Nonprofit Spending and Government Provision of Public Services: Testing Theories of Government-Nonprofit Relationships

Empirical studies and theories of government-nonprofit relationships have assumed a unidirectional funding flow from governments to nonprofits and therefore focusing on the impact of governments on nonprofits. By articulating multiple mechanisms of how nonprofits may influence government spending and utilizing a unique panel dataset that contains nonprofit and local government spending on parks, this article tests several prominent theoretical models of government-nonprofit relationships to answer the question of how spending by park-supporting charities influences the level of public spending on parks and recreation services. The findings indicate that spending by park-supporting charities spending has a decreasing effect on the level of public operational spending on parks, which supports the supplementary model. However, there is a net gain in total community support for parks and recreation services. Finally, this article suggests that government-nonprofit relationships are not identical when funding sources for public service provision differ in subsectors. A two-way understanding is essential for the theory building and testing in government-nonprofit relationships.