Nonprofits

Nonprofit donations actually end up going to wealthier counties and rural communities are left in the dark

Data Source: Urban Institute

The Path Forward

Persistent funding disparities have left nonprofits in struggling communities less able to help disadvantaged residents who are most in need. Closing this gap will require meaningful change from the three largest funders of nonprofits: 1) The Federal government, 2) individual donors, and 3) foundations

🏛 Shift government support to communities with the greatest need - The Federal government is the single largest nonprofit funder, providing over $491 billion a year. However, rural areas get 36% less federal funding for community development than urban areas. To close this gap, the Biden administration should first conduct an audit of rural-urban funding disparities across government agencies, and then reallocate funding to rural communities until the gap is closed. Second, the Community Development Block Grant should be reformed to better target communities with the greatest need. This could be done by removing the distinction between urban entitlement counties and rural non-entitlement counties, and re-allocating funds away from wealthy counties and towards persistent poverty counties.

💸 Make a difference with your donations - Individuals are the second largest source of nonprofit funding, donating over $324 billion in 2020. However, individuals are less likely to donate to smaller nonprofits, which we know tend to be located in poorer, rural areas. The pandemic disrupted legacy giving patterns and showed all of us how big a difference our donations can make. This is one example where individuals can actually make more of an impact than large organizations - and that change starts with which organizations you choose to donate to this year.

🏃‍♂️ Rally foundations to address US poverty and inequality - Foundations contribute $44 billion each year to US nonprofits, but as Catherine Coleman Flowers astutely observed, “Our billionaire philanthropists like Bill Gates fund water treatment around the world, but they don’t fund it here in the US because no one acknowledges that this level of poverty exists in the richest nation in the world”. If foundations want to make good on last year’s equity and justice pledges, they need to acknowledge the poverty and inequality that exists here at home. Supporting nonprofits working in persistent poverty counties, whose residents are disproportionately Black and Native American, would be a good start. Foundations can also help elevate impactful nonprofits working in these communities, and make it easier for individual donors to support their work.