nonprofit sector (Hodgkinson and Weitzman 1996b). This economic role, however, is disproportionately concentrated in the largest organizations. As in other parts of the economy, the resources of the nonprofit sector are highly concentrated. More than one-third of nonprofit employees work in hospitals. A study of nonprofits that report to the IRS shows that the top 1 percent of organizations in 1995 are responsible for 28 percent of income, and the top 10 percent for 68 percent of income (Pollak and Pettit, forthcoming). Nonprofits are the entry point into the labor force for many women and minorities. About two out of three workers in the nonprofit sector are women. Major nonprofit hospitals and universities also anchor whole inner-city neighborhoods or small towns with employment opportunities, services, and amenities like arts, culture, and recreation opportunities. They pay payroll taxes and generate taxable income through employment. Because most do not pay property taxes or sales taxes, they may be perceived as a drain on the local economy. A growing number of large nonprofits, including foundations, make payments in lieu of taxes to city governments. The city of Philadelphia now requires payments in lieu of taxes from the larger nonprofits within its jurisdiction, after a series of stories in The Philadelphia Inquirer criticized nonprofits for not contributing to the city's coffers (Borowski and Gaul 1993). In chapter four, "Tax Treatment of Nonprofit Organizations: A Two-Edged Sword?" Evelyn Brody and Joseph Cordes discuss the special treatment of nonprofit organizations, a primary area of government regulation of the nonprofit sector. Studies of the economic impact of nonprofits, however, reveal significant economic contributions to local economies. In Baltimore, for example, a study of the nonprofit sector conducted by the Merrick School of Business at the University of Baltimore showed a fast-growing part of the local economy that provided enough full-time equivalent jobs for 18 percent of the workforce and generated $5.4 billion in economic activity in the city. The Baltimore city government received an estimated $41 million in "piggy back" state income tax, real estate tax, and sales tax revenues traceable to spending by nonprofits, their vendors, and employees. Visitors to Baltimore's nonprofit tourist attractions spent over $303 million in the city. Nonprofit elementary and high schools and community service organizations spent an estimated $900 million annually on behalf of the city's residents, more than half of Baltimore city government spending on similar programs and services (Maryland Association of Nonprofit Organizations 1997). NEGATIVE IMPACTS Nonprofits have the potential for positive as well as negative impacts on society and are subject to the failings of the people who lead them. The regulatory framework is designed to protect the public from malfeasance, but other types of potential negative impacts are not as easily regulated. Some are obvious: nonprofits can be a divisive and fragmenting influence on the political system. They may undermine political parties (or support them), and well-funded groups can manipulate public opinion and promote ideological positions or have a disproportionate impact on public policy. Low-income populations may be at a disadvantage in the policy process because they may not have access to groups that can represent their interests. Although there is little confirming evidence, nonprofits may have an edge over businesses in the same markets because of their tax-exempt status. Other potentially negative consequences are not as obvious. The use of nonprofits by governments to deliver services may separate governments from direct credit or blame for services funded, thus undermining popular support for public financing of programs or promoting cynicism toward nonprofits if programs do not work. Nonprofits can provide a "cop-out" for political leaders who wish to curtail government responsibilities. Nonprofits can also be used by wealthy communities to provide for their needs while they fail to provide tax revenues for public education and other public health and human services for low-income residents, Hopefully, the already significant role of nonprofit organizations in human service provision and the well-established but sometimes hidden relationship between government and nonprofits will be uncovered as welfare reform, devolution, and other shifts play out. CONCLUSION We must understand the variety of roles played by the nonprofit sector before we can thoroughly explore its relationship with government. Because the spheres of activity undertaken by nonprofits and government intersect in so many ways, the nature and scope of nonprofit organizations will be sensitive to changes in public policy. For example, budget policy affects the demand for services provided by nonprofits, as well as the ability of agencies to supply those services. Similarly, tax policy affects the resources available to nonprofits in fulfilling their missions. It is important to remember that interaction between nonprofits and government in a civil society is dynamic. Therefore, while studying the past can be useful, mechanically projecting the future from the past can be misleading. Simplistic assumptions about what nonprofit organizations can do and how they affect society may lead to public policies that are ineffective or have unintended negative consequences both for the organizations and for society. Note on Data Sources During the past 15 years, researchers (Virginia Hodgkinson, Lester Salamon, and others) have made great progress in assessing the dimensions of the nonprofit sector in the United States and in other countries. This has been difficult because governments do not collect and maintain data about nonprofit organizations as they do for businesses. In 1981, a group of researchers started the National Center for Charitable Statistics (NCCS) to collect information derived from IRS reporting forms, classify organizations by purpose, and produce periodic statistics. Through the years, NCCS has developed and refined a classification system (the National Taxonomy of Exempt Entities) for nonprofits and issued regular reports. To date, the most comprehensive source of data on the nonprofit sector in the United States is the Nonprofit Almanac 1996-1997, published by Independent Sector and updated in May 1998. Its companion volume, The State Nonprofit Almanac 1997, published by NCCS at the Urban Institute, contains more refined data at the state level. A pathbreaking analysis of the IRS data on nonprofit organizations is also included in The Charitable Nonprofits: An Analysis of Institutional Dynamics and Characteristics, by William G. Bowen, Thomas I. Nygren, Sarah E. Turner, and Elizabeth A. Duffy (San Francisco: Jossey-Bass Publishers, 1994). While such data on nonprofits have improved greatly over the past several years, data on the sector as a whole are limited. One problem is the absence of many nonprofits from the IRS data sets, the gaps being greatest for the small social service and advocacy organizations (Gronbjerg 1994). There is also little information on nonprofits with less than $5,000 annually in gross receipts that are not required to register or file information returns with the IRS. While estimates vary, there may be several million such formal and informal groups in existence (Smith 1994). There are virtually no data available on most unstaffed coalitions or civic and community groups that do not meet the threshold for reporting. In addition, some organizations may be unaware of the reporting requirements, and others may choose not to report. References References available in printed copy.
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