Overregulation hinders New Jersey’s charities

With over 50,000 nonprofit organizations in New Jersey employing nearly 600,000 people, this development should have us all concerned.

A new Philanthropy Roundtable ranking of the best and worst states for charity regulations finds that New Jersey ranks as the third-worst state in the country for regulations imposed on charities.

A few years back, LPS Industries vice president Paul Harencak told a Garden State Initiative policy forum that state government required a company to complete 58 pages of paperwork to register a business in New Jersey.

“Now, if I’m an entrepreneur and I want to move my business and come to the East Coast, I got to really think about this,” he said.

Imagine how burdensome these regulations can be for new startup charities that are looking to help get people who are homeless off the streets and turn their lives around, assist people with disabilities to lead more independent lives, or provide mentorship and extra tutoring to students living in challenging surroundings.

Every dollar and minute of manpower that a charity has to spend complying with excessive government regulations is time and effort they cannot spend bringing aid to people in need and making our communities better places to live, especially for those who need a helping hand.

Like small businesses, most charities are small organizations. According to the National Council of Nonprofits, nearly 90 percent of charities have annual budgets of less than $500,000 to fulfill their missions.

Consider that the annual independent audits required of charities, for example, can cost between $10,000 and $20,000 per year, according to one estimate.

When you add to the costly startup and annual audit requirements the state’s burdensome annual reporting requirements, annual fees that, all told, add nearly $300 in additional costs, expensive bonding requirements on paid solicitors, and limitations on how charities can raise funds, the time and expense spent complying with government regulations can be the difference between a small charity making a go of it or having to close their doors or pare back their good work.

The charity regulation rankings bear this out: The top third of states in the rankings had, on average, about 15% more charities in their state per $1 billion in GDP compared with states like New Jersey in the bottom third of the rankings.

Being among the worst states in the nation for charities is something that should concern Democrats and Republicans alike. We hope that lawmakers in Trenton will review the totality of state regulations on charities in light of New Jersey’s troubling rankings.

Effective state regulations on charities can bring accountability and trust in charities. Donors and the public can see benefits from regulations that improve accountability and transparency while imposing minimal costs.

The full cost of the regulatory burden on charities — less charitable activity and fewer people helped — should be viewed against the benefit of the regulations. After all, charities in New Jersey and across the country have a far better track record than the government in helping meet the individual needs of those who need a hand up, especially those charities that help the homeless, foster youths, and the disabled. In a state where taxes are a constant concern, successful charities can help ease the burden on taxpayers to provide these services.

The Garden State should welcome all who are moved to make a difference and help others by streamlining regulations that impose an unnecessary burden on charitable work.