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Residents of Indianapolis and all of the state’s urban and rural areas benefit from the services not-for-profits provide. The good work these organizations do is Hoosier Hospitality in its purest sense.
That’s why civic and business leaders and policymakers should not overlook flashing warning signs about the health of our not-for-profits. The warnings come from two interconnected developments: a change in the nation’s tax laws and an increase in the demand for services.
Let’s start with the tax law, which reduces the financial advantage of giving. Only taxpayers who itemize their deductions see a tax break for giving to charity. With the increase in the standard deduction under the 2017 Tax Bill, fewer taxpayers will itemize their charitable donations. Meanwhile, shrinking federal and state budgets means fewer grants to not-for-profits, just as government safety net agencies see their own budgets shrink and are less able to fulfill their traditional responsibilities.
Research by the Indiana University Lilly Family School of Philanthropy estimates that not-for-profits will lose up to $11 billion in donations next year thanks to changes in the tax law. Not-for-profits will need private donors more than ever.
With so much demand, where should you give? Regardless of size, any not-for-profit should be clear about its goals, where its money comes from and how it is spent, and how it measures success. But success means more than being lean. Let’s vanquish the “overhead myth”—the idea that the less money an organization spends on fundraising and administration, the better.
Running only on volunteers and donated goods can actually be less efficient. Effective not-for-profits invest in staff and infrastructure so programs thrive. That’s more important as not-for-profits and donors adjust to the changes in law.
The second warning sign is outlined in a new IU report, “The Indianapolis Nonprofit Sector: Overview and Challenges.” Using data from a 2017 survey of about 260 Indianapolis-area not-for-profits, IU’s Indiana Nonprofits Project found that demand for programs and services is increasing. At the same time, not-for-profits struggle with lean budgets and other administrative challenges. The majority have few employees and rely on volunteers to fill the gaps. They operate at or just above the margin. Some don’t have the key organizational components for good management and transparency. Then there are financial and marketing challenges.
As we rightly worry about tax laws and lean budgets, don’t overlook the good going on in not-for-profits. Early in my scholarly career, I visited a church as I studied the ways gospel singing binds communities. At the weeknight children’s choir practice, one little girl, in the midst of a song about God’s love, piped up that she was sick and wondered why a loving God would permit that. The choir director stopped the music, laid hands on her, and prayed for her healing.
Many not-for-profits that serve our communities are ill. We mustn’t turn away because the charitable deduction has changed or because some charities are overburdened or undermanaged. Like that little girl, they need to feel the power of all of our hands reaching out, offering the gifts and other support that will help them heal and, in turn, keep us all well.•
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Schnable is an assistant professor at the Indiana University School of Public and Environmental Affairs.
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