At a recent convening hosted by the Urban Institute’s Center on Nonprofits and Philanthropy, Mason Nonprofit Center Director Alan Abramson reflected on his early work with Lester Salamon during the Reagan Administration’s era of federal budget cuts, offering insights that continue to resonate with today’s nonprofit sector challenges.
Abramson and Salamon began collaborating at the Urban Institute in 1980, where their research helped advance a foundational concept in public service delivery: the implementation of government programs often involves a collaboration of some combination of different levels of government, nonprofit organizations, and businesses—a model Salamon termed “third-party government.”
This partnership was soon tested when President Ronald Reagan took office after campaigning to sharply reduce federal spending. Nonprofit leaders anticipated that these government cuts would increase the need for nonprofit services at the same time they reduced nonprofit income, while the administration argued that private philanthropy could fill the resulting gaps.
In response, Abramson and Salamon, working with the newly established nonprofit umbrella association Independent Sector, launched a study to assess the potential impact on nonprofits of the proposed government cuts. Their findings were clear: especially in the short-term philanthropy could not replace large-scale government funding cuts. One of the study’s most important underlying points was that charitable donations are not the primary revenue source for most nonprofits. Instead, for the nonprofit sector as a whole service fees rank first, followed by government funding, with philanthropy third. Misconceptions about nonprofit revenue sources persist today and continue to create unrealistic expectations about what philanthropy can accomplish when public funding declines.
Abramson also recalled the challenging context in which the study was released. At the time of the publication of the first report on nonprofits and the federal budget in spring 1981, the Urban Institute itself was facing significant federal funding cuts, and President Reagan was recovering from an assassination attempt. In an effort to avoid political backlash, a news article even referred to Salamon as a Washington, DC political economist, without noting any institutional affiliation, underscoring the Institute’s delicate position in navigating politically sensitive research.
Despite these challenges, the research agenda on the state of nonprofits expanded significantly. Follow-on projects examined the broader impacts of Reagan-era domestic policy changes, including a field study of nonprofits across 16 U.S. sites and, when Salamon moved to Johns Hopkins in the late 1980s, a comparative analysis of nonprofit sectors internationally. Mason Center faculty member Stefan Toepler was a collaborator on this latter comparative study. These various projects not only helped establish nonprofit studies as a recognized academic field but also informed policy debates—supporting arguments against further spending cuts and in favor of tax incentives to encourage charitable giving.
Abramson noted that nonprofits have historically found it easier to unify around tax policy than around government spending priorities. Unlike in program areas such as defense, there is no single topline for a “nonprofit budget,” making coordinated advocacy around spending more difficult. Tax policy, by contrast, offers a clearer and more cohesive focal point for collective action.
Politics, Abramson emphasized, continues to shape and constrain the nonprofit sector. In the 1980s, congressional intervention helped prevent deeper cuts. At the same time, structural limitations—such as restrictions on political endorsements and contributions by charitable nonprofits—continue to limit nonprofit influence. More recently, however, nonprofits have found alternative avenues for impact, including collective litigation strategies.
Looking ahead, Abramson expressed concern about growing skepticism towards research itself. The increasingly common notion that “everyone has their own research” risks undermining the credibility and value of rigorous, evidence-based inquiry. This trend is particularly troubling given the critical role research has historically played in shaping public understanding of the nonprofit sector and informing policy decisions.
Abramson’s reflections highlight several key takeaways for today’s nonprofit leaders and policymakers:
- The primary funding sources of nonprofits remain widely misunderstood.
- Building consensus around government spending priorities continues to be challenging, while tax policy and collective litigation remain appealing tools for advocacy.
- Independent, credible research remains essential and must be conducted with neutrality and rigor.
While the relationship between nonprofits and government has always been complex and politically influenced, Abramson’s retrospective underscores how historical insights can inform more effective strategies moving forward.