The Scope and Impact of Nonprofit Workforce Shortages
Charitable nonprofits from across the country have reported experiencing significant difficulties in retaining staff and filling vacancies, resulting in challenges delivering services. In October, the networks of the National Council of Nonprofits launched a Survey of Nonprofit Workforce Shortages to determine the scope and impact of these difficulties. A preliminary analysis posted in mid-November identified numerous concerns and causes, and posited some potential solutions. This updated The Scope and Impact of Nonprofit Workforce Shortages, benefitting from responses from more than 1,000 nonprofits from all 50 states, presents a more robust picture of the impact of workforce shortages on the ability of charitable nonprofits to advance their missions. What was initially considered a challenge has now become a workforce crisis in need of rapid remedy and long-term commitment to overcoming pre-existing problems exacerbated by the COVID-19 pandemic.
Read the Report
Build Back Better Act in the Senate
In recent days, Congress avoided a government shutdown by enacting a Continuing Resolution to fund the government through February 18, and a process is in the works for the Senate and House to raise the federal borrowing limit (debt ceiling) in the coming days. That leaves the Build Back Better Act as the primary piece of legislation on which to advance nonprofit priorities. Senate Majority Leader Schumer (D-NY) has repeatedly stated his goal of passing a Senate version of the legislation before the holidays. To this end, on Saturday, Senate Finance Committee Democrats released their latest 1,180-page draft of tax provisions in the legislation. The new draft contains several tweaks to corporate taxes and energy tax credit provisions in the House-passed version of the legislation, yet retains the sections providing four weeks of paid leave, one-year extensions of the child tax credit and earned income tax credit, among other provisions.
Still unresolved is whether the Senate bill will retain an increase in the state and local tax (SALT) deduction to $80,000, as approved in the House bill, retain the current $10,000 cap, or set a cap somewhere in between with limits for higher-income taxpayers. The draft bill marks the issue with the text: “[Placeholder for compromise on deduction for state and local taxes].” Also omitted from the legislation is a restoration of the Employee Retention Tax Credit (ERTC), the refundable payroll tax credit that was created by the CARES Act in March 2020, improved in the year-end COVID bill, and extended under the American Rescue Plan Act. The bipartisan infrastructure bill, signed by President Biden on November 15, retroactively repealed the ERTC for the fourth quarter and IRS guidance issued this month requires organizations to quickly repay any ERTC advances received for the quarter and make full payments to their payroll tax accounts. See next article for House legislative activity on the ERTC and action items for nonprofits.
- Senate Confirms CNCS CEO: The Senate confirmed Michael D. Smith to serve as the Chief Executive Officer of the Corporation for National and Community Service, the federal agency that runs AmeriCorps, national service, and volunteerism programs. Smith previously served as executive director of the My Brother’s Keeper Alliance and director of youth opportunity programs at the Obama Foundation. According to the CNCS news release, “Smith plans to leverage his years of experience to strengthen the role of national service and volunteerism in tackling COVID-19, economic recovery, climate change, racial equity, education and workforce development, and community resilience.”
- Government Contractor Executive Order Enjoined: Last week, a federal district judge in Georgia issued a nationwide injunction blocking the federal government “from enforcing the vaccine mandate for federal contractors and subcontractors in all covered contracts in any state or territory of the United States of America.” The decision is in the case of Georgia v. Biden. With this decision, all three Biden Administration rules requiring vaccinations or testing are blocked by nationwide injunctions pending the outcome of the separate litigation. In addition to the government contractor executive order, the Administration issued the CMS Interim Final Rule aimed at healthcare facilities and the OSHA emergency temporary standard that would apply to all employers with 100 or more employees.
- Commenting on the OSHA Emergency Temporary Standard: The Occupational Safety and Health Administration (OSHA) has extended the public comment period for the COVID-19 vaccination and testing emergency temporary standard (ETS) to Jan. 19, 2022. OSHA extended the comment period by 45 days to allow stakeholders additional time to review the ETS and collect information and data necessary for comment. Individuals and organizations can submit comments identified by Docket No. OSHA-2021-0007 electronically at Regulations.gov (follow the online instructions for making electronic submissions). The Federal e-Rulemaking Portal is the only way to submit comments on this rule. The ETS has been stayed by a federal court of appeals while challenges to the rule proceed.
- IRS Guidance on Repaying ERTC Funds: The Internal Revenue Service issued Notice 2021-65 to provide guidance to employers on dealing with the retroactive repeal of the Employee Retention Tax Credit for the fourth quarter of 2021 enacted as part of the bipartisan infrastructure law on November 15. The Notice explains how nonprofits anticipating the ERTC are to revise their payments and paperwork. Advance payments received under the ERTC for the fourth quarter (Q4) must be repaid by the usual due date for the employer for applicable employment tax return that includes Q4. (Due dates vary by employer size.) Failure to repay the advance on time may result in failure to pay penalties. Reduced payroll tax deposits withheld by the employer in anticipation of ERTC must be repaid on the applicable employment tax return or schedule that includes the period from October 1 through December 31, 2021. The Notice provides that no waiver of penalties is available for payments due after December 20, 2021.
- Payment Due for Deferred Payroll Taxes: The Internal Revenue Service is reminding employers they need to pay off part of the deferral of payroll taxes permitted last year under the Coronavirus, Aid, Relief and Economic Security (CARES) Act. The CARES Act allowed employers to defer the deposit and payment of the employer's share of Social Security taxes during the "payroll tax deferral period" that began on March 27, 2020 and ended December 31, 2020. Fifty percent of the deferred payments must now be deposited by December 31, 2021, to be treated as timely and avoid a failure to deposit penalty. The IRS website provides more information on how to pay the CARES Act deferral amount.
Spending ARPA Funds
More Creative Investments Involving Nonprofits
Across the country, policymakers are seeing the value of partnering with and investing funds from the American Rescue Plan Act in charitable nonprofits in their communities. Last week, the Rhode Island Governor and legislative leaders announced an initial investment of 10 percent of the state’s ARPA funds, about $113 million, in their RI Rebounds proposal. The plan would provide $38.5 million to support children, families, and social supports; $32 million to assist small employers impacted by COVID-19; and $29.5 million to promote affordable housing, housing stability reports, and broadband. The Governor also announced that he will direct $57.4 million in Federal Medical Assistance Percentage (FMAP) funding for workforce-related investments that provide support to home- and community-based services direct care workers.
In Massachusetts, the Conference Committee ARPA bill includes $16.5 million for a loan repayment program and $13.5 million for a grant program for human services organizations to support the retention and recruitment of human services workers. In Michigan, Detroit Mayor Duggan announced that the city plans to use up to $75 million of its ARPA funds on a three-year workforce program that will pay more than 2,000 residents to learn new job skills, while they also work on neighborhood improvement projects. The city is calling the program Skills for Life. Read the updated Special Report, Strengthening State and Local Economies in Partnership with Nonprofits, for more ideas on how nonprofits can encourage governments to partner and invest the ARPA funds to support direct impact in the communities they serve.
Government Grants/Contracting Reforms
Major Cities Taking the Lead in Ending Abuse of Nonprofits
Newly elected officials in New York City announced recently that they are committed to stopping many of the long-standing and well-documented contracting abuses imposed on nonprofits providing services on behalf of the city. In an op-ed in the New York Daily News, Mayor-Elect Eric Adams and Comptroller-Elect Brad Lander wrote “When nonprofits fall short — whether because the city fails to pay them on time, or because a small handful of rogues exploit the system — the most vulnerable New Yorkers are the ones who suffer most.” The incoming officials created a joint transition task force “to identify the root causes of the dysfunction, establish a clear agenda to fix it and implement the changes.” Among other things, the task force will focus on significantly reducing payment delays to nonprofit contractors, increasing the predictability of payment schedules, increasing public transparency in the contract registration and payment process, and delivering on the City’s recent commitment to increase the “indirect cost rate” for nonprofit service providers. Representatives on the task force include Meg Barnette of New York Nonprofits and Doug Bauer of the Clark Foundation, a board member of the National Council of Nonprofits.
In San Francisco, nonprofit leaders are calling for systemic change in how governments hire and reimburse charitable nonprofits. A recent article in Mission Local quotes Jan Masaoka, CalNonprofits CEO, as saying, “Contracting should be fair,” and that “Smart governments know nonprofits will do the work and do it well.” She and others on a recent panel highlighted the many inequities in the government grants and contracting system.
Nonprofit Workforce Crisis, Solutions Identified
Last week, three associations of nonprofits focusing primarily on human services hosted an online forum for policymakers to discuss the challenges facing frontline nonprofits and identify potential solutions to the ongoing nonprofit workforce crisis. More than 200 people, including 40 state legislators from the three states, attended the event that explored how human service providers are facing the intersection of fiscal uncertainty, increased demand for services, and lack of adequate governmental support. In opening remarks, Gian-Carl Casa, President & CEO of the CT Community Nonprofit Alliance emphasized the value of nonprofits in that they “serve people in need, they employ hundreds of thousands of people in the tri-state area,” while observing that “years of underfunding followed by COVID have combined to exacerbate the challenges that they face under normal situations.” Michael Weekes, President & CEO of the Providers’ Council in Massachusetts, shared that "While our chief competitor for talent was state government, and the health and hospital industries, we're now losing them to grocery and retail stores, both of which can offer higher rates of pay for all their employees."
Lawmakers responded favorably. On the need to fairly compensate direct service providers, Rhode Island State Representative Liana Cassar expressed that “we have jobs in Rhode Island, we need to make them well-paying,” and that the human services sector has the biggest potential for stability but is destabilized by structural inequalities. With most states starting their legislative sessions next month, there is an opportunity to dedicate ARPA and other funding to support nonprofits providing direct services, address government grant and contract reform for providers to be paid on time and fairly, and include other long-term plans that address the concerns of the nonprofit sector. View recording of the regional forum.
Because Nonprofits Are Right There in Their Communities
Occasionally people ask why nonprofits are asked to fill out so many surveys about their experiences and those of the people they serve. The answer is straightforward and unapologetic: Because nonprofits are on the frontlines seeing the problems and innovating the solutions in real time. When nonprofits fill out the surveys and provide honest assessments and commentary, policymakers, the media, and communities need to take note. Here are three examples of survey results reported by state associations of nonprofits about pressing issues of the day: the impact of the pandemic and racial equity.
Last month, the Delaware Alliance for Nonprofit Advancement (DANA) and partner organizations released the latest results of “COVID-19 Impact to Delaware Nonprofits,” an ongoing survey that began in March 2020 to understand the impacts of COVID-19 and identify nonprofit organizational needs. The survey found that nonprofit concerns about their clients remain consistent with last year, including housing instability, mental health wellbeing, and financial hardship. In addition, nonprofits said they need technology supports, volunteers, technical and consulting supports, improved government communications (funding sources, guidelines, partnerships), and advocacy (ARPA funding and collaboration).
Last week, the Florida Nonprofit Alliance released the 2021 edition of “The Effect of COVID-19 on Florida Nonprofits.” The report includes trends in program, fundraising, finance, and planning changes nonprofits made this year. Key findings are broken down by challenging news and bright spots. Some of the challenging news: nonprofits are not recovering financially; fundraising and funding remain the largest concern and challenge; and the pandemic continues to take a toll on volunteering. However, on the bright side, nonprofits in Florida are starting to provide services in person again and are interested in maintaining partnerships that helped them through the early days of the pandemic.
A recent survey report from Maryland Nonprofits illustrates the reality that minority-led nonprofits have struggled disproportionately during the pandemic, fueled by hard-to-reach government funding and catastrophic losses on every income source. COVID-19 Pandemic and Racial Equity Survey results, for instance, highlight that nonprofits led by people of color were more likely to experience greater than 50% losses in every revenue stream than white-led nonprofits. In response to these findings, more than 200 nonprofits and individuals are calling on policymakers to allocate $1 billion of the state’s budget surplus to aid struggling nonprofits.
The three reports highlighted here are a small sampling of the benefit of asking nonprofits what’s what, what works, and what needs to change in their communities. Respecting the views of nonprofits on the frontlines, the updated report from the National Council of Nonprofits issued today, The Scope and Impact of Nonprofit Workforce Shortages, quotes nearly 100 professionals as they explain the realities of the nonprofit workforce shortages and why they matter to individuals and communities serve. Policymakers and their constituents will benefit if the elected officials heed the calls to action identified in each of these reports from the frontlines.
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