The Rundown - The United States of Philanthropy - February 10, 2023
The Philanthropy Roundtable releases rankings on different states on regulatory measures. Does it really matter?
The Comparison Trap
One of the more interesting aspects of living in the United States is that while we are one country, we are made up of fifty individual states. And when you include territories, districts and commonwealths, you end up with even more state-level jurisdictions.
Each one of these states are laboratories amongst themselves, a separate place where ideas can be put into place and tested on their worthiness. This inherent competition built in the fabric of the country leads to endless lists of the “Best States to…” and the “Worst States to…”
Of course, looking at a handful of criteria does not a good study make. However, in a world that is desperate for new (if not interesting) content, top 10 lists are always a tried and true method of getting clicks.
Well, our good friends at Philanthrophy Roundtable, not to be outdone, recently came out with their Top 5 Best and Worst States for Nonprofit Regulations. You can read the report here. And because I hate cliffhangers and waiting until 11:28 p.m. to watch the best story of the night on the late news, I will cut to the chase and give you the good information right now:
It’s probably no surprise that the “Best” states are those with the easiest state-level administrative burdens and those state are primarily the sparsely-populated west (Montana, Wyoming, Idaho). The “worst” states are those with higher burdens and seen in places with more dense populations (New Jersey, Connecticut, Pennsylvania). This thumbnail analysis is intresting, but it really begs us to dig deeper.
In determining their rankings, the Philanthropy Roundtable looked at five separate criteria: Ease of start-up, Annual Reporting Requirements, Paid Solicitor Feeds and Regulations, Audit Requirements, Oversight Regulations.
The Roundtable was careful to note:
“These categories are included because they comprise the main features of the charitable regulatory landscape. This analysis does not argue that any one specific type of regulation discussed here should be eliminated. Rather, that the full compliance burdens on charities should be weighed against the benefit of the regulations.”
Does This Really Matter?
In my previous career, I worked for a small city doing economic development. This work revolved largely around attracting large companies to come to the city I was working for. For those not involved with the industry, it’s pretty competitive.
Anytime a business was looking to relocate, state-level policy really mattered. State tax rates, labor laws, local financial incentives (which were often governed by state law), education, population — all of these played critical roles in helping huge industrial concerns to make million (or even billion!) dollar investments in small communities.
In those instances, those state-level lists made a lot of sense. If one state was doing better than another in attracting industry, it was worth looking at things as state-wide tax policy to make a state more competitive.
But, as I read about this, does this stuff really matter in the nonprofit world?
Most of the nonprofits that I work with and deal with are extremely local in nature. A few friends and neighbors come together, see a problem and start tackling it. The movement grows and it makes sense to incorporate as a non-profit and make the effort more an institution.
For these groups, this list doesn’t make a lick of difference. I can’t pack up the food pantry I work out and move across the state line and still expect to operate or serve the same way I am doing it now. Regulatory enviornment is not a major driver in our decisions. I sincerely doubt it’s a major driver for a vast majority of the nonprofits in our country.
Do Fewer Regulations Mean A Better Non-Profit Enviornment?
The executive summary of the Philanthropy Roundtable report stated that:
“There is, in fact, a strong correlation between the states that impose more burdensome regulatory environments and the vibrancy of the charitable sector. While more research is required, the results are an initial indication that the states imposing the most burdensome regulatory environments are dimming the vibrancy of the charitable sector. Consequently, states should consider the benefits from streamlining state regulations and eliminating unnecessary burdens as a means for promoting a more efficient and effective charitable sector.”
So, you are telling me that the states with the highest regulatory enviornments are bad for business? Well, maybe. But, let’s face it, the inverse certainly isn’t true. The lack of regulations do not indicate a stronger nonprofit sector. According to data from Indepdent Sector, 14% of Montana’s workforce (the state with the lowest burden) was employed in the non-profit sector. Connecticut (the state with the highest burden) had a non-profit sector employment rate of …. 14%. At least on this one measure, the size of the state’s regulation doesn’t seem to matter much.
If regulations were such an inhibitor to growth, wouldn’t we expect to see a much higher percentage in a place like Montana as compared to Connecticut?
While the Philanthrophy Roundtable is an important voice and has provided plenty of information for nonprofit and philanthropy professionals to think about and ponder, it does make me think that comparing each state’s regulatory burden for nonprofits may be an excercise in futility.
What do you think? Leave your thoughts and ideas in the comments below!
The Weekly Notebook
A quick rundown of what I am seeing and hearing in the nonprofit world….
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Online Learning Options from Texas A&M Announced
If travelling for professional development isn’t in the cards (or the budget), the Center for Nonprofits at Texas A&M University has some great offerings! I recently enrolled in one of their certificate programs and really enjoyed the online format and the online discussions that were developed. It was time and money well spent and I would highly recommend this program, especially for early or mid-career professionals. The next session begins in early February and you can learn more here!
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