The Importance of Funding Nonprofit Advocacy at the State Level
As readers of Nonprofit Advocacy Matters, you likely have noticed how the greatest number of policy threats and opportunities - such as protecting charitable giving incentives, resisting unreasonable regulations, reforming broken government contracting processes, opposing attempts to tax, and more - are happening at the state level, not federal. Data back this up as, during its last two full terms (2011-2014), Congress passed fewer than 600 bills, while during the same time period state legislatures
passed more than 135,000 bills. Yet, while the entire nonprofit community - charities and foundations alike - needs a reliable and sturdy infrastructure at the state level to advance common policy interests, that’s not where foundations have been investing, according to a study by the Foundation Center looking at the time period of 2004-2012. This two-part series in The Nonprofit Quarterly dives deeper:
Add your voice to this conversation by reading the two articles and then posting comments to share your observations and insights.
Mixed Views Confront Compliance Imperative of Overtime Final Rule
Nonprofit employers and employees are reacting with a range of delight and concern to the new revisions to the federal regulations governing which employees are entitled to be paid overtime. The Department of Labor’s Overtime Final Rule provides that starting December 1 employees covered by the law and earning less than $47,476 per year ($913/weekly) must be paid overtime for work over 40 hours in any given work week, regardless of whether they are classified as hourly or exempt white-collar workers. A few nonprofit leaders have voiced objections that the higher salary threshold may force the reduction of services to people in need or handicap cause-oriented nonprofits that could “be forced to hire fewer staff and limit the hours those staff can work – all while the well-funded special interests that we're up against will simply spend more.” Jon Pratt of the Minnesota Council of Nonprofits has taken the naysayers to task for not recognizing that the new overtime rule "represents a timely call for a
different way of doing business, and 21st-century HR practices for organizations with flexible finances.” Pratt reinforced, "There is no economic reason why people in the nonprofit sector should be paid less than others in the economy doing the same or similar work."
Many organizations, recognizing that the Final Rule will be the law of the land in December, are promoting clarity and compliance. The headline from the North Carolina Center for Nonprofits is representative: “Start Planning Now: New Overtime Rules Will Take Effect on December 1, 2016.” Demonstrating that the new federal changes often interact with state laws, a growing list of state associations of nonprofits (e.g., in California, New York City, New York State, and Oregon) have posted analyses of how the changes in federal overtime rules affect nonprofits in their states. State associations of nonprofits in Colorado and New Hampshire have already scheduled webinars in the
next two weeks, and many more are scheduling training sessions and developing how-to materials to help ease and expedite the implementation process.
- Guidance for Non-Profit Organizations on Paying Overtime under the Fair Labor Standards Act, U.S. Department of Labor, May 18, 2016.
- Known, Unknowns, and Options for Nonprofits on the Overtime Final Rule, National Council of Nonprofits blog, May 19, 2016, encouraging nonprofits to move past denial or opposition and start taking the steps needed to comply with the law.
- Automatic Application of Overtime Rules, identifying the 10 states and the District of Columbia that incorporate the Fair Labor Standards Act regulations into state law – meaning that the DOL overtime rules apply to virtually every employer and employees in those states. The states are Alaska, District of Columbia, Illinois, Maine, Maryland, Massachusetts, Missouri, New Jersey, New York, North Carolina, and Ohio.
The Personal Side of State Budget Intransigence
It is easy enough to say the 11-month budget impasse in Illinois just got personal – the nonprofit run by the Governor’s wife recently joined a lawsuit against him and several members of his administration over failure to pay state human service providers for work they’ve already performed but not been paid for since July 1, 2015. But the harm has been personal all along for the people losing services and nonprofit employees losing jobs, income, and benefits as the result of the refusal by politicians to reach agreement on a spending plan. This latter point, by analogy, was made clear in a report released
last week by the Pennsylvania Association of Nonprofit Organizations (PANO) and others that identified the impact of that Commonwealth’s 10-month budget standoff, which only ended in April. More than 17,000 people in Pennsylvania received no or reduced services due to the budget impasse, the survey found. Among the Pennsylvania nonprofits responding to the survey that had government grants and contracts, the politicians’ inaction forced them to lay off, furlough, or eliminate or reduce the hours, pay, or benefits of more than 380 nonprofit employees. 135 nonprofits reported having to borrow a total of more than $170
million to continue operations while not getting paid by the state. Anne Gingerich, PANO’s Executive Director, translating the numbers into personal terms, revealed the state’s budget “stalemate literally kept domestic violence victims in the communities where their abusers had access to them, stalled training for those seeking jobs and forced food banks to distribute less nutritious food.” The announcement of the survey results concluded with this warning: “Without an on-time budget in 2016-17 with funding at levels appropriate to meeting citizen’s needs, nonprofit organizations will most likely need to curtail critical services—as they continue to address the impact of the previous
Taxes, Fees, PILOTs
- Property Taxes: The Mayor of Providence, Rhode Island, and others are pleading with the legislature to approve legislation to empower local governments to tax nonprofits up to 50 percent of what their property tax bill would be if their properties were not tax-exempt. Rhode Island already provides state revenues to compensate local governments for the presence of government, nonprofit, and other tax-exempt properties.
- PILOTs: The Lowell (MA) Sun has run several articles in May essentially advocating for more aggressive efforts by city officials to extract "voluntary" payments in lieu of taxes (PILOTs) from local nonprofits. In its latest article, the newspaper reports that smaller communities in the region generate more payments from tax-exempt property owners than Lowell, and quote the city’s CFO as stating, “Historically, this exercise has been to no avail as very few groups have contributed any payments at all.” Readers perhaps are tired of the newspaper’s agitation on the issue
with the local government, at least as noted by this online comment, “what part of 'voluntary' doesn't the city understand?”
Constitutionally Suspect Bills Die in California, Missouri
Last Friday marked the end of the road for two of the year’s most contentious and constitutionally suspect pieces of legislation that threatened the ability of nonprofits to advance their missions. Nonprofits across the country learned through a tweet from CalNonprofits that AB 2855 was held in committee and won’t be reheard this year. That is the California legislation that would have forced every nonprofit in the country that solicits funds in California (which means every nonprofit with a “Donate Now” button) to put a link on its home page, and print a disclosure on all other solicitation materials, directing potential supporters to the California Attorney General’s website. The Sacramento Bee ran an op-ed, “Nonprofits don’t deserve to have a warning label,” which explained that nonprofits support transparency laws but oppose onerous disclosure requirements that would “cast an unfair shadow of suspicion on tens of thousands of nonprofits that operate ethically and honestly without truly increasing transparency for donors” and “constitute a new administrative burden on every nonprofit, diverting time and resources away from efforts to provide services to people in need.”
Also, the calendar ran out for action on a bill pending in Missouri that would have prevented animal rights charities from raising funds in the state to spend elsewhere or to spend on “political activities” within the state. The Missouri bill was nearly identical to a bill that passed the Oklahoma House but never got out of the Senate. Read more of the background on the bills and the problems they raised for nonprofits in a Chronicle of Philanthropy article and the detailed constitutional analysis by the National Council of Nonprofits.
Government-Nonprofit Contract Reform
Administrative Costs Aren’t Sexy, But Are Necessary
Nonprofit advocates for government-nonprofit contracting reform continue to make progress in New York City while acknowledging administrative costs are not a sexy topic, but necessary. At a press conference held last week outside City Hall, nonprofit leaders and New York City Council members publicly called for the Mayor to provide a 2.5 percent increase in City contracts with nonprofits to help defray growing administrative costs. Earlier, all but two of the 51 City Council members signed a letter urging the Mayor to increase the City budget by $25 million to cover the 2.5 percent beginning July 1, the start of the City’s
2017 fiscal year. New York City nonprofits have garnered the support of the City Council through its Contracts Committee after a recent study found that a combination of underfunding, payment delays, and unfunded mandates by government agencies were causing financial insolvency of nonprofits upon which governments and the public rely.
Reversing the Trend on Tax-Exemption Challenges Takes Many Forms
All 50 states exempt from taxation the property owned by charitable nonprofits and foundations when used for their charitable missions. Yet national headlines report court challenges in New Jersey against Princeton University and a major hospital, Connecticut legislation targeting Yale University and other large nonprofits, Massachusetts bills to legalize demands for payments in lieu of taxes (PILOTs), and tax assessors in Michigan nibbling away at the standards for demonstrating tax exempt status - to name only a few of such threats from every branch of government. 2016, however, is shaping up to be the year when the collective response of nonprofits and foundations reverse the trend from challenges to recognizing the importance and impact of the exemption.
In response to more than 40 cases of inconsistent interpretations of the law by local tax assessors, legislation in Michigan seeks to remove the subjectivity in how county tax assessors determine what is a charitable organization entitled to exemption from property taxes. The Michigan Nonprofit Association is leading advocacy efforts in support of the bill. Its colleague organization, the Council of Michigan Foundations (CMF),
recently alerted its members that “the subjective nature of interpretation from assessor to assessor poses bigger questions around clarifying decision making on both the nonprofit and assessor sides.” Connecting the challenge to the foundations themselves, the regional association of grantmakers stated, “For CMF members that own their own facilities or support nonprofits that own facilities, solving this question is a high priority.”
Impact litigation is another approach to protecting tax exemptions. Nonprofits and foundations in Minnesota have been bedeviled for years by efforts of local governments to evade protections against property taxes by imposing special assessments and fees on such things as street lights. This year, the Minnesota Council of Nonprofits and others shifted their advocacy strategy away from pointing out problems to city officials and instead turning to the courts for protection under the law. A lawsuit now before the state Supreme Court
addresses the question of whether organizations exempt from property taxation should “be required to pay local taxes disguised as regulatory service fees and used to finance general government services properly paid through ad valorem [property] taxes.” In an amicus brief, the state association of nonprofits stated the argument succinctly: “When municipal taxes collected for the provision of general city services are recast as fees, as the City has done with its [right of way] assessment, the privilege and entitlement of tax-exemption is wrongfully and detrimentally eroded.” The Supreme Court is expected to rule on the case in the coming weeks.
Finally, legislation introduced in New Jersey this month would prohibit private citizens from filing lawsuits challenging the property tax exemption of nonprofits. The case pending against Princeton University has been brought by two dozen local taxpayers who are asserting that the university should no longer be considered a charitable nonprofit eligible for tax exemption, and they are suing the local government as well for failing to enforce the law. The broader nonprofit community is very concerned about the ability of third parties to challenge exemptions recognized by governments, in part because of the cost and uncertainty
such lawsuits impose. More importantly, nonprofits recognize that the third-party lawsuit option empowers disgruntled residents to harass organizations with missions they oppose, such as reproductive health or environmental concerns. It is unclear whether the new legislation will be considered as a free-standing bill, or attached to another measure, but it represents a concerted effort to provide stability in an issue area undergoing reconsideration.