Briefing Paper: Advancing Nonprofit-Government Relations

By a.alderman •

A Briefing Paper for INsights at Delmar Divine, February 22, 2024

Introduction

Nonprofit organizations, and the human services they provide, are highly dependent on government policy, funding and regulation – at the federal, state and local levels. Policy advocacy and lobbying are considered important, core nonprofit functions. However, in recent years, despite constitutionally protected rights, the number of nonprofits engaging in policy practice has declined dramatically. This trend may adversely affect the provision of needed services as well as the health of the nonprofit sector.

Definitions[1]

Policy Advocacy: Involves attempting to influence government policy as the local, state, or federal level. This may include lobbying, but it also involves many educational and information-sharing activities including sponsoring events to raise public awareness of an issue, conducting research, educating the public about policies that affect your organization, or participating in coalitions.8 Advocacy may be directed at legislative, administrative or judicial (e.g., amicus briefs) matters. It may be proactive, seeking to advance a policy initiative, or defensive, seeking to block an initiative.

Lobbying: Involves taking a position on specific legislation (local, state, or federal level) and communicating this position to legislators or their staff, either directly or indirectly.8

501 (c)(3) organizations are generally limited in that lobbying cannot be a “substantial” portion of their activities (expense and effort). However, they may conduct an unlimited amount of other advocacy efforts. Because the word “substantial” is imprecise, the Internal Revenue Service (IRS) adopted the 501(h) expenditure test to determine the acceptable level of lobbying expenses. It is based on budget size, with an upper limit of $1 Million. The IRS distinguishes between direct and grass roots lobbying, by which the organization asks individuals to contact legislators on its behalf. Grass roots lobbying may not exceed 25% of total lobbying expenses. 501(c)(3) organizations are prohibited from partisan political activity – supporting or opposing political candidates or parties.19

501 (c)(4) organizations may generally engage in unlimited advocacy and lobbying and may engage in partisan political activity to a limited degree. However, they may not contribute to political campaigns.19

Other IRS categories of 501c nonprofit organizations, such as professional associations and chambers of commerce, may engage in policy advocacy and lobbying. Organizations considering lobbying should obtain expert counsel to assure compliance with reporting requirements and additional regulations, such as those involved in the employment of paid lobbyists.19

Extent of Nonprofit Advocacy & Lobbying

A 2022 Independent Sector survey documented a steep decline in the number of nonprofits engaged in advocacy and lobbying. Only 31% report engaging in advocacy or lobbying during the last five years, and only 25% report everlobbying. This compares with 74% that reported ever lobbying in 2000. Of those that reported, 9.79% engaged in both advocacy and lobbying; 17.8% have only done advocacy; and 3.11% have only lobbied. Just 13% conduct nonpartisan activities to help people vote.9 There is limited support for lobbying from governing Boards, with less than 45% understanding or monitoring the impact of policy on their organizations; and less than a third working to some or a great extent on policy efforts.10

Despite IRS clarity and readily available public information, only 32% of nonprofits know they can support or oppose federal legislation. Fifty-six percent report that policy engagement is not applicable to their mission and 18% believe that their mission discourages advocacy.9 It appears that many organizational leaders fear retaliation from government funders, donors or other stakeholders, and others fear running afoul of the financial limits.

Organizations that belong to local, state or national coalitions are more likely (57%) to engage in policy practice. Likewise, organizations that are invested in DEI efforts, organizations that share racial identity with their clients and those that offer services in languages other than English. Organizations in child welfare and youth services are less likely.9

Ethical Dimension

The human services sector widely acknowledges that solving most social problems requires systemic changes – that is change in policies to relieve adverse conditions or promote better solutions. Therefore, advocacy and public engagement are central to the work of nonprofits (p.3).9 Accordingly, the ethical codes of the National Association of Social Workers and the American Public Health Association mandate engaging in social and political action.2, 13 Moreover, the social work and public health accrediting bodies require that graduates demonstrate competence in policy practice.6, 7

Importance of the Government Role & Examples of Advocacy Impact

The Interdependence Theory, advanced by nonprofit theorist Lester Salomon, holds that nonprofit and government sectors are mutually reliant for service provision, and that the growth of the nonprofit sector is largely a result of government contracts and grants.12, 15

Research points to the role of government and strong nonprofit-government relations as critical factors in nonprofit resilience, particularly in periods of crisis. This was clearly evident during the COVID-19 pandemic, when the federal government enacted numerous programs that helped keep nonprofits open and serving the public.12 These included the Employee Retention Tax Credit, Paycheck Protection Program and emergency funding for the childcare sector.10

Federal policy changes can have enormous and widespread impact. For example:

  • Affordable Care Act (2010) provides access to affordable health insurance, extends Medicaid, and supports innovation in medical care to lower costs.
  • Every Student Succeeds Act (2015) advances equity, increases states accountability with annual statewide assessments, supports evidence-based and place-based innovations, expands investment in preschool.
  • Inflation Reduction Act (2022) advances manufacturing in clean energy and climate strategies, job creation, reduction in electricity bills and prescription costs, and strengthens IRS enforcement capability.
  • Missouri examples include:
  • Overcoming legislative resistance to expand Medicaid through a successful 2020 Ballot Initiative.
  • Kids Win Missouri successes include creation of the Office of Childhood (Executive Order); expansion of Pre-K services; raising the age of adult prosecution from 17 to 18; defeating proposals to expand the prosecution of juveniles as adults; and expanding services to youth experiencing homelessness.
  • The Asthma & Allergy Foundation – St. Louis Chapter successfully advocated for Missouri and Illinois to authorize and fund Rescue, the provision of asthma medication, equipment and instructions in every public school in Missouri and most in Illinois.
  • The First Steps to Equity Collaborative mobilized a grassroots campaign for City of St. Louis Proposition R, raising property taxes for early childhood education.

Current Agenda

At the time of writing, Missouri legislative proposals were just emerging. Among them, initiative petition reform, taxation and trafficking. Organizations would be wise to focus on monitoring and preparing for action around four major themes.

  • Missouri budget. After several years of budgetary surpluses based on higher than expected revenue and federal ARPA funds, state revenue projections show declines due to tax reduction and the expiration of pandemic federal programs. State budget revenues are projected down .07% for FY 2024 and .02% more in FY 2025, well below inflation-driven growth in costs. These declines make new spending in these years much less likely and creates challenges to sustain wage and rate increases.18 
  • The culture wars, anti-woke activism, and the Supreme Court ruling on affirmative action can be expected to resonate and surface in multiple legislative, regulatory and judicial initiatives. These can negatively impact client access to services and elimination or restrictions on funding certain programs.
  • Abortion Rights Ballot Initiatives – With several bills already filed, multiple petition efforts, legal challenges, and powerful opposition, abortion rights will remain a high-profile issue in the legislative season.
  • Voter Registration & Get Out the Vote – The results of the 2024 elections will have profound implications for human services, nonprofit organizations and achieving racial and social equity. Encourage your employees to vote and provide time off.
  • Additionally, most segments of the human service sector will identify priority proactive or defensive advocacy agenda items.

Nonprofit Sector Policy

Although advocacy is generally thought of in relation to specific social needs and client populations, there are numerous policies and policy debates affecting the nonprofit sector as a whole. Issues include labor shortages, weak leadership pipeline, inadequate cost reimbursement, and unfavorable tax policy.

For example, Dennis Young20 puts forth a series of policy changes that would strengthen the sector, including tax policy to favor unrestricted giving over restricted; accommodating fixed costs as well as variable costs in government contracts; and requiring timely government payments.

Policy initiatives like these require and can benefit from nonprofit advocacy and lobbying. Yet, it is likely that even fewer nonprofits engage in policy work related to sector issues.5, 16 Anheier & Toepler suggest that nonprofit policy has failed to evolve with the growth of the nonprofit sector, the increasingly competitive nonprofit environment, and demands for more effective and cost efficient management. Terming it “policy neglect,” the authors point to needed changes in regulation and accountability such as enhanced IRS ability to address nonprofit fraud and malfeasance.3

Each year, bills are submitted to support the nonprofit sector such as the Charitable Act (HR 3435/S 566). Numerous authors and advocacy organizations have pointed to a long-list of policy matters that could significantly enhance the work and sustainability of the nonprofit sector and the lives of nonprofit employees. Among them:

  • Passage of a Universal Charitable Deduction
  • Greater distribution requirements for Foundation & Donor Advised Funds
  • Resisting efforts to repeal the Johnson Amendment (prohibiting nonprofit partisan political activity)
  • Investments in workforce development including expansion of the Public Service Loan Forgiveness Program and reinstatement of the Employee Retention Tax Credit and affordable childcare and housing.
  • Full and timely cost reimbursement for indirect expenses; payment for up-front expenses; funding nonprofit capacity-building, cost of living adjustments
  • Simplification and standardization of application, data collection, reporting and reapplication processes

What is Effective?

There is very limited research on the outcomes of policy advocacy and only nine quantitative studies.17  Moreover, it is very challenging to disaggregate the impact of any one organization’s impact or strategy, when most policy debates play out over a long time horizon.1

Buffardi, Pekkanen & Smith4 studied the advocacy activities of a large sample of nonprofits. Approximately two thirds rely on other organizations to represent their interests and 20% employ lobbyists. Organizations use a wide variety of specific activities. The most common are: attend meetings (45%); contribute public comment (44%); ask members to contact government (44%); form an alliance (40%); provide expertise (32%); and seek involvement of influential figures (32%).

Forty-five percent of the organizations reported that they have some political influence (18% strong; 5% very strong). Activities associated with policy change (at a statistical level of significance) were forming alliances, providing expertise, attending meetings. Other strategies may have been beneficial, however did not reach statistical significance. One strategy – placing opinion ads – was negatively correlated with policy change. Organizations indicated that they were most effective in defensive advocacy – stopping or modifying policy in the face of opponents. The authors conclude, “Taken together, our findings suggest that for small nonprofits working at local and state levels who face decisions about where to allocate limited advocacy resources, they may affect

greater policy change by pursuing a more tailored advocacy strategy and by collaborating with other organizations when aiming to create new policy. Taking advantage of their unique expertise, experience and relationships may be more productive than a broad strategy that seeks to reach more general audiences through opinion ads or the media (p1243).”4 Similarly, Johansen & LeRoux found that political networking increases advocacy effectiveness.11

Almog-Bar and Schmid suggest that staying power for the long run, having policy expertise and allocation of resources to advocacy all contribute to effectiveness. They highlight several additional strategies including building personal relationships with policy-makers and their staff, connecting policy-makers to grassroots constituents, training clients and preparing them to speak about their experience.1

It should also be noted that other positive benefits derive from policy practice. Advocacy gives voice to client needs, builds relationships with government officials, and may influence cultural attitudes.

Additionally public advocacy may positively influence foundations and individual donors as well.

A further possible indication of effectiveness comes from a study of the return on investment (ROI) from policy advocacy undertaken by grant-makers. The authors found an average ROI of $115 in community benefit for each dollar expended, with a range of $91 – $157.14

Sectoral Advocacy collaboration

The National Council of Nonprofits and Independent Sector take the lead in educating the nonprofit community about policies, regulations and issues. The Network for Strong Communities (NSC), Nonprofit Connect in Kansas City and Forefront in Illinois are affiliates of the National Council. In 2009, Nonprofit Missouri formed as an affiliate to lead statewide advocacy. However, it failed to win widespread financial support. Examples of successful sectoral advocacy organizations include:

  • Shelby (TN) County Nonprofit Committee, an innovative partnership of County government and a coalition of nonprofits for shared action planning and mutual accountability.
  • Washington DC Coalition for Nonprofit Equity successfully advocated for passage of the DC Nonprofit Compensation Act.
  • Human Service Council of New York City takes collective action on public policy issues. Its #JustPay campaign, involving work stoppages and rallies, resulted in $560 Million in New York City workforce investments and implementation of a Cost-of-Living provision.

Individual Civic Action

Voting and participation in the political process are the primary way to impact policy. Additionally, the Lobbying for Good Movement encapsulates the idea that public civic engagement and access to policy–makers is needed to counter-balance the impact of for-profit corporations and well-funded special interests. Opportunities for individual action include pro bono legal work and other direct assistance to advocacy organizations. Several resources exist to facilitate individual engagement in policy advocacy:

  • Change.org Start or sign petitions to government, companies.
  • Cicero Database of elected officials and legislative districts around the world. It can match individual addresses to legislative districts and verify legislators’ social media accounts. This tool can be added to nonprofit website advocacy pages.
  • Avaaz Global activism platform for petitions, media campaigns, lobbying, offline protests.

Resources

References

  1. Almog-Bar, M., & Schmid, H. (2013). Advocacy activities of nonprofit human service organizations: A critical review. Nonprofit and Voluntary Sector Quarterly, 43(1), 11-35.
  2. American Public Health Association (nd). Public Health Code of Ethics
  3. Anheier, H. K., & Toepler, S. (2019). Policy Neglect: The True Challenge to the Nonprofit Sector. Nonprofit Policy Forum, 10(4) p.20190041.
  4. Buffardi, A. L., Pekkanen, R. J., & Smith, S. R. (2017). Proactive or Protective? Dimensions of and activities associated with reported policy change by nonprofit organizations. Voluntas (28:1226-1248).
  5. Center for Human Service Leadership (2022). Briefing Paper: Building the Nonprofit Ecosystem
  6. Council on Education for Public Health (nd). MPH Foundational Competencies.
  7. Council on Social Work Education (2022). 2022 EPAS Educational Policy and Accreditation Standards.
  8. Faulk, L., Kim, M., & Macindoe, H. (2022) Public Engagement Nonprofit Survey, Independent Sector.
  9. Faulk, L., Kim, M., & Macindoe, H. (July 2023). The Retreat of Influence. Independent Sector.
  10. Independent Sector (October 2021) Health of the U. S. Nonprofit Sector 2021.
  11. Johansen, M., & LeRoux, K. (2012). Managerial networking in nonprofit organizations: The impact of networking on organizational and advocacy effectiveness. Public Administration Review 73(2), 355-363.
  12. Kim, M. & Mason, D. P. (2023). A Shock to the Status Quo: Characteristics of Nonprofits That Make Strategic Decisions During a Crisis. Independent Sector.
  13. National Association of Social Workers (nd). Code of Ethics.
  14. Ranghelli, L. (2012). Leveraging Limited Dollars: How Grantmakers Achieve Tangible Results By Funding Policy and Community Engagement. National Committee for Responsive Philanthropy.
  15. Salamon, L. M. (1987) Partners in public service: the scope and theory of government-nonprofit relations. In W. W. Powell (Ed.) The Non-Profit Sector: A Research Handbook, 99-117. Yale University Press.
  16. Sargeant, A., & Day, H. (2018). The Wake Up Call: A Study or Nonprofit Leadership in the US and Its Impending Crisis. Concord Leadership Group LLC.
  17. Ward, K. D., Mason, D.P., Park, G., & Fyall, R. (2023). Exploring nonprofit advocacy research methods and design: A systematic review of the literature. Nonprofit and Voluntary Sector Quarterly 52(5), 1210-1231.
  18. Winton Policy Group (nd). Update on State Revenue and Pre-Filed Legislation.
  19. Worth, M. J. (2021). Nonprofit Management, 6th ed. Sage. Chapter 11, Advocacy & Lobbying, pp 307- 314.
  20. Young, D. R., (2022). Nonprofits as a Resilient Sector: Implications for Public Policy. Nonprofit Policy Forum, 14(3), 237-253.

[1] Lobbying is a complex, legally regulated topic. Seek qualified counsel.[1]

Leave a Reply

Your email address will not be published. Required fields are marked *