THE FUTURE FOR A STRONG INDEPENDENT SECTOR

THE FUTURE FOR A STRONG INDEPENDENT SECTOR
By Jon Pratt and Kari Aanestad
Photography by Alexis Brown, Priscilla Du Preez, Dylan Gillis, Neonbrand, and Joshua Ness on Unsplash

Minnesota has benefitted from key elements of a strong independent sector. The charitable giving climate is considered to be among the nation’s best. Government and nonprofits have had robust relationships. Key markers of civic engagement have been high. But, what of the future? Drawing from their presentation at MCF’s 2019 annual conference, Minnesota Council of Nonprofits’ executive director Jon Pratt and director of advancement Kari Aanestad anticipate the path for transformative growth of Minnesota’s independent sector.

The Minnesota Council on Foundations’ 2019 annual conference presented an opportunity to address necessary conditions to sustain the nonprofit and philanthropic sector:
• A positive charitable giving climate;
• Positive government relationships; and
• An active, inclusive civil society.

It can be said that Minnesota has some special advantages from being a high participation state with one of the strongest independent sectors in the nation -- often ranking at the top for charitable giving, volunteering, and civic engagement. This robust level of activity is itself an accomplishment, but not actually the point. We must recognize that the whole purpose of this resource is to improve conditions in the face of opportunity and disparity — or in the words of the MCF Strategic Framework — for foundations to “collectively advance prosperity and equity,” and as MCN’s vision aims for nonprofit missions to achieve a “healthy, cooperative and just society.”

To begin with we recognize that a vigorous voluntary sector is continually strengthened by several contributing factors:
• Robust infrastructure support: Minnesota’s nonprofit and foundation sector has access to high-quality capacity-building resources, infrastructure support, and nation-leading higher education opportunities dedicated to nonprofit management (including the Minnesota Council on Foundations, Minnesota Council of Nonprofits and allied support organizations).
Source attribution: 2018 Minnesota Nonprofit CFO Report by the Minnesota Council of Nonprofits and PropelNonprofits.

• Strong Economic base for nonprofits and philanthropy: Nonprofit organizations and foundations play an important role in Minnesota’s communities — creating essential services, employing local residents, and improving the quality of life — from the arts to civic participation to human services, and recreation and youth sports.
-- Continuous growth: It is good news that Minnesota’s nonprofit sector has experienced 25 years of reliable growth in employment and share of the state’s workforce (even during the Great Recession years of 2008-09). In 2017, we saw an all-time high of 328,000 nonprofit employees accounting for 12 percent of the state’s total workforce.
-- Cross-sector wage gap compression: Another positive trend in nonprofit employment is substantial wage compression, in which the historical gap between nonprofit wages and business and government wages has shrunk (even when higher paying large Hospital, College and University employers are removed from the equation). For the first time nonprofit wages match average government annual wages (removing hospitals and colleges) in 2017.
-- Changes in the number of nonprofits: While there is no ideal number of nonprofits, it is worth tracking changes in the number of organizations over time. Over the past 25 years the number of nonprofit organizations reporting having at least one employee fell by eight percent from 3,640 to 3,339 (from 1993 – 2017). This reduction reflects some consolidation, some dissolutions, and some new organizations formed and added to the list of employers.
Source attribution: 2017 Nonprofit Economy Report by the Minnesota Council of Nonprofits and Hamline University.

Meaningful levels of charitable giving: U.S. Charitable giving reached an all-time high in 2017, surpassing $410 billion. Charitable giving to foundations also broke records reaching $45.89 billion, and all four charitable sources of giving reported increases:
-- Corporations – 8 percent increase
-- Foundations – 6 percent increase
-- Individuals – 5 percent increase
-- Bequests – 2 percent increase
Source attribution: GivingUSA 2017 Report

Building on these conditions - Three Elements for a Strong Independent Sector:

1 Positive charitable giving climate: Charitable giving is an important expression of how the community values and supports the work of nonprofit organizations. A central challenge facing this field is whether charitable giving will continue to be a widely shared value and practice, even after the 2017 federal tax changes.
What defines a positive charitable giving climate:
• Strong overall contributions from individuals, foundations and corporate philanthropy: Minnesota has more than 1,400 grantmakers that provide meaningful support to nonprofit organizations, including general operating support for core functions like financial management and oversight. Minnesota is home to 19 Fortune 500 companies and is often recognized as a national leader for its corporate philanthropy programs combining grantmaking, volunteerism, and encouragement of their employees to serve on nonprofit boards. The Greater Twin Cities United Way is the second largest United Way in the country, and active United Ways, Minnesota Initiative Funds and community foundations throughout the state provide proven vehicles for inspiring donors.
• Public trust that nonprofits are honest, accountable and effective: WalletHub reported recently that Minnesota ranks 3rd in the nation for charitable giving. Donor support of nonprofit work is a demonstration of the public’s trust in the value of nonprofit organizations.
• Active, responsive grantmaking community: Minnesota’s funding community has led with wonderful examples of responsible grantmaking recently from initiatives like SolidarityMN, a collaboration of nearly 20 funders to support organizations working with immigrant and refugees in face of harmful policies and national discourse, to the Pohlad Family Foundation, offering time-limited grants to nonprofit organizations who received sudden cuts in funding from the Greater Twin Cities United Way after unpredicted revenue shortfalls.

2 Positive government relationships: The government interacts with nonprofits and foundations at critical, distinct points, acting at different times as a funder, a regulator, and as a project partner. A central challenge in this relationship is how to strike the balance between public responsibility and private action.
• Regulation and oversight, such as from the federal Internal Revenue Service or State Attorney General’s Office, helps define and protect credible accountability, building community trust that nonprofit organizations and foundations are operated exclusively for charitable purposes.
• State and federal government can create and/or expand policies that establish charitable giving incentives. For example, Minnesota is one of two states that offers a charitable deduction to taxpayers regardless of itemization status, allowing taxpayers who are non-itemizers to deduct 50 percent of gifts over $500. MCN and MCF have worked in partnership to create even more incentives for charitable giving by removing the $500 floor and 50 percent ceiling, thereby making 100 percent of charitable gifts deductible on state taxes for all taxpayers, regardless of income. We’re also working in partnership to establish a universal deduction at the federal level.
• 30 years of public opinion polling by the Center for Survey Research have shown that the vast majority (always over 80%) of Minnesotans believe in the public benefit missions of charitable organizations by supporting their exemptions from sales and property taxes.


3 An active, inclusive civil society
: Minnesota ranks high in volunteering, voting, blood and organ donations, census participation and charitable giving. This wide spectrum of generosity serves as an important indicator of community members who are actively involved in and supporting the work inspired by voluntary organizations. As we continue to work together toward a more equitable future, participation and shared power across all groups who comprise our state will be crucial. A central challenge for civil society is whether and how we can fairly involve the whole community in decision-making.
Together we build an active, inclusive civil society through:
• Peer support - As Minnesota’s nonprofit sector has been growing, developing, and cohering over the past few decades, nonprofit leaders have had robust opportunities for peer interactions that support the mutual growth and achievement of strong organizations. A robust, well-connected nonprofit and foundation network offers close proximity to high performers, which continues to inspire the highest performance in others.
• Leadership development: Emerging leaders receive the training, support, and resources to develop skills and power to enact meaningful changes that advance equitable outcomes. Programs like those led by the Blandin Foundation, Citizens League Capital Pathways, Nexus Community Partners, Ron McKinley Fellowships and Wilder’s Shannon Institute provide strong examples.
• Group problem-solving and innovation: Minnesota is a collaborative and innovative state. Grant programs like the Bush Foundation’s Community Innovation program and collaborative initiatives like the BEtter OUTcomes Initiative inspire new ways of thinking about and approaching persistent disparities.

As noted at the beginning, this robust level of activity is itself an accomplishment, but not actually the point. We have an operational and moral challenge as support organizations to put this available nonprofit and philanthropic infrastructure to work in the service of a better world. The world needs more of what these organizations do — our task is to fairly involve the whole community in ways that make the most of available resources.

Jon Pratt is executive director of the Minnesota Council of Nonprofits, co-director of GrantAdvisor.org, and a contributing editor to the Nonprofit Quarterly. 

Kari Aanestad is the Director of Advancement for the Minnesota Council of Nonprofits (MCN) and co-director of GrantAdvisor.org. Kari advances the mission and work of MCN and Minnesota’s nonprofit sector through strategic visioning, fundraising, relationship development, sector research, and education.

 

GIVING FORUM V41 | SPRING 2019