This post is part of a larger series.

Introduction to Section Three

This is the beginning of my final major section: my proposals on how we can create a more equitable Philadelphia. In this broader section, I will cover three areas of reform:

  1. Governance: the management and functioning of the government in general, including but not limited to elections, how money is accounted for, and what processes are in place to implement programs.
  2. Fiscal policy: everything having to do with money, including but not limited to tax rates, wage laws, or spending policies.
  3. Programmatic policy: everything having to do with program implementation, which includes all of the services the City provides.

I will begin with governance. Everything hinges on having a smoothly functioning, efficient, accountable, transparent government that has the trust of its citizens. Without this, all other reforms are meaningless. It doesn’t matter what tax reforms we initiate if the money is squandered, or if it disappears through corruption. It doesn’t matter what vision we have for Philadelphia—conservative or liberal—if there simply is no public trust in the government to carry out that vision. That is why I’m focusing on this topic first and foremost. Only then will I explore changes in fiscal and programmatic policy at the local level that will reduce the poverty rate and mitigate the negative impacts of poverty.

 

Why Government is the Only Solution

Before getting into my proposed changes, I need to show why government is the only possible solution. Time and time again I see the proposed solution to our poverty and inequality as this: non-governmental sources can tackle the problems of poverty and inequality—just look at corporate social responsibility, private philanthropy, nonprofits, and our culture of volunteerism! Why create more regulations or taxes when people seem to choose to help others on their own?

I hear you—there are a lot of really great initiatives happening. However, coming from the nonprofit fundraising sector, I can tell you that this alone is not the solution. However, I don’t want to leave the impression that nonprofits are bad. To the contrary, nonprofits in Philadelphia are doing some of the best work in the region to mitigate the effects of poverty and inequality. Nonprofits are providing a range of services that the Philadelphia, State, and Federal governments are failing to provide, and that the private market will not provide for those who cannot afford them. Until our society is reformed, nonprofits are the most immediate and effective way to help those in need. Please, continue to donate or volunteer, but understand that it is not enough by itself. We need to continue to provide whatever immediate relief we can, while pushing for broader, systematic change.

My purpose here is to highlight the structural flaws of the nonprofit sector, and why we can’t just rely on all of society’s issues to “work themselves out” through the private sector. We have to take deliberate, democratic action through government. It is the only way to generate enough resources consistently, organize the use of those resources, and to create the change in rules in our economic system that are collectively needed to change Philadelphia for the better.

As Martin Luther King Jr. wrote in his final book:

“True compassion is more than flinging a coin to a beggar; it understands that an edifice which produces beggars needs restructuring.”

Source: King Jr, Martin Luther. Where Do We Go from Here: Chaos or Community? (King Legacy) (p. 198). Beacon Press. Kindle Edition.

What we are doing right now amounts to flinging coins. Our system needs restructuring. The only way to achieve this is through government, which is why we must reform Philadelphia’s governance so that it is more capable and trustworthy.

With that in mind, here are my three reasons why the nonprofit sector alone cannot solve Philadelphia’s problems of poverty and inequality:

1-Resources

For one, the non-governmental sector will never be able to generate enough resources to effectively tackle the problems of poverty and inequality on a large enough scale to make meaningful change.

Take an affordable housing nonprofit, for example. One organization serves about 100 people a year with a budget of about $7 million a year. Other similar organizations might be serving about 30 people a year with a budget of under $2 million. A very large housing organization might serve several hundred people a year, with a total budget closer to $40 million.

This is a great accomplishment, and surely provides much-needed assistance to families who could otherwise not afford it. However, it is just the tip of the iceberg when it comes to the level of need in Philadelphia. The families admitted into these programs are the lucky few. They have won the nonprofit lottery. Based on current estimates, there are more than 30,000 owner-occupied homes in dire need of repair in Philadelphia. Likewise, it is estimated that Philadelphia needs 40,000 new, affordable homeownership units to make homeownership affordable for the typical Philadelphia family.

It’s a similar story for every type of service. The need far, far outstrips the ability of organizations to provide services. And, it is not surprising when we think of why. The nonprofit sector is trying to fill gaps in services that government traditionally provides for the whole of our society. A single nonprofit organization is considered wildly successful if it has an annual budget of more than a couple million dollars. The kinds of programs we need would require several hundred million dollars, or even several billions of dollars.

Let’s do some simple math based on our most recent estimates on the need just for housing. Let’s assume a fairly conservative cost of the most basic home repair at $20,000, and the cost of the most basic, two-story row-home at $200,000. The program we’re imagining might offer free repairs and zero-interest or low-interest mortgages (hint, one of my proposals later). The American Housing Survey reports that, in 2017, there were 61,400 units that were severely or moderately inadequate in terms of housing quality. Since this includes Philadelphia and Camden, let’s scale this to ratio of the number of occupied housing units that Philadelphia has, so 2,364 of those units are in Camden. Of course, this might not be exactly true, but it should be the general ratio. So, we have about 59,000 inadequate housing units in Philadelphia. This will probably increase slightly each year. The number of new units needed is more difficult to estimate. I will go with the estimate from the City’s Department of Planning and Development. Their plan highlights the need for 36,500 new units in the next ten years and 63,500 repaired. I will use both of their estimates for the sake of consistency.

Considering all of this, here are our simple calculations:

63,500 homes in need of repair
x $20,000 per home for the most urgent repairs needed
=$1.27 billion total

36,500 new, affordable homes needed
x $200,000 per home in new construction costs
=$7.3 billion total

=$8.57 billion total

If we set out with a ten-year goal of achieving this, it would cost $857 million up-front every year, with large amounts of revenue coming back in via mortgage payments. Keeping a simple model of zero-interest mortgage revenue and no inflation, there would need to be a total of $7.475 billion up-front over ten years, with the City eventually receiving back $7.3 billion.

This kind of revenue can only be generated through taxation. Even if nonprofit fundraisers miraculously convinced everybody in society to make donations, it would not even get close to the amount of revenue that taxation can provide, and it would almost certainly not have the stability of taxation.

This is no way to treat the most vulnerable among us. People’s basic needs should not be a matter of charity, left to the desires of private individuals and companies. We deserve better—we deserve fully funded, sustained programs, and taxation is the only way to achieve that.

2-Organization

Second, the non-governmental sector will never be able to organize its efforts to create the sustained, robust, coordinated programs needed to create lasting change.

Nonprofits, even more than government, operate on shoestring budgets. The industry is notorious for burnout from low wages, unpaid overtime, and simply bearing too many responsibilities on too few people. Because of this, turnover is a real issue. It is not uncommon for even high-level positions to rotate every one to two years, leading to managerial turmoil.

The industry is also notorious for relying heavily on volunteer labor. It is not uncommon to have two the three full-time staff with dozens of rotating volunteers assisting them. This seems great in many regards, but consider the fact that volunteers are, well, volunteers. They are not consistent, and why should they be? They are not a replacement for full-time employees. Nonprofits have no way to ensure that volunteers show up on time, show up at all, or stay for a full shift. Also, volunteers are seldom skilled, instead filling roles that require very little training or experience. You will be hard-pressed to find a volunteer accountant, program manager, or director of development, and even more hard-pressed to find one that can afford to and wants to show up on-time every day for years. Finally, many volunteers are much less volunteers than they are unwilling employees showing up for a photo-op. This includes large groups of corporate employees from large funders, all clad in matching, branded T-shirts. In fact, many volunteer groups more often than not cost nonprofits more in time than the benefits that they bring—but nonprofits are required to host these groups due to the funding structure of the whole sector.

Both of these issues stem from the first issue, a lack of resources. Nonprofit managers feel forced to make these tough calls, or to not get their work done. The result is that the management and operation of any individual organization is characterized by high turnover rates and inconsistency. This makes it difficult to create sustained, robust programs even within one organization. This makes it even more difficult to coordinate with other nonprofits to most effectively fill the gaps in society’s needs. It is hard for a housing and a food organization to coordinate, for instance, if the liaison from each group leaves several times. Nonprofits are having a hard enough time just staying afloat, let alone creating citywide programming that utilizes each organization’s strengths.

3-Systems

Finally, the non-governmental sector can provide much-needed relief, but it will never be able to change the broader systems that make its services needed.

The first reason why nonprofits can never make systems change is that nonprofits overwhelmingly tend to focus on direct services. They provide affordable home repairs, free food, emergency shelter, after-school programming, English language courses, healthcare services, and so on—all tangible services. There are only a select few groups who focus on advocacy.

This is because of the funding structure of nonprofits. Essentially, nobody wants to fund intangible programs, so they simply don’t happen as much. In the nonprofit world, there are two types of dollars: general operating dollars, and restricted dollars. General operating is money that comes with no or virtually no restrictions, so it can be used to pay staff salaries, keep the lights on, buy printer paper and postage, and so on.  Restricted dollars, on the other hand, can only be spent on a specified thing, and this thing is usually something tangible. Think of things like the roof materials needed for a home repair, the food that is provided in a nutrition program, the board games provided at an after-school program, or the textbooks provided in an English language course. Restricted dollars typically make up the majority of nonprofit fundraising. Restricted dollars tend to come from corporations, foundations, faith-based groups, schools, and government as grants. General operating dollars tend to come from individual donations or fundraiser events, or from any revenue the organization generates by itself, perhaps through program fees or creative fundraising initiatives.

Why do people only want to write checks to purchase tangible goods? For one, it makes for a really easy measure of success. Now you can say that the grant you provided to XYZ nonprofit enabled it to buy X number of notebooks for needy students. It is much harder to quantify or make understandable the impact of funding the program staff who actually teach the needy students, and even less so when it comes to paying rent or utilities. People like this because it clearly shows success, and corporations especially like this so that they can use it as a statistic in their annual reports on their corporate social responsibility. A second reason is that people do not seem to trust that their dollars will be spent well if there are not clear restrictions on the dollars. Regardless of the motivation, the result is that the nonprofit sector is ultimately a direct services sector. Therefore, with only a few exceptions, it is not working to advocate for serious change in policies so that the core issues they deal with are not issues in the first place.

A second reason why nonprofits can never enact the needed change in our economic system is that nonprofits are beholden to their funders. Because of the funding structure of nonprofits, most are faced with a choice: accept checks from the large companies that have directly contributed to the issue you are working on, or cease to exist. Take for example an affordable housing nonprofit. In order to have enough money to actually build homes, it needs to accept grants from the large banks and construction or materials companies. In short—every organization you can think of that relates to the housing industry, whether from the financial side or the construction side.

While it is great that they are providing these funds, their ultimate motivation is not to create a world in which these inequalities do not exist. Rather, it is to create positive imagery of their company, to meet the requirements of the Community Reinvestment Act, and to claim tax write-offs for charitable donations—all while gaining a powerful influence over the very organizations that are best positioned to push for the kind of change we need. It is, as I’ve seen it put, “letting the foxes guard the henhouse.” If these companies really were interested in creating a more equitable society, they would push for greater regulations of their industries, higher taxes on the most profitable companies, and publicly funded programs for basic needs. But they don’t, and they never will. This contradicts their interests.

Now imagine if the benefactor nonprofits of these organizations decided to push for these changes. Would these companies continue to write checks? Would they continue to praise the accomplishments of the nonprofit industry? Would they continue to send their representatives to photo-ops at major events, and post support on their social media? Would they continue to write about the need for affordable housing, healthy food access, healthcare access, quality education, and so on?

No, of course not. They would stop writing checks to that nonprofit, and they would begin spending resources on a campaign to fight that organization’s advocacy. Nonprofits that stand up for broader policy changes would fade away as their limited resources dwindle. The only exceptions are organizations that are able to rally a consistent, core group of individual donors who support that organization’s specific advocacy.

This is not an accident. This is not an unfortunate side-effect of our current system. This is a feature. The nonprofit sector is the ultimate dream of privatization. It is a band-aid solution to a far larger, structural issue, being used to placate any would-be reformers. The nonprofit sector is not positioned to rise to the level of replacing governmental services and protections. Rather, it is often being used as an extension of the public relations department of companies. Companies are able to use this system to make billions of dollars through deregulation and tax evasion, and then to publicly pay millions of dollars back to society to make it seem as if they are part of the solution. It is a way to co-opt any movement for real change before it happens.

Finally, nonprofits can never enact regulations or policies for the whole of society. Nonprofits cannot levy taxes in order to reduce inequality or to discourage negatively impactful behaviors. They can never pass legislation to reform zoning policies, or create stronger protections for consumers, or raise the minimum wage. Nonprofits simply don’t have this power, they are private organizations. The most they can do is raise money, provide services, and conduct advocacy. At the end of the day, though, it is government policy that needs to change in order to reduce poverty and inequality. In short, nonprofits cannot change the rigged game because they themselves presuppose this rigged game.

Conclusion

As I stated early on in this post, I don’t want to leave the impression that nonprofits are bad. I simply want to push back on the idea that the current system of the nonprofit sector alone providing services will be able to eliminate Philadelphia’s problems of poverty and inequality. Good governance and robust public programs are the only realistic solution. Nonprofits can and should play a vital role, but that role should be supplementary to a broader shift in government policy and political reform.