In general, it should be understood that government, and particularly the nonprofit sector cannot individually meet the total needs of society. The government can provide for equitable spending, i.e., assuring that citizens get equal treatment, and nonprofits may be able to provide particular services in communities. However, the nonprofit sector cannot substitute for government, nor replace it. Rather, nonprofit organizations can complement and serve as a conduit for the provision of services through government contracts. What PRWORA creates is a patchwork quilt, with 50 different states providing different requirements and funding for welfare and many of them passing the responsibility to over 3000 counties. The result of devolution is to reduce the chance of equitable treatment to Americans related to welfare policy. For example, in the state of Virginia, the length of time a family can remain on welfare at any one time is six months, while in the state of Illinois, legislation has been passed to extend benefits to working families from the state budget after the two-year deadline for benefits.7
Neither private foundations nor governmental agencies have made major investments in studying the effects of welfare reform on nonprofit organizations, although they have made substantial investments in studying the impact of welfare reform on government. As a result, there is only anecdotal evidence about the impact of welfare reform on nonprofits essentially coming from major nonprofit service providers such as the Salvation Army and the Children's Defense Fund.8 Anecdotal evidence on the impact of welfare reform indicates that large service organizations, such as the Salvation Army, has been stretched beyond its capacity in some states when recipients have gone off the welfare rolls particularly in the areas of food and shelter.9 There is increasing evidence from state government survey surveys to suggest that welfare recipients that have gone off the rolls do not have jobs a year later, that only a small percentage of these families have moved above the poverty line, and that many working poor have to choose between paying rent or going hungry part of the time. The number of Americans without health insurance has increased along with the number of uninsured children.
Welfare reform has brought about an increase in contracting with nonprofit organizations and private corporations at the state and local levels. Because of the requirements of these contracts, only large nonprofit organizations can compete with corporations such as Lockheed-Martin. Smaller nonprofits are likely not to be able to keep their client base. They are being encouraged to merge or to consolidate with other nonprofits. Accountability in the form of measurable outcomes is a "code-word" for capacity building at the local level and could lead to the bifurcation of the sector of large nonprofits who take up business practices and who can build revenue-generating programs against smaller nonprofits who cannot compete and whose survival is in question. In a recent study in Cuyahoga County in Ohio, all nonprofits regardless of size found that their "public service character threatened by the marketization of the sector, specifically public services that nonprofits have provided in the areas of research, education, advocacy, and serving the indigent."10
The capacity of nonprofits is primarily determined by government funding, citizen generosity of time and money, and charges for services. Changing the proportion of these funds in a major way affects the capacity of nonprofits to carry out their work. If individuals lose entitlement benefits including welfare payments, food stamps, and medical insurance, nonprofits are more heavily affected because they must try to meet a larger unfunded unmet need. How much need they have to meet depends on state and local public policies.
