Public Governance: Why Nonprofits Should Be Involved

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Money Drain

The remarkable city government scandal of Bell, Calif. reverberates still, as the former police chief’s petition to double his annual pension to $510,000 was recently rejected by a California judge. Randy Adams, Bell’s former police chief, will continue to have to make do with an annual pension of $240,000, which nonetheless leaves him with the eighth highest pension check in the California public employee retirement system. Meanwhile, eight former city officials—the “Bell Eight”—are now awaiting trial for corruption, facing charges of giving themselves exorbitant salaries, including nearly $800,000 for the city manager and $457,000 for Chief Adams himself. Adams has sued Bell, arguing that the city owes him severance pay, and Bell has sued him back, arguing that he should return some or all of his generous salary.

While all of these allegations are working their way through the courts, a panel at the Hudson Institute’s Bradley Center for Philanthropy and Civic Renewal made the case that these problems and their solutions are rooted in fixing the city’s budgeting process—which really means fixing the process in which citizens have a voice and a stake in the municipality’s decision-making dynamics. Doing that requires an infrastructure of functioning nonprofits and advocacy organizations.

The Need for a Nonprofit Civic Infrastructure

Ken Hampian is Bell’s interim pro bono city manager. He was brought in after the dismissal of the public officials now awaiting trial. At the Hudson panel, he described a revised city structure, one that is meant to change the relationship between Bell’s municipal government and its citizens. Another panelist, Pete Peterson from the Davenport Institute for Public Engagement and Civic Leadership at Pepperdine University, suggested that public engagement in municipal government is in the midst of a major change toward an emphasis on participatory governance. According to Peterson, citizens are at the table weighing in on the definition of the problems, rather than simply commenting on what government officials are thinking or proposing to do. This is in contrast to the traditional public hearing dynamic, which Peterson said invites confrontation and a lack of deliberative participation—the three-minutes-at-a-microphone format that he said is “flypaper for whack jobs.”

Hampian and Peterson were joined by Bell City Councilor Ana Maria Quintana and Chris Gates, the executive director of the foundation affinity group Philanthropy for Active Citizen Engagement. Together, these panelists described an alternative to traditional, dysfunctional models of participation that instead emphasizes involving citizens thoughtfully, substantively, and serially. Although the Hudson Institute discussion emphasized the notion of community engagement in the budget process, Hampian and Gates briefly brought the conversation to the issue of building civic infrastructure.

Hampian suggested that one of the indicators of what many have seen as a broken system in Bell was the withering infrastructure of functioning nonprofits and advocacy organizations through which the organized voices of citizens might have been heard. Gates added that one of the problems he has seen is that, with more data and more information, the result hasn’t been clarity in public processes, but more often than not, obfuscation. Citizens may have increased access to information, he said, but making that information useful requires guides, docents, and curators—and those intermediary players and their functions have been missing.

Gates added that there is a “severe lack of places where people can feel like they’ve been heard.” Those intermediary functions and the places where citizens can be heard sound like venues for a civic infrastructure. They require a nonprofit sector that is robust enough to work with and for the citizenry, convening residents to coalesce around issues and ideas rather than submerging themselves into government-controlled processes meant to manage participation so that there is the appearance of community input and cover for officials’ decisions.

The Hudson discussion of the need for a nonprofit or civic infrastructure felt like it moved toward a communitarian vision, presuming common values that would come to the fore if only we could all get to the table and be heard. If it were only that simple (and we know that none of the speakers would say quite that). But sometimes, the civic infrastructure is meant to be a check and balance on government—and the private sector—because partnership around shared values isn’t always possible. Through municipal budget and other financial processes (think about the Community Development Block Grant program), too many nonprofits focus on their monetary needs rather than the more basic issues that Peterson, Hampian, Quintana, and Gates presented about local democracy. Even in Bell, a small city, the nonprofit sector that did exist didn’t exactly take a stand in the face of charges of corruption. For instance, the Montebello Housing Development Corporation honored Bell’s former mayor—who was in charge when city officials were allegedly engaging in corrupt practices—with a $350 a plate dinner.

Money Talks—but Usually Not about Poverty

More significant than any alleged corruption in Bell, however, is Bell’s poverty. Bell, which has a population that is more than 90 percent Hispanic, is one of the poorest municipalities in Los Angeles County. Although too small to be an entitlement recipient of Community Development Block Grants, it is a sub-recipient in the CDBG program of Los Angeles County, which received $38 million in its urban county entitlement in 2012. Where is the nonprofit infrastructure in addressing not only Bell’s public budgeting process, but its poverty?

More than 29 percent of Bell’s population lived on incomes below the federal poverty level in 2009, compared to 19 percent for California as a whole. Bell has a homeownership rate of 27.8 percent, less than half the homeownership rate of the state overall. Only 3.8 percent of Bell residents age 25 or older have a bachelor’s degree, compared to about 30 percent among all Californians. On the Bell municipal government website, the two nonprofits that are given prominence are the Bell Chamber of Commerce, a nonprofit serving business interests, and the Friends of Bell Foundation, which raises money for grants and scholarships for Bell students.

This doesn’t suggest a robust nonprofit presence. The Bell Chamber of Commerce, according to the Form 990 it filed for its fiscal year ending in June of 2011, is an $80,000 a year operation. The Friends of Bell Foundation doesn’t seem to have filed a full 990 since 2009, suggesting that it is below the income threshold for anything other than a 990 e-postcard. Serving Bell and the even poorer Bell Gardens plus six other cities, the Southeast Community Development Corporation reported, in its 2010 Form 990, total revenue of just over $300,000, a steep drop from the $596,000 it received the year before, hardly a solid revenue base for an organization addressing the economic development needs of eight municipalities.

Gates and Hampian sounded all the right notes about the importance of a nonprofit infrastructure to Bell’s Phoenix-like rise from the depths of its alleged municipal government scandal. But the notes about a rejuvenated nonprofit sector, while compellingly important, do not seem to be much in evidence. Citizens may be participating in Bell’s revived and revamped budgetary process, but more is needed to make a convincing case for the sustainability of Bell’s new approach to governance and citizen-informed decision-making than just standing up as a potential critic of government.

For all of the participatory mechanisms that might be developed, nonprofits know that there are a number of arenas of governmental activity that often afford select people and interests outsized influence over the content of governmental processes. There are flows of private money in governmental systems that don’t show up in municipal or CDBG budgets, everything from the ubiquitous campaign contributions for mayoral and City Council candidates to investments in development projects that come with developers’ demands for public sector incentives.

The complexity of governmental finances, particularly for larger cities, is daunting. Gates suggests that the public agenda is really “jointly held” and involves not just the municipal budget, but a “collective emptying of pockets on the table” of multiple governmental and private entities, and a “more complex conversation…about social capital.” He is on point that the public agenda is more than what comes into and flows out of municipal coffers, but while jointly held, it isn’t equally held. Just as is the case at the federal and state levels, the political influence of moneyed interests operates constantly behind the scenes, no matter what participatory processes might be divined.

Determining the Appropriate Local Government-Nonprofit Relationship

The ideas—or ideals—of Gates, Peterson, Hampian, and Quintana all make sense, but the communitarian ideal that “we’re all in it together” doesn’t always hold in real life politics. Whether interests converge or diverge, the potential success of a participatory dynamic requires a strong nonprofit infrastructure. The budgetary and policy decision-making of municipal officials from Bell, Calif. to Jersey City, N.J. are improved immensely when citizens at the table early, sharing in the generative processes of defining the issues and setting priorities rather than simply taking the mic for a few minutes of reaction at public hearings. But citizens won’t be at the table early unless there is a nonprofit infrastructure to accomplish what Gates described as the intermediary functions of translating, interpreting, curating, and guiding—and no one on the dais at the Hudson Institute explained how a municipality with a civic infrastructure deficit like Bell’s accomplishes that.

Did Quintana and Hampian rebuild Bell’s nonprofits to serve as the venues for facilitating citizen involvement? Did they create nonprofits from scratch? Did they take the shells of existing nonprofits and pump life into them? Did community organizers watching Bell’s municipal government implode come into the city with resources and a commitment to bolster the community’s voice? It isn’t clear whether the reformed Bell process, despite a wholesale replacement of the community’s official decision-makers, actually reinvigorated and made sustainable the nonprofit infrastructure that is the necessary intermediary for helping citizens participate effectively in the city’s participatory governmental mechanisms.

Hampian concluded that the point of participatory mechanisms like those that Bell designed to replace the closed municipal budgeting processes of the past have an important overriding goal: to give citizens opportunities to feel like their involvement with government really matters. These are processes for people beyond just those that Gates described as the “professional citizens” who show up at every public hearing and whose hobby is to “mess with public officials.” Rather, the idea is to design processes that will somehow organically lead to greater authentic participation because, as Hampian said, “citizens who are sincere will get it.” But that doesn’t totally answer the question that Gates raised about the nonprofit infrastructure.

NPQ has long documented the importance of the local infrastructure of nonprofits. Particularly, nonprofits that are “networked” to others are able to turn to them for help, support, and resources, which is crucial to effective governance and to addressing critical problems such as concentrated poverty. But we are not convinced that there is a clear path for public officials in jumping in to specifically build nonprofits. How would nonprofits that are created (or re-created, in some cases) by public officials actually work as entities independent of the governments that gave them life? There are numerous examples of nonprofits with ties to public officials that have come with unwanted results. Consider, for example, those nonprofits in New York State that have been caught up in the various “members’ items” scandals. Don’t such cases suggest that too-close links between nonprofits and governmental decision-makers are dangerous?

That’s not to say, however, that there is no role for government to play in helping to foster a dynamic nonprofit sector. If municipal government officials aim to remake local government decision-making without contributing to a strong and sustainable local nonprofit picture, the local government “fix” will not hold. By the same token, the story of Bell, Calif. should be a reminder that one of the major challenges for the nonprofit sector is helping to overcome dysfunction among municipal, state, and even federal government partners.

  • Nonprofit Reform Movement

    We need to expand the Nonprofit Reform Movement across the United States. http://NonprofitReform.blogspot.com

  • Ron Wormser

    The seemingly accelerating trend of encouraging nonprofits into a more active engagement with politics, with the exercise of self-governance as practiced in the US, is a curious development. E.g., the statement in this article, “But citizens won’t be at the table early unless there is a nonprofit infrastructure to accomplish what Gates described as the intermediary functions of translating, interpreting, curating, and guiding—” is asserted rather than explained. It might well be asked, “What makes nonprofits both qualified and better positioned to play such roles?” Other questions: Are not nonprofits every bit as self-interested as others? Is not their first, some might argue ‘only’, obligation to fulfilling their missions?

    Perhaps more to the point: Chronically under-resourced in staff time, how can diverting such resources to non-mission fulfillment purposes be justified? Why should those who fund nonprofits (those who benefit from their services and those who contributed funds to support those services) want or approve of their funds being diverted to other uses?

    On what grounds can the diversion of staff time and funds provided for other uses be justified?

  • Simone Joyaux

    Thanks, as usual, Rick (and NPQ) for a pointed article that reminds us of the role of nonprofits / NGOs. One of my very favorite pieces is Waldemar Nielsen’s marvelous paen,”The Third Sector: Keystone of Caring Society.” This was a paper presented at the 25th anniversary conference of the National Council on Philanthropy, 1979, Denver, Colorado. The paper was published by the Independent Sector – and I think is still available.

    Keystone of a caring society. How? (1) Delivering a wide range of services to people – and often bridging the gap between government investment and actual community needs. (2) Strengthening the other two sectors – the for-profit marketplace and governing – often producing corrective and compensatory effects. And, finally, serving as a humanizing force – offering people an opportunity to give.

    But I don’t think our sector does #2 enough. Nonprofits are afraid – and often rightfully so given government’s reaction to nonprofit advocacy and lobbying work. And now we have for-profits providing education and prison management and medical care and and … All areas that were, traditionally, the purview of nonprofits. So NGOs are even more afraid, I suspect.

    But now is not the time to shy away. Actually, we should never shy away. The third sector – the independent sector – nonprofits/NGOs are the keystone of a caring society. Speak out. Silence is consent. Hold government and for-profit … and our compatriots in the nonprofit sector itself… hold them all accountable.

  • Gregory Kurth

    I think the article alludes to, but fails to emphasize, the importance of “advocacy only” organizations in civic engagement. Essentially, non-profits intertwined with government (e.g. Chambers, CDFIs) are certainly not going to “bite the hand that feeds them.” Rather, philanthropy can be a much more powerful voice in funding democracy efforts.

    Such efforts require a true independent, “backbone” organization. Effective community organizations are those that emphasize a voluntary spirit with independent governance. Yes, it means a revitalization of de Toqueville’s vision of Democracy in America. It requires supporting good organizing tactics and independent dissemination of information in a culturally-competent manner. Any idea of depending on government to fill this void is dinstinctly and historically “unAmerican.”