Abstract
Publicly funded nonprofit organizations are indispensable to a privatized social service system. Federal courts view them as private organizations. As a result, clients and employees are deprived of due process protection in state action cases. Underlying these decisions is a judicial opinion that a nonprofit organization ` legal structure is what defines its public/private nature, rather than statutory purpose, public funding, or contractual administrative requirements. Further, nonprofit agencies are exempt from many federal statutes regulating citizen-government interaction. Policymakers must redefine state action and public agency to avoid a dual system of citizens rights and statutory protection.