The Nonprofit Sector at a Crossroads: The Case of America

Despite some encouraging trends, America’s nonprofit sector stands at a cross-roads because of an interrelated series of challenges. Government budget cuts beginning in the early 1980s have eliminated a significant source of nonprofit revenues and created a serious fiscal squeeze for many organizations. Although the sector as a whole managed to replace this lost revenue, it has done so largely through fees and charges that have attracted for-profit businesses into traditional fields of nonprofit action, creating a serious economic challenge to the sector. Simultaneously, important questions have been raised about the effectiveness and accountability of nonprofit organizations, and about what some see as the over-professionalization and bureaucratization of the sector. All of this has undermined public confidence in the sector and prompted questions about the basic legitimacy of the special tax and legal benefits it enjoys. To cope with these challenges, American nonprofits could usefully undergo a process of renewal that revives the sector’s basic values, reconnects it to its citizen base, and creates a better public understanding of its functions and role.