Some nonprofits likely will face a surge in demand for services but how the sector as a whole will be affected likely will depend on just how long the shutdown lasts.
“It all depends: is it two days, two weeks, two months? If it’s two days, everyone presumes life will go on,” said David L. Thompson, vice president of public policy at the National Council of Nonprofits in Washington, D.C.
“When government backs out and government offices close, people turn to nonprofits. Churches and frontline nonprofits are going to gear up, alert staff and volunteers that the load going to increase,” Thompson said. “Business will stop working, nonprofits will keep going as long as they can.”
Road builders and defense contractors tend to shut down if they don’t know whether they’ll be getting paid, Thompson said, but nonprofits are not likely to kick clients out of mental health services or juvenile programs. “The nonprofit community most likely will tighten its belt and keep on trying to help each other out,” he said, suspecting that 2-1-1 call centers might see an increased volume during a shutdown.
The beginning of fiscal year, Oct. 1, also is the beginning of some federal contracts. When sequestration was threatened, some states didn’t sign deals until they knew how much they would get, Thompson said, so a January 2013 contract might be put off until June. “The same thing applies with a shutdown. State and local governments don’t know what, if anything, the federal government will pay, so they hold off on nonprofits,” he said.
Even if a deal is reached on spending, another showdown looms over the debt ceiling. The issue with the Oct. 1 deadline is the federal spending authority while the federal government’s borrowing authority becomes an issue in mid-October when the debt ceiling must be increased, Thompson said.
Thompson cited surveys by the Nonprofit Finance Fund (NFF) indicating how much cash in reserves charities hold. “Those are ones that most likely don’t have lines of credit or ‘fat-cat’ donors who can give in a pinch. Those are the ones most likely to furlough,” he said.
People frequently will presume that nonprofits can rely on an endowment if the government shuts down, however, most small organizations don’t have that option, Thompson said.