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Explorations in Nonprofits


									                             Explorations in Nonprofits
                                        Part I: Trends and Disparities
                                 by Robert Lerner, Ph.D. and Althea K. Nagai, Ph.D.
Summary: The following is the first of two
articles summarizing a major new Capi-
tal Research Center report examining
America’s charitable institutions. A ma-
jor portion of the 250 page study Explora-
tions in Nonprofits: Preliminary Findings
looks at the relationship of nonprofit or-
ganizations to government, particularly
at how nonprofits benefit from increased
government activity. The study also looks
at how a very small number of wealthy
nonprofits benefit disproportionately from
public contributions. The full study, con-
taining comprehensive statistical charts,
documentation and analysis as well as
appendices for eleven nonprofit
subsectors, is available on the CRC
website and is
available for purchase in two volumes for
                                           The American Red Cross ranked sixth ($545.5 million) on the list of

A                                          nonprofits receiving contributions. The nation’s top 100 nonprofits col-
        merica has always relied on chari- lected nearly 20 percent of all nonprofit contributions in 1998.
table institutions to provide for those in
need. Throughout most of the 20th cen-
                                              and local community initiatives.                     The research we compiled in our mono-
                                                                                               graph Explorations in Nonprofits: Pre-
tury, however, government at local, state          Presidents and other policymakers           liminary Findings, published in April by
and especially federal levels increasingly    recognize the importance of nonprofit in-        Capital Research Center, hopefully adds to
took on the task of trying to meet the        stitutions. But the study of nonprofit or-
social, educational, cultural, moral,         ganizations is in its infancy. There is little
healthcare, and other needs of Americans.     quantitative data collection and statisti-
                                                                                                         June 2002
Then, beginning with the Reagan adminis-      cal analysis of nonprofits, especially com-                CONTENTS
tration and thereafter, policymakers          pared to the work that has been done on
seemed to slow the pace of government         other aspects of American society, in-               Explorations in Nonprofits
activity. They began trying to reduce         cluding basic demographics, public opin-                         page 1
government’s role in helping the needy        ion, macro and microeconomics, and so
and increase the role of private nonprofit    on. The quantitative study of nonprofits
organizations. Welfare reform in the middle   has grown since the 1980s, but it has a                 Philanthropy Notes:
1990s is the most notable example of this     very long way to go.                                            page 12
effort. Most recently, President George
W. Bush has called for greater faith-based
Foundation Watch

the general understanding of nonprofit         How Does Nonprofit Activity                     not seem to be a function of state poverty
organizations, but we treat it as a prelimi-   Relate to Government Activity:                  rates.
nary empirical study.                          Crowding-Out or Complement-
                                               ing?                                            Statewide Distribution of
     The report contains many interesting           What is the relationship of nonprofit      Nonprofits
– and startling — conclusions. For in-         activity to the activities of government?            The number of 501(c)3 organizations
stance, far from charitable giving in the      There are two views. What might be called       in 1998 ranges from 25,402 in California to
1990s constituting some “golden age” of        the “traditionalist” view of American soci-     587 in Wyoming. Since there is a nearly
charity, the largest nonprofits have taken     ety holds that nonprofits are “crowded-         perfect (re=0.97) positive correlation be-
the lion’s share of charitable wealth and      out” by the activity of government. In this     tween the number of organizations in a
income, getting richer as typical nonprofits   view, the work of traditional charity, edu-     state and the size of a state’s population,
have struggled to get by. In addition, the     cation, and civic improvement is at some        we needed to develop an index of the con-
number and size of human service               level at odds with government welfare pro-      centration of nonprofits that did not sim-
nonprofits is not related to the percentage    grams. If nonprofit activity and govern-        ply reflect a state’s population size, which
of population that is in poverty in any        ment activity are essentially substitutes       is simply a nuisance factor. To find the
given state.                                   for each other, then they are competing for     number of nonprofits per capita, we di-
                                               the people’s resources. To increase gov-        vided the number of 501(c)3 organizations
     In states where government is stron-      ernment welfare programs and spending is        in a state by the state’s population and
gest – with more government employees          to crowd out private charities, leading to      multiplied the result by 1,000. The result—
and higher government spending – there         less charitable giving, fewer individual        “5.82 per 1,000 population” for the District
are more nonprofits per person than in         volunteers, more welfare bureaucrats, more      of Columbia, for instance—is abbreviated
those where government is smaller. The         welfare regulations—and worsening so-           as “5.82 nonprofits per capita.” Chart 1
report also analyzes the growth trends in      cial outcomes for the poor.                     ranks the states by number of nonprofits
nonprofit policy subsectors such as the                                                        per capita.
environment, civil rights and education             The contrasting view is that nonprofit
issue areas. The second installment of the     organizations can and do act as partners of          It seems apparent that where govern-
series will discuss developments in the        the welfare state. This “handmaiden” view       ment is most pervasive, nonprofits will be
specific policy subsectors.                    holds that nonprofit organizations should       most present. At 5.82 per capita, Washing-
                                               and do complement the activities of gov-        ton, D.C. has by far the highest concentra-
                                               ernment. Nonprofits may serve as the labo-      tion of 501(c)3 nonprofits. It has three
                                               ratory for future public solutions to social    times the number of 501(c)3 organizations
                                               problems, they may contract with govern-        per capita as are located in second ranked
Editor: John Carlisle                          ment to administer its public welfare pro-      Vermont, which has only 1.78 nonprofits
                                               grams, or both. In any case, the “indepen-      per capita. The states with the lowest num-
Publisher: Terrence Scanlon                    dent sector” will not be as independent as      ber of 501(c)3 organizations per capita are
                                               some might hope or others fear because it       Nevada (0.44 nonprofits per capita) and
Foundation Watch                                                                               Utah and Mississippi (0.47 nonprofits per
is published by Capital Research               will act in collaboration with government
Center, a non-partisan education and           or even be the government’s agent. If the       capita), hardly bastions of “big govern-
research organization, classified by           mission of nonprofits is to help carry out      ment.” Bolstering the suspicion that
the IRS as a 501(c)(3) public charity.         the mission of government, then one             nonprofits are not crowded out by govern-
                                               should expect that the number and activi-       ment activity but gather around it is that
Address:                                                                                       the greater the number of government em-
1513 16th Street, N.W.                         ties of nonprofits will be positively related
Washington, DC 20036-1480                      to the size and scope of government. More       ployees in a state, the greater the number
                                               government will produce more nonprofits,        of 501(c)3s per capita in a state. In addition,
Phone: (202) 483-6900                          not crowd them out.                             our statistical analysis shows that greater
Long-Distance: (800) 459-3950                                                                  per capita state spending predicts a com-
                                                    Our study concludes that there is sig-     parable increase in the number of 501(c)3
E-mail Address:                  nificant statistical support for the propo-     organizations per capita. When the Dis-
                                               sition that nonprofit organizations enjoy a     trict of Columbia is included, the correla-
Web Site:                                      positive correlation to government. The         tion is very strong. When D.C. is not in-                                                                 cluded, the correlation remains moderately
                                               per capita number of nonprofits does seem
                                               to be related to the number of government       strong .
Foundation Watch welcomes letters
to the editor.                                 employees, state spending, and state wel-
                                               fare spending. By contrast, the concentra-          There is also a modest relationship
Reprints are available for $2.50               tion of nonprofits across the country does      between the number of 501(c)3 organiza-
prepaid to Capital Research Center.

2                                                                                                                             June 2002
                                                                                                       Foundation Watch

tions per capita and a state’s tax burden.      Poverty Rates, Nonprofit                          As we noted in part one of our full study,
As the total tax burden of a state increases,   Organizations and State Welfare                   it is a mistake to assume that a 501(c)3
there is an increase in the number of                                                             “public charity” is intended to help the
nonprofits per capita. When the District of                                                       destitute. The data on the nonprofit sector
                                                      Next we tried correlating the number
Columbia is removed from the analysis the                                                         do not support this commonly held opin-
                                                of 501(c)3 organizations per capita and the
correlation drops. Similarly, the correla-                                                        ion. Human services organizations com-
                                                percent of a state’s population that is in
tion between nonprofits per capita and the                                                        prise only 14 percent of nonprofits filing
                                                poverty. Our hypothesis here is that where
state and local tax burden is strong when                                                         IRS form 990. And education and espe-
                                                there is a greater need for charity, there will
D.C. is included but only weak when D.C.                                                          cially health-related organizations enjoy
                                                be more charities. A positive correlation
is not included. The weak correlation does                                                        the lion’s share of nonprofit revenues.
                                                would lend support to this view. We found
not allow us to conclude that an increase
                                                little or no relationship. When the District
in a state’s tax burden will positively pre-                                                           We then examined the relationship
                                                of Columbia is included, the correlation is
dict an increase in the number of nonprofits                                                      between human service organizations and
                                                a modest one. When D.C. is excluded from
per capita.                                                                                       poverty rates. Even though there is no
                                                the calculations the correlation becomes a
                                                negative one. We conclude that the rela-          correlation between nonprofits and pov-
                                                tionship between poverty and the number           erty, one might expect to find a correlation
                                                of 501(c)3 organizations per capita is nil.       between the rate of state poverty and the

June 2002                                                                                                                                   3
Foundation Watch

number of human service nonprofits and         spending per capita increases so do the        Findings on Nonprofits, Social
the percentage of the state population in      number of human services nonprofits (See       Capital, and Church Attendance
poverty. But we found that states with         Chart 2). Including D.C. in the analysis            This next section examines the rela-
comparably high poverty rates have sub-        yields a strong correlation of 0.68. When      tionship between certain characteristics
stantially different numbers of human ser-     D.C. is removed from the calculation the       of American society and the concentra-
vices nonprofits per capita. And states        relationship declines but is still statisti-   tion of nonprofits. First, we try to correlate
with comparable numbers of human ser-          cally significant.                             nonprofits with political scientist Robert
vices nonprofits per capita have different
                                                                                              Putnam’s social capital index, and we look
poverty rates.                                     Thus, there is significant statistical     at “religiousness” (as measured by per-
                                               support for the proposition that nonprofit     centage of frequent church attendance
      What other factors might affect the      organizations enjoy a positive correlation     per state) to see what, if any, role it plays
number of human services nonprofits? We        to government. The per capita number of        in being able to predict the concentration
found a significant statistical relationship   nonprofits does seem to be related to the      of nonprofits across states. Then we look
between the number of human services           number of government employees, state          for correlations between the number of
nonprofits per capita and the amount of        spending, and state welfare spending. By       nonprofits per capita and charitable giv-
state spending on welfare. Here is perhaps     contrast, the concentration of nonprofits      ing.
the clearest measure of whether govern-        across the country does not seem to be a
ment spending crowds out or gathers in         function of state poverty rates.                   One of the stranger findings in
the sub-sector of human services
                                                                                              Putnam’s study Bowling Alone is his con-
nonprofits. We found a strong relation-
                                                                                              clusion that social capital is not correlated
ship between the two variables. As state
                                                                                              with church attendance. Putnam found a

4                                                                                                                           June 2002
                                                                                                       Foundation Watch

very small negative correlation (r= -0.09)        church attendance to the prominence of               We then looked at state rates of fre-
that is not statistically significant. That is,   nonprofits. We began by comparing the           quent church attendance. They were not
he found that the greater a state’s score on      states to find out more about the relation-     correlated with social capital, as Putnam
the social capital index—which measures           ship between Putnam’s social capital            had observed, and we found they were also
such things as sociability, trust in one          scores and the number of nonprofits per         not correlated with nonprofit organizations
another, and community participation—             capita.                                         per capita as well (See Chart 3).
the smaller is the proportion of those who
attend frequent (weekly or more often)                 The state scores on Putnam’s social             As the chart shows, there is a negative
religious services.                               capital index are highly correlated with our    though small and statistically insignificant
                                                  measure of the number of 501(c)3 organi-        relationship between the proportion of state
     Putnam’s findings are confirmed by           zation per capita in 1998 (r=0.76). In other    residents that attend church on at least a
our own independent analysis. We also             words, in states where we find higher           weekly basis and the number of nonprofit
found a negative relationship between a           scores in social capital we also tend to find   organizations per capita. The higher the
state’s social capital score and the per-         higher numbers of nonprofits per capita.        number of 501(c)3 organizations per
centage of those in the state regularly           The Dakotas score high in social capital        capita, the lower the state’s frequent
attending church (r=-0.15). This negative         and have higher numbers of nonprofits           church attendance (r=-0.156). A high pro-
relationship led us to further statistical        per capita. Nevada scores low in social         portion of Utah residents attend church
exploration. We were curious about the            capital and has the lowest number of            frequently, but the state has fewer
relationships between social capital and          nonprofits per capita.                          nonprofits per capita than other states.

June 2002                                                                                                                                   5
Foundation Watch

Washington, D.C. has very high numbers         dance is also related to volunteering, which   voted in the most recent Presidential elec-
of nonprofits, but seems to be no more         is likewise related positively to charitable   tion), and voluntarism (measured by num-
churchgoing than other states.                 contributions.                                 bers of community projects and the num-
                                                                                              ber of times individuals volunteer).
     What does this finding mean? In part,          Moreover, Putnam’s index of social
our statistical analysis underscores that      capital may be lacking. We subjected                We computed factor scores based on
social capital and nonprofit organizations     Putnam’s data to a statistical technique       these three dimensions and used them as
as measured here are generally secular         called principal components factor analy-      variables that can be correlated with other
phenomena. Recall that the data on             sis, which it appears he did not do. This      variables. We found the nonprofit organi-
nonprofits is based on 501(c)3 organiza-       commonly used statistical tool helps in-       zation factor is strongly negatively corre-
tions that file IRS Form 990. This specifi-    vestigators determine whether a set of vari-   lated with church attendance (r = -0.48).
cally excludes most churches. It also ex-      ables is best understood in a single dimen-    That is, where there is more church atten-
cludes nonprofits with revenues of less        sion or as multidimensional. This, in turn,    dance, there are fewer 501(c)3 nonprofits
than $25,000. These poor nonprofits, argu-     provides better understanding of a group       that file IRS form 990. And where there are
ably, may exist in greater numbers in states   of correlations. Using this technique, we      more of these nonprofits, there is less
that have higher numbers of frequent           found social capital is best considered in     church attendance. For example, Utah has
church attendance. So at least one appar-      terms of three dimensions or factors—          very low rates per capita of nonprofit orga-
ent anomaly may simply reflect the defi-       nonprofit organization (measured partly        nizations (nonreligious ones, that is), while
ciencies in the available data. We did find    by per capita number of 501(c)3 organiza-      it has the highest rates of church atten-
that church attendance is closely related      tions and partly by certain measures of        dance of any state in the Union. Accord-
to charitable giving, while the number of      trust), political participation (measured by   ing to our data 68 percent of the popula-
nonprofits per capita is not. Church atten-    the proportion of registered voters who        tion goes to church once a week or more.

6                                                                                                                          June 2002
                                                                                                    Foundation Watch

    We also found that scores on the vol-       of all nonprofits was $152,289 or less (or     196,083 nonprofits, approximately ten per-
unteer factor are positively related to         more). In 1998, it was $154,477. But when      cent less. However, the number of
church attendance (r=0.34). In states (e.g.,    adjusted for inflation, the median assets      nonprofits would have still increased, al-
Utah) where more people go frequently to        for all nonprofits actually declined from      beit at a slower rate.
church, there is more volunteering.             1990 to 1998. In 1990, the median was
                                                $152,289. By 1998, it was $123,866 — a              The economic prosperity of the 1990s
     The data suggest that religious activ-     decline of approximately 19 percent over       provides another possible explanation for
ity and nonprofit activity as measured here     eight years.                                   the significant increase in the number of
exist in different social worlds.                                                              nonprofits. As nonprofits become
                                                     Here is the paradox. In the 1990s the     wealthier more must file tax returns. The
Nonprofit Financial Picture:                    nonprofit sector experienced remarkable        increase in the number of nonprofits would
General Trends                                  growth in overall wealth. But when mea-        therefore contribute to the increase in the
     If we look at all nonprofit organiza-      sured by the mean, the increase in non-        total assets of nonprofits. But at the same
tions in the datasets, we find certain inter-   profit assets, on average, was far less im-    time, there might be more nonprofits with
esting and paradoxical trends. First, look at   pressive. Finally, when the assets of          fewer assets, as reflected both in the lack
the total assets of the nonprofit sector, and   nonprofits are measured by the median,         of change in median assets from 1990 to
then the mean and median assets.                then the wealth of the “middling” non-         1998 as well as in the decline in the median
                                                profit has actually declined by almost a       when adjusting for inflation.
    Total Assets                                fifth when adjusted for inflation.
     Chart 4 displays the total assets of all                                                       When we compare the increase in mean
nonprofits from 1990 through 1998. The               Why do three measures of nonprofit        assets from 1990 through 1998 to the con-
dollar amounts are reported in billions of      assets yield conflicting findings? The an-     stant level of median assets (as well as the
dollars. For each year, the amounts are         swer to that has to do with two trends that    inflation-adjusted decline in the median)
reported in current amounts and in amounts      occurred from 1990 to 1998: the explosion      we may infer one other characteristic of the
adjusted for inflation since 1990.              in the overall number of nonprofits and the    nonprofit sector from 1990 to 1998: the
                                                dominance of a relatively few nonprofits       assets of the richest nonprofits were in-
      In 1990, the nonprofit sector had $627    that are extremely wealthy. We turned to       creasing, while the assets of the remaining
billion in assets. By 1998, the total was       this issue in the next two sections of our     nonprofits stayed constant or dropped.
$1.352 trillion. Adjusted for inflation, non-   study.
profit growth was still impressive. From                                                            A comparison of the richest 100
1990 to 1998, total inflation-adjusted as-      Increase in the Number of                      nonprofits to all others is further evidence
sets rose from $627.0 billion to $1.0839        Nonprofits                                     of the skewed wealth of the nonprofit sec-
trillion. Total inflation-adjusted assets in        In 1990, approximately 138,000             tor (See Chart 5). In 1998, 218,649 nonprofits
the nonprofit sector increased by approxi-      nonprofits filled out IRS 990 tax forms.       filed IRS Form 990. They reported total
mately 73 percent.                              Since then, the number of nonprofits re-       assets of over $1.3 trillion. But approxi-
                                                quired to file this tax form has grown         mately one-third ($441.1 billion) was re-
      Mean Assets                               steadily. There were over 165,000              ported by just 100 nonprofits. The other
      The mean assets of nonprofits also        nonprofits by 1993, 191,000 in 1996, and       218,549 nonprofits held the rest.
grew over time, although the percentage         over 200,000 in 1997. By 1998, the number
increase from 1990 to 1998 was not as large     of nonprofits—218,000—had increased                 These were the ten wealthiest
as for total assets. In 1990, nonprofits had    approximately 68 percent since 1990.           nonprofits in 1998. The College Retirement
mean assets of approximately $4.6 million;                                                     Equities Fund had $96.3 billion in assets
by 1998, the mean had risen to $6.2 million.         What accounts for this striking in-       followed by the Teachers Insurance and
Adjusted for inflation, mean asset amounts      crease? There are at least two possible        Annuity Association of America with $86.4
still rose, from $4.6 million in 1990 to more   explanations. First, the IRS requires that     billion. Third was the Common Fund for
than $5 million in 1998, an increase of ap-     all nonprofits with revenue of $25,000 or      Non-Profit Organizations, with $24.3 bil-
proximately nine percent — considerably         more file Form 990. The IRS cut-off is not     lion, followed by the President & Fellows
lower than the 73 percent increase in total     indexed to inflation. Over time, then, the     of Harvard College ($15.3 billion), the
assets.                                         filing requirement applies to an increasing    Howard Hughes Medical Institute ($13.0
                                                number of nonprofits. Had the cut-off been     billion), Yale University ($7.3 billion), the
    Median Assets                               adjusted for inflation, based on 1990 dol-     Shriners Hospitals for Children—A Colo-
    Median assets for nonprofits from 1990      lars, nonprofits would need revenues over      rado Corporation ($7.2 billion), the Kaiser
to 1998 present a very different picture.       $31,178 in 1998 before they would be re-       Foundation Hospitals ($7.1 billion),
The median assets of nonprofits have re-        quired to file Form 990. And instead of        Stanford University Board of Trustees ($6.0
mained steady over the past eight years in      requiring 218,649 nonprofits to file Form      billion), and the Trustees of the University
current dollars. In 1990, the assets for half   990, the IRS would have required a filing by   of Pennsylvania ($5.9 billion).

June 2002                                                                                                                                 7
Foundation Watch

Nonprofits Receiving Public                    1990, the mean public individual and gov-        ter less contributions in 1998 than in 1990.
Contributions                                  ernment contributions to nonprofits were         This decline, as with the category of as-
    Approximately eight out of ten             more than a half a million dollars ($649,551),   sets, may be explained in part by IRS Form
nonprofits receive public contributions.       rising to $706,785 in 1994 and to $779,598       990 reporting requirements that fail to ad-
The amount has steadily increased since        in 1998.                                         just for inflation. But the evidence on the
1990, but the proportion of nonprofits re-                                                      distribution of contributions also suggests
ceiving contributions is about the same—           Adjusted for inflation, however, the         that individual giving and government
83 percent—every year. There are 58 per-       mean of individual and government contri-        grant making in the 1990s has tilted to-
cent more nonprofits with public contribu-     butions to nonprofits declined slightly after    wards the largest nonprofits.
tions in 1998 than in 1990 (See Chart 6).      1990. Inflation-adjusted mean contribu-
                                               tions declined to $632,666 in 1994 and to            Contributions to nonprofits are
     Total Public Contributions                $625,114 in 1998, a four percent decline in      heavily weighted towards large institu-
     Total contributions to nonprofits rose    contributions from 1990.                         tions. The nonprofits receiving the most
steadily from 1990. In 1990, nonprofits re-                                                     contributions and grants have a dispro-
ceived $74 billion in contributions. In cur-        Median Public Contributions                 portionate percentage of the total dollar
rent dollars, total contributions were close        Inflation-adjusted median contribu-         amount of public contributions. In 1998,
to $140 billion in 1998. Adjusted for infla-   tions declined by approximately 24 per-          the top 100 nonprofits received almost
tion, contributions topped $112.1 billion      cent from 1990 to 1998. In 1990, median          one-fifth of all government grants and pri-
by 1998, a 52 percent increase from 1990.      contributions were $76,741. They declined        vate contributions that went to over
                                               to $65,840 in 1994, and $58,044 in 1998.         179,000 nonprofit organizations (See Chart
    Mean Public Contributions                                                                   7).
    Mean public contributions have                 It is noteworthy that a typical non-
steadily increased in current dollars. In      profit at the median received almost a quar-         The ten nonprofit groups with the

8                                                                                                                            June 2002
                                                                                                     Foundation Watch

most contributions in 1998 were as fol-        rely on dues. In 1990, approximately 34,000      In other words, after adjusting for inflation
lows. Stanford University Board of Trust-      nonprofits collected $4.7 billion in dues.       the typical dues collecting nonprofit in
ees ($870.1 million), Massachusetts Insti-     This figure rose to $5.1 billion in 1994, and    1998 received 29 percent less in dues than
tute of Technology ($869.3 million), the       $5.7 billion in 1998, adjusting for inflation.   it had in 1990.
President & Fellows of Harvard College         Overall, total inflation-adjusted dues rose
($774.1 million), Cornell University ($682.9   21 percent from 1990 to 1998.                         What is the significance of the dispar-
million), the Trustees of Columbia Univer-                                                      ity in changes in the total, mean and me-
sity, New York ($568.3 million), The Ameri-         In 1990, nonprofits collected a mean of     dian dues collected? Apart from the issue
can National Red Cross ($545.5 million),       $33,952 in dues. By 1998, this figure de-        of IRS reporting requirements, previously
the University of British Columbia ($515.2     clined to a mean of $25,909 when adjusted        discussed, the disparity in dollar amounts
million), Duke University ($503.0 million),    for inflation—a 24 percent decline.              of dues collected may say something about
the Mitre Corporation ($487.4 million), and                                                     the membership of nonprofit organizations.
the American Cancer Society Divisions,              Median dollars collected by nonprofits      A few nonprofits with members have a
Inc. ($473.3 million).                         are significantly less than the collected        great many members, while most nonprofits
                                               mean dollar amounts, even when adjust-           have relatively few members. Are Ameri-
Nonprofits Collecting Dues                     ing for inflation. In 1990, half of all          cans increasingly joining the largest
    The number of nonprofits collecting        nonprofits collected approximately $9,000        nonprofits instead of other nonprofits?
dues has steadily increased since 1990,        or less in dues, while the mean dollar           The data on dues collected offers no an-
from approximately 34,000 in 1990 to over      amounts for that year was almost $34,000.        swers, but raises interesting questions.
50,000 in 1998—a 54 percent increase. Ap-      In 1994, median dollars declined to $7,858
proximately 24 percent of all nonprofits       (adjusting for inflation), and $6,555 in 1998.

June 2002                                                                                                                                 9
Foundation Watch

The Top 100 in Membership                       graphic Society ($225.8 million), the Fam-    when the amounts are adjusted for infla-
Dues                                            ily Health Plan Cooperative ($159.9 mil-      tion and when the mean and median
     The nonprofits collecting the most         lion), the Public Broadcasting Service        amounts are calculated for the nonprofit
dues have a disproportionate percentage         ($126.5 million), Kadlec Medical Center       sector as a whole and for certain subsectors
of the total dollar amount of dues col-         ($93.9 million), the Boy Scouts of America    the results are much less impressive and
lected. Chart 8 displays the percentage of      National Council ($84.1 million), the Chan-   often troubling for those concerned about
dues collected by these 100 nonprofits in       cellor Masters And Scholars of the Uni-       the health of the nonprofit sector.
1998 as a percentage of all dues collected      versity of Cambridge ($63.4 million), the
by over 52,000 nonprofits that collect mem-     Institute of Nuclear Power Operations               Total assets, total contributions and
ber dues.                                       ($48.5 million), and the Smithsonian Insti-   total dues, for the sector as a whole and
                                                tution ($43.8 million).                       among subsectors, have increased sub-
     In 1998, the 100 largest dues-collect-                                                   stantially since 1990 (73 percent, 52 per-
ing nonprofits received 44 percent of all       General Nonprofit Trends, 1990-               cent, and 21 percent, respectively). Mean
dues. The other 52,344 dues-collecting          1998: Conclusions                             assets for nonprofits as a whole increased
groups collected 56 percent of all dues.             The nonprofit sector from 1990           at a smaller rate (nine percent), while some
                                                through 1998 is not best described as a       sectors actually experienced a decline in
     The top ten nonprofits collecting the      golden age for charity. Many current stud-    mean assets. Mean contributions for the
most dues in 1998 were as follows. The          ies examine changes in total amounts of       sector as a whole declined (four percent),
Health Alliance Plan of Michigan ($899.2        numbers of nonprofits, and their assets,      as did mean contributions for six of the 11
million), the Electric Power Research Insti-    contributions and dues. They present im-      subsectors examined (to be discussed in
tute Inc. ($302.2 million), the National Geo-   pressive increases in these measures. But     next month’s edition.) Mean dues declined

10                                                                                                                         June 2002
                                                                                                   Foundation Watch

for almost all subsectors, as did mean dues     for 501(c)3 organizations, they need to           Robert Lerner and Althea K. Nagai
for nonprofits as a whole (24 percent).         have a clearer and more detailed picture of   received their Ph.D. degrees from the
                                                the nonprofit sector. If they only act on     University of Chicago in sociology and
     Median assets, contributions, and          their impressions of a relatively few large   political science, respectively. They are
dues for nonprofits as a whole as well as       nonprofits they may harm the many more        partners in Lerner & Nagai Quantitative
for almost all subsectors declined. The         numerous small nonprofits. Public             Consulting, a social-science research-
average nonprofit experienced a decline of      policymakers need statistics that go be-      consulting firm.
19 percent in assets, 24 percent in contri-     yond the measurement of totals.
butions, and 29 percent in dues. Most
subsectors experienced a decline in me-              This preliminary evaluation of the               x mont s sue Foundation Watch
                                                                                                   Ne t h’ is of
dian assets, and almost all saw a decline in    nonprofit sector from 1990 through 1998       features Dr. Lerner and Dr. Nagai’s discus-
median contributions and median dues.           employs statistics that measure the mean      sion of three nonprofit subsectors: Environ-
The disparities between the totals and the      and the median assets, contributions, and     ment, Education and Human Services.
means and medians point to the domi-            dues for the nonprofit sector overall and
nance of a very few large institutions in the   among 11 subsectors. These statistics
nonprofit sector. Summary statistics on         provide a surprising picture of the non-
the top 100 nonprofits in various nonprofit     profit sector as a whole and among its
subsectors and measurement categories           subsectors. It is a picture of many small
in 1998 demonstrate the extent of that domi-    nonprofits that are hurt by inflation and
nance.                                          the dominance of a small number of wealthy
                                                nonprofits during a time of general pros-
     As Americans think about the charac-       perity.
ter of our “public charities” and as lawmak-
ers consider appropriate public policies

June 2002                                                                                                                             11
Foundation Watch

The Searle family, one of Chicago’s wealthiest, is threatening to withdraw its money from the Chi-
cago Community Trust, a community foundation that supports hundreds of area nonprofits. Searle
family members don’t approve of liberal causes like Planned Parenthood supported by the Commu-
nity Trust. But the Community Trust says a clause in the will of pharmaceutical magnate John G.
Searle allows it to distribute $20 million annually from the $350 million Searle Fund. The controversy
is indicative of a growing trend as donors take a more active role in determining where their money
is spent. Last year, Searle’s 20 descendents voted unanimously to remove the Community Trust as
administrators and replace it with Northwestern University, where Searle once served as board
president and where his grandson is on the board of trustees. The Illinois attorney general’s office
says it will decide if the family can remove its money from the Community Trust.

Cantor-Fitzgerald, the bond-trading firm that lost 658 workers in the World Trade Center attack,
has paid nearly $5 million in aid and health care to the families of the lost employees. The money is
the first payment from a fund that Cantor chief executive Howard Lutnick set up two days after the
attack to help the families. Cantor has pledged a quarter of its profits over the next five years to the
families. The company will also pay for their health care for up to 10 years.

The Federal Emergency Management Agency (FEMA) has paid out less than $65 million to help
needy families who lost income due to the September 11 attacks. The money, which helps pay bills,
avoid eviction and buy food, is only a fraction of what the relief agency typically distributes in the
months after other major catastrophes. ($1 billion went to families affected by the 1994 Northridge,
California earthquake.) FEMA officials say they initially decided to limit benefits to those who could
prove their lost income was a “direct result” of the attacks. They now say the standard may have
been ill-defined. Government officials estimate that 75,000 jobs and $4.5 billion in income were lost
in the New York disaster region. Executive director Joseph Allbaugh says FEMA is doing everything
possible to reach more victims, although he defended the “direct result” requirement as fiscally

A Phoenix woman was arrested in April on charges that she fraudulently obtained relief benefits from
a September 11 victims fund. Authorities say Casey O’Shay falsely said her foster son and his
wife died in the World Trade Center attack. Prosecutors say she received about $2,000 from a
relief fund to fly to New York for a memorial service. If convicted, O’Shay faces up to four years in
prison. She is one of 22 people accused of lying to receive more than $759,000 in relief funds.

A growing number of school districts are establishing nonprofit foundations to fund their programs
and build business relationships in local communities. School districts began to set up foundations
in the mid-1990s to deal with parental demands for more programs, cuts in government funding and
a move toward more business-like efficiency in schools. One example, the Philadelphia Educa-
tion Fund, reported revenue of $7.8 million in 2000. It relies on support from the Pew Charitable
Trust, the William Penn Foundation and the Carnegie Corporation of New York. There are an esti-
mated 3,000 to 4,500 school foundations in the nation.

12                                                                                            June 2002

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