What charities cannot do

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In recent weeks, presidential candidates have triggered an overdue discussion on the role of charities in delivering social services. And this month the White House is holding a conference to explore the potential of philanthropy.

Whether under the banner of Republicans' "compassionate conservatism" or Democrats' "third way," there are many suggestions to strengthen charitable giving, grant charities further tax breaks, channel government contracts through faith-based charities, and rely more on nongovernmental initiatives to help solve society's problems.

While harnessing the power of these nonprofits makes sense, so does taking their measure. Using private charities and other nonprofits to deliver public services has a long history - witness government payments to nonprofit hospitals, universities, and charities serving low-income people. The trend is on the rise: Between 1977 and 1996, government payments to nonprofits grew at twice the real annual rate (6 percent) of private contributions (3 percent).

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The prospect of further enlarging these conduits of social capital with private funds has prompted proposals to expand incentives for charitable giving. Ideas range from increasing limits on charitable deductions to simplifying an excise tax on foundations that currently discourages giving. Our own proposal to spur giving is to allow individuals a grace period - until April 15 or when they file their tax returns - to deduct contributions, just as is allowed now with deposits to individual retirement accounts.

But even if such actions prompt greater giving, charities won't have the funds needed to do everything proponents of compassionate conservatism or the third way would like. The contributions these groups receive total only 10 percent of what government spends on social welfare - not enough to counter cuts or shifts in government spending. Even if their budgets did increase, charities are constrained by one of their greatest strengths - they often serve those nearby or closely tied to the organization itself. But their very responsiveness to individuals and communities means they can't step back as government does to vouchsafe equal rights for the equally needy. They can't always find and serve those in greatest need. Studies of social services provided by local congregations show, for instance, that a small percentage support organized programs that reach much beyond their own neighborhoods.

Government funding has both pluses and minuses. If government tries to channel too much through charities, these organizations can lose some of their identity, sovereignty, and sense of mission because of bureaucratic red tape.

This dynamic relationship between charities and government must be taken into account when considering changing or expanding the role of charities. These two sectors depend on each other - one for funds and the other for innovation and understanding of local needs. An otherwise creative and usually collaborative process can sour into conflict if more is expected of either side than it can handle.

This delicate balance needs to be addressed squarely. Ideally, a national bipartisan commission will be created to strengthen the tradition of giving and identify the characteristics of successful government-nonprofit partnerships.

Even short of that, candidates and voters need a clearer sense of what charities can and can't do lest the enormous potential of nonprofits be either undervalued or oversold.

*Elizabeth Boris directs the Center on Nonprofits and Philanthropy at the Urban Institute, in New York. Eugene Steuerle is a senior fellow at the Urban Institute. The views expressed here are their own.

(c) Copyright 1999. The Christian Science Publishing Society

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