Can Alabama’s ‘Third Sector’ come to the rescue?: op-ed

This is a guest opinion column provided to 205focus.com.

Alabama’s community structure relies on three distinct pillars: government, business, and nonprofit organizations. While government manages defense and public safety, and businesses handle the provision of everyday goods, nonprofit organizations—often referred to as the "Third Sector"—serve as the vital bridge for vulnerable populations, faith communities, and the arts. These sectors are not isolated entities; they are deeply interdependent, with nonprofits relying on government support via tax exemptions and grants to function.

Can the Third Sector bridge the gap?

Late last year, a study released by the Public Affairs Research Council of Alabama (PARCA) shed light on how this sector partners with government to deliver essential public services. Funded by the Community Foundation of Greater Birmingham and the Alabama Association of Nonprofits, the research highlights a pressing question: Can nonprofits step in as the safety net shrinks? With federal and state budget cuts looming—ranging from Medicaid and the Affordable Care Act to mental health services—many conservative thinkers argue that these human services should return to "civil society." However, the PARCA report suggests that Alabama’s nonprofit sector is currently ill-equipped to shoulder such a burden.

The reality of Alabama’s nonprofit landscape

The data reveals two major hurdles for Alabama: a low density of nonprofits and limited philanthropic assets per capita. Currently, Alabama ranks 40th in the nation regarding nonprofit density, with only 114.6 organizations per 100,000 residents. Over half of these are concentrated in just three counties: Jefferson, Madison, and Mobile. This sparse distribution undermines the theory that the sector is oversaturated; instead, it indicates a significant lack of resources available to address human needs.

Furthermore, the state ranks 49th nationally in per capita foundation assets. Even if local foundations were to distribute 5.6% of their assets—a high bar for most—they could not replace the scale of sustained public investment required to manage the state's social service demands. As the report succinctly puts it: "Private philanthropy cannot replace sustained public investment."

Democratic health and the road ahead

Beyond funding, the state of the Third Sector serves as a barometer for the health of our democracy. PARCA’s analysis emphasizes that these organizations represent the American principle of federalism—local decisions funded publicly and executed through community trust. While Alabama ranks 30th nationally in the ratio of nonprofits to foundations, the challenge remains: we are historically better at creating foundations than we are at providing them with the necessary funding to thrive.

For Alabama, strengthening the Third Sector is not merely about financial support for human services; it is about protecting the infrastructure of our democracy. Understanding why our nonprofit sector lags behind other states is a critical first step in addressing the systemic gaps in our safety net.

Stephen Yoder teaches a course on philanthropy at the UAB Honors College. He is a retired lawyer and was a professor and administrator at UAB.