Congress Returns to Pre-Election Budget Showdown
Congress returns to work after a seven-week recess with agreement on two issues – the need to pass a short-term spending bill and the need to avoid a government shutdown – but with wide differences on how those will be accomplished. The initial debate is over how long to fund the government with a temporary spending measure known as a “continuing resolution.” Senate Democrats are threatening to filibuster legislation that would keep the government funded into March 2017, preferring a bill that will expire just after the elections to force current officeholders to negotiate a deal before the new President and Congress start work. Conservative Republicans in the House reportedly are insisting on a six-month
omnibus spending bill that would put off tough decisions until the newly elected officials take charge. They reportedly are concerned that a lame-duck Congress would approve spending hikes and special-interest provisions as the price for avoiding a government shutdown during the holidays.
Several other issues remain in dispute. While spending levels were capped in the Budget Control Act of 2011, Congress must decide how to adjust to news from the Congressional Budget office that the federal deficit is likely to be $56 billion higher than estimated in March. Other issues that have proven to be contentious are aid for states and territories to combat the mosquito-borne Zika virus, limits on contraceptive services, and gun control legislation.
- Bipartisan Child Welfare Reform: The Senate may take up a House-passed bill designed to strengthen families by providing federal support for substance abuse treatment, mental-health services, and in-home parenting programs — to allow parents or other relatives to get the help they need to safely care for their children. The bill, the Family First Prevention Services Act (HR 5456, S 3065), is the subject of a September 6 op-ed in the Washington Post signed by the Chair and Ranking Member of both the House and Senate tax committees.
- Unionizing Nonprofit University Workers: Graduate students at Columbia University and other private, nonprofit universities have the right to organize unions and engage in collective bargaining, the National Labor Relations Board ruled last month. The ruling reverses a 2004 decision holding that graduate students have a primarily academic relationship with the university. The NLRB now finds that those earning a degree while working at a school have a dual role as students and employees and the former decision “deprived an entire category of workers of the protections of the [law] without a
- State Auto-Enroll IRA Rules: The U.S. Department of Labor issued final rules last month authorizing states to create programs requiring employers to automatically enroll employees in Individual Retirement Accounts (IRAs) when the employer doesn’t provide a retirement savings plan. Individual workers retain the right to opt out of the program. Eight states have enacted auto-enroll mandates, but concern over whether the federal retirement security law preempted state action reportedly has discouraged other states from legislating in the area.
- Feds Meet Syrian Refugee Goal: The federal government is expected to meet the President’s goal of resettling 10,000 Syrians in the country by September 30, the end of the fiscal year. The resettlement program, which typically relies on the assistance of charitable nonprofits across the country, came under fire last year from some Governors who sought to block the Syrian refugees out of expressed fears about terrorism.
Minnesota Nonprofits Win Historic State Supreme Court Tax-Exemption Decision
Local governments in Minnesota may not circumvent the state constitution’s prohibition against taxing the property of charitable nonprofits by disguising a “tax” by relabeling it a “fee,” the state Supreme Court ruled August 24. The Minnesota Constitution expressly exempts property owned by charitable nonprofits from taxes. Yet in recent years, Minnesota municipalities experiencing fiscal challenges have sought to generate new revenues from charitable nonprofits through creative methods, such as imposing street lighting “fees” and assessing street
maintenance "fees." Two churches brought a lawsuit contending that the imposition of a “Right of Way Maintenance Fee” by the City of St. Paul to fund street repairs was not a special assessment benefiting a specific property but a general tax, and subject to constitutional limits. A lower court ruled against the churches, which appealed to the state Supreme Court.
The Minnesota Council of Nonprofits filed an amicus curiae brief in support of the position of the churches and on behalf of all Minnesota nonprofits. 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 agreed and reversed the lower court ruling. This opinion provides clear guidance for maintaining
charitable property tax exemptions, and will allow Minnesota nonprofits to contest a variety of so-called “fees” levied by St. Paul, Minneapolis, and other cities across the state. The case, while limited to the wording of the Minnesota Constitution, should also prove persuasive in the 17 other states that embed the nonprofit property tax exemption in their state constitutions.
States Facing Mounting Deficits
Although the reasons vary as widely as their cultures and economics, states across the nation are confronting growing deficits that are causing policymakers to cut spending immediately or plan for reductions next year. Illinois represents the worst-case scenario as its spending exceeds revenue and unpaid bills could hit a record $14 billion next summer if corrective action is not taken. Many Illinois nonprofits still await payment for services they provided on behalf of the state in the last fiscal year. Louisiana,
which took emergency steps this spring to close a current budget gap, and Virginia reportedly are facing potential deficits of $1.5 billion next year. New Mexico is dealing with a $450 million deficit in the current fiscal year. South Carolina’s Governor has ordered state agencies to plan for a 3 percent budget cut — about $206 million — in their spending proposals for next year. Kansas, which has faced major budget challenges since enacting a series of large tax cuts, saw its fourth straight month in which revenue projections fell short and spending cuts had to be ordered. Texas is also bracing for across-the-board cuts of 3 percent to save $1.5 billion and avoid deficits caused by increased Medicaid spending and recent tax cuts. As nonprofits across the country have seen, when policymakers cut spending on programs serving human needs, the public turns increasingly to charitable organizations that face
greater demand for services and reduced resources to provide them.
Business Tax Incentives Called into Question
Even while questioning longstanding nonprofit tax exemptions, state and local policymakers spend, on average, more than $658,000 per job when fashioning “megadeals” to attract or retain for-profit business employers. That is the key finding of the report Smart Skills Versus Megadeals, from the group Good Jobs First. By contrast, 31 of 33 workforce development programs with available data from state audits cost less than $7,000 per job. The study draws heavily from the watchdog
group’s Subsidy Tracker database, that includes more than 500,000 deals in more than 740 federal, state, and local economic development subsidy programs. Writes Governing finance reporter Liz Farmer, “If you're only looking at job creation, this report contains some pretty damning evidence against offering huge tax breaks to lure employers.” The report's authors conclude: “Public officials should quit ‘buffalo hunting’ for risky megadeals and instead invest in skills, infrastructure, clusters and entrepreneurs to reduce taxpayer risk and obtain better returns.”
Taxes, Fees, PILOTs
- Taxes: A new panel has been created to review tax policy and provide recommendations to the Mississippi Legislature. The bi-partisan panel is co-chaired by the House Speaker and Lieutenant Governor, and includes 19 other legislators and a designee of the Governor. The first meeting of the tax review panel took place on September 1, and recommendations are expected to be considered in the 2017 session. In announcing the panel, the House Speaker explained, “On the tax side, we want to examine the entire tax structure and develop a comprehensive plan that is both fair and provides a more solid stream of revenue.” The new group will also examine spending for the state’s largest agencies,
including the departments of Health, Mental Health, Human Services, and Education, among others. The public can submit comments to the legislative committee on tax policy via e-mail at www.mstaxpolicy.ls.ms.gov.
- Taxes: New York City has been allowing ineligible property owners to collect key tax benefits, according to an audit by the City Comptroller. More than 800 businesses are claiming tax breaks intended for primary residences of individuals, the audit found, costing $713,454 in “improper tax breaks.”
Government-Nonprofit Contracting Reform
California Advances Grant Clearinghouse Bill
The California Legislature approved and sent to the Governor Assembly Bill 1348 that would establish a special position within the State Clearinghouse to serve as a primary point of contact for information on federal grants related to community, economic, and local development. The Administrator’s job would be to manage and maximize federal grant opportunities within the state, and includes providing information and access to nonprofits interested in performing services in their communities.
Policymakers, Voters, Court Weigh in on Minimum Wage Hikes
Legislatures were active this year in addressing minimum wage rates for private employees, including at nonprofit organizations. New York and Oregon enacted hikes to their state minimum wages over a period of several years. This past month, the Governors of Illinois and New Jersey vetoed minimum wage
hikes previously approved by their Legislatures. Voters in Arizona and Colorado will get the opportunity to decide whether to raise their state minimum wages to $12 per hour, although the Minnesota Supreme Court blocked a Minneapolis ballot measure that called for raising the wage floor to $15 per hour.
From Understanding the Problem to Advocating for the Solution
“A seemingly permanent fiscal crisis in the midst of ever-increasing costs and demand for services has put the nonprofit community at risk.” That is the conclusion (and emphasis) that the CT Community Nonprofit Alliance shared with its members last month.
So it is no surprise that the CT Alliance is taking action to promote the interests of the nonprofit community and, most importantly, the people served by nonprofits. “Now more than ever, it is imperative that all nonprofits advocate to make community services a state budgeting and policy priority!” the state association announced to its members. “With the election season shifting into high gear and a looming budget deficit of $1 billion, The Alliance is hosting seven regional policy and state budget briefings across Connecticut.”
The state association of nonprofits is inviting nonprofits to attend and join its policy team, a state-funding expert, and communications strategists for in-depth analyses of the state budget. The sessions are designed to provide individuals with the knowledge they need to speak with informed certainty – and advocacy skills – to inform lawmakers and the media about the consequences of the severe cuts to people across Connecticut.
The CT Alliance budget and advocacy trainings program certainly fits the bill as “Advocacy in Action,” times seven.