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

This is a guest opinion column provided for 205focus.com readers.

In Alabama, our daily life relies on three distinct sectors working in concert: government, business, and nonprofit organizations. While the government handles essential duties like defense and security, and businesses provide the goods and services we use every day, the Third Sector—our nonprofit community—fills the critical gaps for vulnerable populations. It serves as a heartbeat for our shared values, faith, and the arts. However, these sectors do not operate in a vacuum; they are inherently linked, with the Third Sector depending on government tax exemptions and grants to function.

Can the Nonprofit Sector Carry the Load?

A report released late last year, authored by the Public Affairs Research Council of Alabama (PARCA) for the Community Foundation of Greater Birmingham and the Alabama Association of Nonprofits, sheds light on the reality of this partnership. Despite the vital nature of these services, the study received minimal media attention at the time of its release.

The findings are particularly relevant today as both federal and state-level policy shifts create new challenges. With potential federal funding cuts looming for Medicaid, the Affordable Care Act, child care, and mental health services, the pressure on the Third Sector is mounting. Alabama’s choice to decline Medicaid expansion continues to leave roughly 100,000 low-income adults in a coverage gap. While some political voices, including those behind the Heritage Foundation’s Project 2025, suggest that the Third Sector can simply fill these voids, the data suggests Alabama is not currently equipped to do so.

The Reality of Alabama’s Nonprofit Capacity

According to the PARCA study, Alabama ranks 25th in the nation in nonprofit strength relative to its population size, struggling in two major categories: the number of nonprofits per capita and total philanthropic assets. The state sits at 40th in density, with only 114.6 nonprofits per 100,000 residents. Even more telling, most of these organizations are concentrated in just three areas: Jefferson, Mobile, and Madison counties.

While some argue that Alabama has too many nonprofits and needs consolidation, the report refutes that notion. Instead, it suggests there is room for growth, not oversaturation. Perhaps more concerning is our fiscal standing; Alabama ranks 49th nationally in per capita assets held by foundations. The study concludes that even if every private foundation in the state paid out 5.6% of their assets—a rare occurrence—they would still only cover about one-third of the funding provided by the federal government to Alabama nonprofits. As the report explicitly states, Private philanthropy cannot replace sustained public investment.

A Barometer for Democracy

There is a glimmer of hope in our ability to form organizations, as Alabama ranks 30th in the ratio of nonprofits to foundations, at roughly 7.3 to 1. This indicates we are adept at creating foundations, even if we still struggle to fund them adequately.

Tending to the Third Sector is not just about charity; it is about preserving the core American principle of federalism. As the PARCA report notes, these organizations represent a system where decisions are made locally, funded publicly, and sustained through community trust. Understanding why Alabama’s nonprofit sector lags behind the rest of the country is an essential step in protecting both our safety net and our democracy.

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.