The Nonprofit Sector and the Provision of Public Services

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Daniel Hummel
February 26, 2020

Downtown Flint, Michigan (Mott Foundation building tallest in picture)

The size of the nonprofit sector varies across the United States. In my state, Pennsylvania, there are roughly 15 nonprofits per 10,000 people. The nonprofit sector is growing. There are a number of reasons for this growth, including demand, funding and the local culture. The size of the nonprofit sector has also been associated with the decline of the scope of government. Commonly referred to as the government failure model, the decline in state and local revenue bases, coupled with a decline in Federal aid, increased demands on nongovernmental actors to provide the services once provided by government. A paradigm shift in public administration with the rise of New Public Management supported the contracting out of public services.

The contracting out of public services to nonprofits made more sense than to for-profits given the public service motivation of nonprofits. This is especially the case for social and human services nonprofits who still rely on government grants and contracts. These nonprofits are actively involved in providing public services even when the services are not adequately funded by the grants and contracts. Additionally, many nonprofits provide public services without any government funding. The reliance of nonprofits on government funding as well as the reliance of the government on nonprofits to provide public services is known as the interdependence model.

The relationship between nonprofits and government can simply be transactional with nonprofits extracting money in exchange for task completion. The relationship could also be due to shared mission with the government and nonprofits sharing an aim to provide services. This relationship is more collaborative and is still evolving in many communities across the United States as trust builds between the two sectors. Another paradigm shift in public administration has accompanied this change with the rise of New Public Governance and the networks that have emerged in the public arena.

As their public involvement has increased there has been greater scrutiny over their operations. Nonprofits are known for having insufficient resources to provide these services, which raises questions about sustainability. Traditionally, nonprofits have also been very particular in their focus on specific communities and issues which may be inappropriate given the roles they are now fulfilling in their service areas. As these nonprofits provide more public services many of the same concerns that circulated around the for-profit provision of these services apply to them. This includes the level of democracy encouraged or suppressed through their involvement. Lastly, concerns have been raised about the level of professionalism in providing these services. These shortcomings are not blind spots for the sector as they work to increase their sustainability, scope, democratic practices and professionalism.

The shift to nonprofit public service provision has also increased the flexibility with these services. Nonprofits are also community-centered with better knowledge about the local circumstances and needs. They are the nongovernmental street-level bureaucrats in many cases. Although not all nonprofits fit this category, they are born of associational life and are therefore nurtured within the very democracy that Alexis de Tocqueville lauded in his treatise on Democracy in America. Their involvement in public service provision would seem to be a natural expression of our democracy.

The size of the nonprofit sector and the implications for their increased role in public service provision requires more research. There could be a relationship between declining government resources and the number of nonprofits in operation as hypothesized by the government failure theory. Interestingly, many nonprofits have had to adjust as government revenues decline along with declining grants and contracts. This has meant that they have had to increase fundraising efforts, diversify their revenues such as through fees for service and cut administrative costs. Cost cutting by nonprofits has been labeled the nonprofit starvation cycle. This has raised questions about their sustainability.

The growth of the sector has meant that there has been an increasing presence of nonprofits some of which are providing critical public services. Their public role has increased expectations for public accountability and performance which some have argued have decreased their level of responsiveness and flexibility characteristic of nonprofits. There are also calls for nonprofit boards to be more representative of the people they are serving not unlike the same demands on government bureaucracies.

In the future nonprofits will undoubtedly remain an important component of public service provision. Understanding the rise of this sector versus government may help explain how public services will change in the future. Fiscal stress at the state and local level could be a major factor in increasing demand for their work. It could also signal less resources for these nonprofits as they become increasingly responsible for this work. There are true opportunities and threats with this arrangement that need to be explored especially in particularly vulnerable communities with a limited government footprint from years of decline.

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Author: Dr. Hummel is an assistant professor in the Department of Philanthropy, Nonprofit Leadership and Public Affairs at Slippery Rock University. He teaches classes on civic engagement, leadership and financial decision making. His email is [email protected]. You can also visit his website: www.hummel-research.com.

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