Reinventing Government: The Promise of Institutional Choice and Government Created Charitable Corporations

Abstract

This Article focuses on a subset of private/public partnerships - those that involve relationships between the public sector and charitable organizations, specifically "government created charitable organizations" (GCCOs). For example, the first President Bush, known as the "Education President," championed the creation of the New American Schools Development Corporation (NASDC) as the cornerstone of his education policy. Designed as an independent charitable organization, the NASDC's proposed budget relied on private corporate contributions. In this way, the federal government could assert that it would fund its new educational program without increasing the federal bureaucracy, raising taxes, or cutting other budget items.

To create a government that "works better" (i.e., is more efficient) and "costs less" (i.e., maximizes access to nontax revenue), reinvention literature encourages policy makers to weigh the relative benefits and burdens associated with locating a particular program in the public, charitable, or private sectors. For example, the charitable sector is considered to perform best where "consumer trust" is important, as in the case of medical care and child care. The private sector, on the other hand, is considered superior where innovation is desired. Both offer access to various forms of nontax revenue. However, in the case of the charitable sector, the emphasis is on corporate contributions.

The comparative institutional analysis advocated by reinventing government is very promising. It recognizes that the institution chosen to deliver the program influences and, to some degree, ultimately determines the success of the program. Unfortunately, the level of analysis is compromised by an obsession with immediate efficiency gains and access to nontax revenue. This ignores the effect of GCCOs on corporations and the charitable community, and leaves little room for considerations of equity and social justice. Thus, the political exigencies of reinventing government threaten to reduce its comparative institutional analysis to nothing more than a short-term cost management tool.

The attempt to quantify the effect of GCCOs on corporations and the charitable community underscores how little is known about the composition and actions of the charitable sector. GCCOs represent yet another instance where policy choices are based on largely unexamined assumptions concerning the nature of charitable organizations. For example, significant tax subsidies rest on certain assumptions about the charitable community for which there is very little empirical support: such as charitable organizations deliver social services more efficiently than government, and they "lessen the burdens" of government in a meaningful way. Reinventing government uses these same assumptions to determine questions of institutional choice.

Keywords: institutional choice, nonprofit sector, privatization, tax exempt, comparative institutional analysis, New American Schools Development Corporation, public private partnerships, reinventing government, philanthropy, 1000 points of light, exempt organization, charitable sector, institutional analysis

JEL Classification: D73, D78, E62, H11, H20, H42, K34, L31, L33