Nonprofit Infrastructure

In the rush to fund infrastructure to help the nation’s economic recovery, this article from Brookings suggests using some of that for the nonprofit infrastructure and that is a good idea; except for the really bad part of the idea that would ban religious nonprofits from funding when they have traditionally been the most effective at providing help.

An excerpt.

“DECEMBER 22, 2008 — No one knows how deep or prolonged this recession will be but each new batch of figures is scarier than the last.

“For this reason, President-elect Obama has decided to take bold action to prevent further damage and revive the economy with a very large fiscal stimulus package—up to $1 trillion over two years. The list of priorities shows that everything is on the table: tax cuts, aid to state governments, and infrastructure—roads, bridges, schools—plus energy efficiency, broadband access and health-information technology.

“But there is one big sector that got left off the list: human infrastructure—in the form of investments in the nonprofit sector. Investing just 10 percent of the stimulus, or up to $100 billion, in nonprofits is very important, especially since they are also being hit by these hard economic times. By including this sector we can take advantage of a huge network of institutions that work hard every day to improve the welfare of communities and individuals, that will spend the money quickly, that have the capacity to spread the dollars widely, and that in the absence of such help will need to shrink and thus become another drag on the economy.

“The nonprofit sector in the U.S. is relatively large and diverse. In 2006, it received almost $1 trillion in revenue and spent or gave away almost all of this. It employs 10 percent of the work force and has grown rapidly in recent years. It includes a wide diversity of organizations from very small, locally-based soup kitchens or mentoring programs to large universities, hospitals, and social service groups like the Red Cross. Unlike the household sector it does virtually no saving and thus any funds provided to this sector will be fully spent and spent in a way that the citizens who voluntarily support such efforts approve. And unlike spending on new infrastructure projects, most of the money will move into the economy very rapidly and employ people with a broad range of skills – skills that go far beyond those needed to repair a highway or create cleaner energy. Finally, without such assistance this sector will shrink, adding to the ranks of the unemployed. Like state governments, this sector must balance its budgets and since it is likely to see a sharp drop in donations as the result of both the recession, and the decline in stock prices or other asset values, it will be forced to cut back thereby adding an additional downward pull on the economy.

“How might an effort to involve this sector be implemented? To keep it simple, one option would be to designate all nonreligious charitable organizations, so-called “public charities” as eligible, to earmark a portion of the stimulus package (say 10 to 20 percent) for this purpose, and to distribute the funds in proportion to the amount each organization reported to the IRS for the prior year. A portion of the funds could also be set aside for the faith-based organizations that provide social services, and allocated by the federal agencies that have been handling this program in the current administration. These organizations need to be treated separately because they are not required to report to the IRS and because it would not be appropriate for taxpayer dollars to be spent on religious activities as opposed to the social service work such organizations often do and do well. It would also be possible to have these same offices handle grants to nonreligious organizations but if we want to get the dollars out quickly and with a minimum of bureaucracy, a simpler option is preferable. It doesn’t get the government in the business of picking and choosing which nonprofits to support, and it still leaves 80 to 90 percent of the package for such conventional items as tax rebates, assistance to state and local governments, extensions of unemployment insurance, food stamps, and infrastructure projects of all kinds.”