The Argument: Funding Nonprofits

The Argument: The Origins of a Trend (full series)
Revolt of the Activists | Democracy Alliance Is Born
Winning Elections | Funding Nonprofits

Funding Nonprofits

If the central role that partisan politics and electoral outcomes have always played in the Democracy Alliance is the first important point to remember, the second is that independent nonprofits have always been the primary types of organizations that the alliance has recommended to its funding partners. Nearly all the groups identified in The Argument as among the first recipients of alliance money were such nonprofits.

There are critical (though not always clear) legal restrictions on how nonprofits may involve themselves in elections. Basically, 501(c)(3)s are categorically prohibited from “directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office.” Voter registration, get-out-the-vote, and other voter education activities are permitted, but must not “have the effect of favoring a candidate or group of candidates.” However, 501(c)(4) nonprofits may engage in substantially more direct political activities—endorsing candidates, making independent expenditures, etc.—as long as these do not become their primary activity.

Nothing suggests that the Democracy Alliance’s activities have violated any of these restrictions. Documents indicate that the alliance is attentive to the requirements of applicable nonprofit law. Yet even with these requirements in place, nonprofits are still seen as playing an important role in America’s political landscape and in electoral outcomes. It’s also a role that appears to be growing. Funding directed toward ideologically left-of-center nonprofits has swelled since at least the 2004 election cycle. The Democracy Alliance is one notable part of this trend.

Consider the budgetary growth of the alliance’s recommended organizations during that time. The Center for American Progress, the Center on Budget and Policy Priorities, the Economic Policy Institute, and Media Matters for America are all 501(c)(3) nonprofits identified in The Argument as among the earliest recipients of Democracy Alliance funding, and all remain core alliance-recommended groups to this day. In 2004, these four nonprofits had combined revenues of about $37.6 million. Adjusted for inflation, based on the Consumer Price Index, that would have come out to just over $50 million 2019 dollars. But the actual combined 2019 revenues of those four groups exceeded $126.2 million.

This trend is consistent across many alliance-recommended groups. Faith in Action (formerly known as PICO National Network) had 2004 revenues of about $5 million. By 2019 its annual revenue exceeded $23 million. The National Employment Law Project brought in less than $1.6 million in 2005, but more than $10.6 million by 2019. The Brennan Center for Justice went from about $4.4 million in 2003 to $84.5 million in 2020, while the Advancement Project jumped from approximately $3.5 million to $15.8 million from 2004 to 2019. All these groups operate as 501(c)(3) nonprofits.

It is also worth noting that many of the nonprofits the Democracy Alliance recommends today didn’t even exist when the alliance was founded or were essentially brand new. America Votes, the Center for American Progress, ProgressNow, Re:Power (formerly known as Wellstone Action), and Working America were all founded in 2003—the same year that Rob Stein started showing his PowerPoint presentation. Catalist, Media Matters for America, and Color of Change popped up between 2004 and 2006—roughly the period chronicled in The Argument. Others came about even later: the 501(c)(3) Center for Popular Democracy was established in 2012, merged with another group in 2014, and brought in almost $103 million total from 2017 to 2019.

The alliance, while steering vast sums of money into groups like these, was of course neither solely responsible for their creation, nor for their budgetary growth. More money has simply been flowing through the ideological nonprofit sector in general. Another example CRC has covered extensively is the consulting firm Arabella Advisors. It was also founded in 2005 and today manages four in-house nonprofits that collectively channel hundreds of millions of dollars to left-of-center groups. Those four nonprofits—three 501(c)(3)s and one 501(c)(4)—have collectively brought in more than $3 billion since 2006, including more than $730 million in just 2019. They also provide fiscal sponsorship services to scores of left-leaning “projects,” including several affiliated with the Democracy Alliance.

A Snapshot of Nonprofit Funding

Recent updates to a CRC study analyzing the revenues of liberal and conservative 501(c)(3) public policy nonprofits found that revenues of 906 selected left-of-center groups increased from just under $5 billion in 2006 to just over $8 billion in 2018, while revenues of 298 selected right-of-center groups increased from about $1.27 billion to just over $2.2 billion over that same period of time. This snapshot of the ideological nonprofit world suggests that while funding to such 501(c)(3)s has ramped up on both sides of the spectrum, the resources available to the left may be substantially larger. In The Argument, readers will find an important account of the origins of this trend.

This article appeared in the November/December 2021 issue of Capital Research.