By Charles R. Halpern
President

American democracy is rooted in public participation. One of the unique features of our republic is a vital nonprofit sector where people come together to act in the public interest-to aid their communities, to support new arenas for creativity, to find solutions for pressing problems-and express themselves as citizens. The freedom to express their viewpoints and to choose the organization in which they speak and act, whether secular or religious, local or national, is embedded in the fabric of American history. Through nonprofit organizations, Americans engage in community and democracy from the ground up, and cooperate with business and government to make a positive difference in the quality of life in the United States and abroad.

Despite its central role in sustaining our democratic society, the nonprofit sector is under attack, beset by serious challenges which threaten to weaken its contributions to American life. Radical cuts in federal and state funding are leaving nonprofits with large budget gaps that cannot be filled by private giving. Faced with these declining government revenues, many nonprofits are turning to fees for service, placing them in competition with for-profit organizations and reducing their unique nonprofit contributions, such as the provision of uncompensated service and support for research and training. Legislation currently pending in Congress would restructure the tax system, drastically reducing incentives for philanthropic giving. States and localities are imposing new taxes on nonprofits and threatening their exemptions from real estate taxes.

Overall, there is a lack of public understanding of what nonprofit organizations do and how they operate. By failing to explain its role in a modern economy to the American public, the nonprofit sector has left itself open to criticism for not living up to the popular perception of charities as small voluntary groups providing direct services to the needy and downtrodden, which is only a small, though important, part of what nonprofits do. The resulting gap between image and reality has produced a deterioration in public confidence in charitable institutions.

Those of us who believe in the importance of a strong, diverse nonprofit sector have for too long failed to promote public awareness of the issues at stake or to explore in a comprehensive, serious manner the problems that plague the sector. What is needed now is a concerted effort to champion the nonprofit sector against attacks and to make it more accountable and effective in today's econ-omic and social climate. Without such a systematic effort, the nonprofit sector will be radically altered in the early decades of the new century and many of the important roles played by nonprofit institutions will be jeopardized.

Over the course of the past eighteen months, the Nathan Cummings Foundation has convened and participated in a sequence of meetings with other foundations, nonprofit groups, scholars of the nonprofit field, and other concerned people to discuss the challenges to the nonprofit sector and consider appropriate responses. Last year, for example, along with other foundations, we supported the public education campaigns which grew up around the Istook Amendment, the proposal to sharply limit advocacy activities by nonprofit groups, which was passed by the House of Representatives and defeated by the Senate. This successful collaborative effort demonstrated how the nonprofit sector can pull together when confronted with urgent challenges on issues of common concern.

The Foundation also commissioned a report by Lester M. Salamon, director of the Institute for Policy Studies at Johns Hopkins University and a leading authority on the nonprofit sector. In this report, Holding the Center: America's Nonprofit Sector at a Crossroads , Salamon offers a preliminary overview of the major challenges and opportunities that the sector faces.

The Nonprofit Sector: Services and Values

Many of the great institutions of our society-the civil rights organizations, the cultural institutions, the medical research institutions-belong to the nonprofit sector. Harvard University and small grassroots arts and environment groups rarely see themselves as colleagues sharing the same concerns. Yet they have much in common. What they share are their nonprofit, tax-exempt status, their dependency on government support and private charitable contributions, and their reason for existing-to serve the public good.They provide services that the private sector cannot provide. A society that is responsive only to private gain will not sustain a homeless center or a neighborhood legal clinic or a symphony.

Some of the most important social achievements of the last 50 years were the result of the passionate leadership and tireless efforts of nonprofit organizations, supported by foundations and individual donors. Building on and stimulating the concerted efforts of citizens, the NAACP, the Legal Defense Fund, and the Urban League, to name a few, led the struggle for civil rights in the legislatures, courts, and public forums. Similarly, the environmental movement, and such organizational leaders as the Wilderness Society and the National Resources Defense Council, helped to establish the network of protective measures that have done much to reduce environmental damage and to protect unique landscapes for future enjoyment.

The nonprofit sector contributes to society in a variety of ways. The sector explores solutions to civic problems and provides services to those in need. Nonprofit organizations identify societal problems and attempt to mobilize broad public support for solving these problems. Nonprofits create and sustain the bonds of trust and reciprocity that are pivotal to the functioning of a demo-cratic society and market economy. Most importantly, the nonprofit sector functions as a "value guardian" in American society-as an exemplar and embodiment of fundamental national values emphasizing individual initiatives for the public good and fostering community, diversity, and compassion.

As members of the nonprofit sector, foundations play a vital role in all of these areas of contribution. Foundation support is especially important in encouraging advocacy, empowering people who are too poor or too few or too far outside the mainstream to make their own views heard.

Framing a New Vision of the Nonprofit Sector

The modern nonprofit sector is complex, and interconnected with both government and business in a host of complementary relationships. Rather than unraveling these relationships, we must find ways to make them work better. The coming decades will see major changes. Our task is to make sure these changes strengthen the nonprofit sector and improve its interactions with both the private and public sectors.

To this end, the Nathan Cummings Foundation will work to address both the short-term and long-term future of the nonprofit sector. We will work closely with the Council on Foundations, Independent Sector, and other infrastructure organizations which support the nonprofit sector. We will also reach out to vital grassroots organizations that are underrepresented in existing associations.

We encourage all foundations and nonprofit groups to recognize their stakes in the health of the sector. It is too easy for nonprofit groups with targeted missions to fail to acknowledge common threats to the sector or to defend its common interests. This is a time to cultivate the larger vision, a time to understand that organizations with a narrow, focused mission share common interests with groups that may seem unrelated. Nonprofit organizations and foundations must work together to achieve their common goals. We must strive to heighten public understanding of the complex network of institutions that make up the nonprofit sector. We must work collaboratively to develop a process for reforming and renewing the sector, so that it is stronger and more effective. We must also recognize the ways that the nonprofit sector benefits from and supports the public and private sectors.

In an effort to provide a standard against which to measure both challenges and reform efforts, the Nathan Cummings Foundation, in collaboration with other funders and nonprofit colleagues, is refining a set of core principles to guide policy and action on the nonprofit sector for the new century. We hope these principles will be a useful beginning to policy makers, opinion leaders, and citizens of all political persuasions for the task of adapting the American tradition of the nonprofit sector to the challenges of our day. These core principles include the following:

-- The nonprofit sector is the repository of core public values such as community, compassion, and generosity.

In a nation in which commercial interests, the profit motive, and market mechanisms play a central role, the vitality of the nonprofit sector provides an essential balance. Nonprofit organizations should reaffirm their commitment to these core values in order to continue to justify public respect and subsidy.

-- The diversity of America's nonprofit sector is one of its greatest strengths. Nonprofit organizations take a wide variety of forms.

Some are directly involved in alleviating human suffering while others promote the advancement of knowledge or the pursuit of artistic excellence. Though a source of complexity, this diversity is also one of the great strengths of the nonprofit sector, ensuring that it can truly give expression to a range of perspectives on what constitutes the public good. We should take care to assure the diversity that gives it its special character.

-- The nonprofit sector's support for advocacy sustains democratic discussions of policy and should be encouraged.

By allowing people to join together to identify public problems and press for solutions to them, nonprofit organizations help to sustain America's constitutional traditions of association, democratic participation, and free speech. This advocacy function helps to educate the public about important problems, gives voice to the voiceless, keeps policy makers informed and accountable, and improves the quality of public decisions.

-- Cooperation between the nonprofit sector, government, and business is a vital part of the American tradition, and one that has served the nation well.

The partnership between the public sector and the nonprofit sector, which dates back to colonial times, combines the distinctive strengths of government-including demo-cratic participation and taxing power-with the flexibility and responsiveness of nonprofit organizations. Nonprofit groups can supplement government functions and responsibilities but cannot replace them. Assurance of adequate living conditions for all citizens, for example, requires resources on a scale that charity alone cannot provide. Government and the nonprofit sector can accomplish far more together than either can on its own.

The nonprofit sector's partnership with the private sector has enhanced each sector's unique contributions to the common good. Cooperation among the nonprofit sector, government, and business provides a way to mobilize public and private energies in the solution of community problems.

-- The system of tax incentives, which has encouraged individual giving and the creation of foundations, should be retained.

Nonprofit organizations are appropriately exempted from federal income taxes and from most state and local taxation. A system of tax incentives is essential to the vitality of the sector.

-- To remain worthy of public trust, nonprofit organizations must be models of openness, accountability, honest self-criticism, and renewal.

We must acknowledge gaps in our performance and develop a practice of mutual criticism aimed at improvements. We must remain true to our missions, encourage active involvement on the part of citizen boards, and operate in an open and demo-cratic fashion. We must renew ourselves periodically and adapt to change to better serve the public.