Sequestration Impact Spreads, Some Communities Provide Temporary Help
The across-the-board federal spending cuts known as sequestration continue to affect communities across the country. The arbitrary cuts are restricting federal court operations, resulting in jeopardized public safety and cuts that actually cost taxpayers more. The U.S. Department of Health and Human Services estimates that 57,000 fewer children will participate in pre-school activities in the coming school year, meaning that these children and their families will lose out on the long-term positive impact of early childhood education. On a temporary basis, Head Start providers and other affected organizations have reportedly been able to stave off the more dramatic effects of sequestration through budget flexibility or by relying instead on local funds from governments, nonprofits, and donors. According to the National Conference of State Legislatures, about 20 states provide supplemental funding to Head Start programs, although it is unknown how many have done so in response to sequestration cuts. “[Head Start providers] found ways to fill the gap,” Yasmina Vinci, executive director for the National Head Start Association explained, warning also that “none of that is sustainable.” Readers can share stories about how sequestration has affected their communities and read others, from every state, at GiveVoice.org.
New Charitable Giving Legislation in the Federal Hopper
Even amidst talks of curtailing the charitable giving incentive, two bipartisan bills have been introduced in Congress that seek to create new or more effective channels for supporting charitable goals:
- PRIs: The Philanthropic Facilitation Act seeks to streamline and shorten the approval process for foundations to invest in businesses that qualify as program related investments (PRIs) and have those investments included in a foundation’s annual pay-out calculation. The legislation would require the IRS to respond within four months to a foundation’s request for a PRI determination. Other foundations would also be allowed to rely on previous determinations that an investment may be treated as a PRI. Bill supporters hope the legislation will improve job growth by increasing investments from foundations in job creators.
- Ag Research: The Charitable Agricultural Research Act would expand the charitable giving incentive to include donations made to agricultural research organizations working with tax-exempt universities.
Nonprofits and Politics
Earlier this month, the Commission on Accountability and Policy for Religious Organizations published a proposal to relax political speech restrictions on charitable organizations while retaining prohibitions on spending on political activities. The Commission was made up of religious leaders and led by the Evangelical Council for Financial Accountability. Although taking pains to emphasize that the proposal sought to restore free speech protections, news accounts typically reported on the likelihood of politicizing charitable nonprofits. Both during Commission deliberations and afterwards, many national nonprofit organizations, including the National Council of Nonprofits, BoardSource, the Jewish Federations of North America, Independent Sector, and others expressed opposition to removing the current tax-law ban on election-related activities of charitable nonprofits. It is unclear whether the issue will be taken up during the tax reform debate.
Government Reliance on Nonprofits: Boon or Bane?
State governments throughout the United States are increasingly turning to nonprofits to assist with or take over public programs that policymakers say can be managed more effectively and efficiently by nonprofits. In Iowa, the Governor recently proposed handing over the reins of the troubled Iowa Juvenile Home to a nonprofit, saying “I think we need to learn from some of the private nonprofits…. I think we should look at the possibility of contracting with a nonprofit group so we can manage this.” In Franklin County, Pennsylvania, County Commissioners voted to reorganize their tourism bureau into a private nonprofit. Eighty percent of the revenues the county collects from a hotel tax will go toward funding the nonprofit, with the remaining 20 percent going to the county. Indiana’s Department of Health and its Office of Faith-Based and Community Initiatives have also recently been cleared to establish nonprofit subsidiaries to raise funds to support their missions. Even larger discussions about how to sustain public transportation systems are looking to nonprofit models: A former New York City planner has proposed reassigning responsibility for public transit to nonprofits, which can provide better management. Pointing to the budget shortfalls of many transit agencies across the country, he suggests that a nonprofit-run public transit system would be more specialized in its services, more flexible in its fundraising, and therefore more likely to remain financially solvent. All of this leads us to ask:
What’s Happening in Your Community?
On the one hand, government officials are recognizing the talent and skills of the nonprofit community. On the other hand, government officials are not only passing along some of their most vexing challenges, but also taking money out of the nonprofit community to pay for things that government has traditionally paid for. Is government reliance on nonprofits a boon or bane to the work of charitable nonprofits and to the broader communities they serve? Tell us what you think.
Connecticut Shows Respect for Nonprofit Partners
Connecticut has launched the Nonprofit Grant Program, the state’s first-ever nonprofit bonding pool designed to provide $20 million in grants for capital improvements to enhance organizational efficiency at nonprofits that contract with the state to provide health and human services. "Connecticut's nonprofit organizations serve every resident of Connecticut and play a substantial role in maintaining our safety net," the Governor said. "Partnering with our nonprofit organizations is a smart fiscal investment to ensure that these agencies can continue to provide services while doing so in an efficient, cost-effective way." While supportive of the Governor’s bond program, many Connecticut nonprofits still say additional investments are needed because contract funding has not kept pace with nonprofit costs after years of government deferring cost of living adjustments. "It's been difficult for the last five years for the nonprofits," Ron Cretaro of the Connecticut Association of Nonprofits said. "This is a pretty positive alternative. This will allow them to be able to make some investments they need without figuring out where the money is going to come from. We would obviously like to see more."
Government-Nonprofit Contracting News
Spotlight on a New York Billing Problem
Fixing contracting problems is not about government agencies or the nonprofits that provide services; rather, it’s about improving the lives of babies and toddlers through early intervention services that prevent future need for more expensive services, which in turn costs taxpayers more money. The preceding was the theme of a recent meeting of government officials and nonprofit early prevention contractors. “The billing systems that were created by the [New York] Department of Health and their interim fiscal agent were so cumbersome that they are killing all of the providers’ businesses,” said one nonprofit participant. Billing systems introduced this year reportedly are so burdensome that some organizations have hired new employees to deal with them, despite not having the funds to do so, while others have been forced to close because they have not been paid for the services they have provided. Prior to the meeting, the state agreed to initiate “safety net” payments to providers, but that is only a short term fix. “The state broke a working system,” one Assemblyman said. “Money’s got to flow, and the red tape’s got to be stopped and be cut. ... This was a plan that was not well thought out. It’s a bad plan.”
Additional State and Local Issues
Advocacy as Transformational Thinking
Acknowledging the important role that policy and advocacy play in the missions of nonprofits, the African Art Museum in New York has announced that it is creating a new policy office as part of its efforts to improve its business model and better achieve its mission.
The African Art Museum sees policy as a logical extension of its mission of increasing public understanding and appreciation of African art and culture. Perhaps even more importantly, it views policy engagement as a way to broaden and increase its donor base and enhance its leadership. "[We] could, within two to three years, become the leading policy institute on Africa in this country,” the Museum board co-chair explained.
The Museum’s consultants at the DeVos Institute of Arts Management at the Kennedy Center confirm the link between policy and fundraising for nonprofits in what is an increasingly competitive financial climate: "To flourish today, organizations require bold thinking," the director of the Institute said. "You could say transformational thinking."
“This is not like a government shutdown. This is much more insidious because it’s slower, it’s cumulative, and it’s more diffuse.”
Steve Bell of the Bipartisan Policy Center, as quoted in Bloomberg News, August 12, 2013, explaining why fixing sequestration is a lower priority for Congress.
On the Charitable Giving Incentive
“It is estimated that charitable giving would decline by $5.6 billion per year if a cap were put on itemized deductions. Is reducing or even eliminating the charitable deduction compatible with reducing the size and scope of government? Who will step in to fill the void left by a shrinking government?”
Senator Susan Collins (R-ME), as quoted in the Portland (ME) Press Herald, August 8, 2013.
“Any harmful tax policy changes to the charitable deduction will take away key building blocks that support communities and jobs and would set off costly and cascading consequences. Such a move would hurt those who need help the most. It would force government to take on more responsibility in providing essential services.”
Charitable contributions need protection, David Heinen of the North Carolina Center for Nonprofits and Holly Welch Stubbing of the Foundation For the Carolinas, Winston-Salem (NC) Journal, August 13, 2013.
“If Congress won't lead, states and cities will,” Melody Barnes and John Bridgeland, Politico, August 16, 2013, highlighting progress in New York City, Milwaukee, and Tulsa where policymakers are collaborating with nonprofit organizations to develop innovative programs to solve local problems.
"For a humane tax reform," John R. Killacky of the Flynn Center for the Performing Arts, Burlington (VT) Free-Press, August 15, 2013, making the case for the charitable giving incentive during Vermont’s upcoming income tax reform debate, noting that other states preserved their tax deductions this year.