The Privatization Equation

There is an ongoing movement in Pennsylvania to publicly fund private schools. Like other organizations, such as hospitals and the emerging fourth sector, for-profit organizations are touted as more efficient – and more effective – than their nonprofit counterparts.

I am not able to intellectually process the efficiency argument. I envision the expenses of each entity as follows:

Business expenses = costs + all taxes + profit

Nonprofit expenses = costs + payroll taxes

From my perspective, the nonprofit expenses are by default much lower than those of business. Perhaps I am missing something.

In my experience, nonprofit – or community benefit – organizations are also more effective in the delivery of public and community services. Community benefit organizations are driven by community need. Businesses, particularly those that are shareholder owned, are driven by making profits. Isn’t that a distraction?

Let’s look at a personal example. The Fruition Coalition is a social enterprise; a for-profit organization. When I first started the organization in 2001, I toyed with the idea of creating a nonprofit organization. Lacking scale and the technological capacity that is available today, it seemed simpler – and less expensive –- to stay a for-profit (although it has yet to be profitable). Today, as the Fruition Coalition is relaunching, I am grateful for this decision. Being a for-profit gives me the latitude to be politically open which is so important to the core of what The Fruition Coalition is all about. In addition, I can cover organizational expenses – including my time – through program service fees. This way, there is no need to compete with nonprofit organizations for limited grant funds. I can also proudly contribute taxes to the things that I value like public education (unfortunately I can’t direct how all of my tax money is spent)! While The Fruition Coalition is technically a for-profit organization, its purpose and activities are fully community-driven.

So, yes, there are times when a for-profit business is a better choice to meet a community need; The Fruition Coalition is just one example. But I believe that this is the exception rather than the rule.

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