For nonprofits that rely on federal grants and contracts, this week’s deal to head off a costly credit default by the government marks the beginning of a fretful new era of lobbying and uncertainty.
The new budget law, which President Obama signed on Tuesday, calls for federal cuts of more than $2-trillion over 10 years but does not spell out exactly where those savings should come from. So nonprofits will have to watch for months, if not years, to figure out if they or the people they serve will be victims of the budget scalpel.
Bitterly divided lawmakers must now decide how much of the savings will come from social programs, how much from tax increases, and how much from Medicaid and other entitlement programs.
“We’re going to see an environment I don’t think we’ve seen before,” says Perry Wasserman, a lobbyist for nonprofits. “Everything’s on the table, and that’s such a big category.”
Time to Act
The agreement crafted by President Obama and Congressional leaders places annual limits on spending that will provide $917-billion in savings through the 2021 fiscal year. Nonprofit groups must now monitor how Congress achieves those savings, most immediately in negotiations over the 2012 budget that will resume in September.
And they must also keep an eye on an entirely new player: a 12-member bipartisan “super committee” that must suggest at least $1.2-trillion in additional budget savings over the next decade.
The committee, with six members from the House of Representatives and six from the Senate, must produce a plan before Thanksgiving, and Congress must approve it by December 23. Otherwise, automatic across-the-board spending cuts will take effect starting in January 2013. As a result, the remainder of the 2011 calendar will be crucial for many groups that want to state their case to lawmakers who are now under the gun to slice huge sums from the federal budget.
“This is not the time to plan a lengthy vacation,” says David Bradley, executive director of the National Community Action Foundation, a group in Washington that lobbies for a nationwide network of community-action groups that operate antipoverty programs. “This is a time you say 'I’ll see you in six months’ to your home life.”
Fear of Big Cuts
Nonprofit advocates who worked overtime during the combative 2011 budget negotiations, which almost shut the government down, are now gearing up for further battle.
“I don’t see how this ends well, and everybody I’ve talked to in other related worlds feels the same way,” says AnnMaura Connolly, who manages Save Service in America, a coalition of groups that is fighting to preserve federal money for national-service programs like AmeriCorps that provide low-cost workers to nonprofits. Save Service is planning an intensive campaign to try to avert what Ms. Connolly calls “potentially and probably devastating cuts” to the Corporation for National and Community Service. She and others expect House Republicans to try to eliminate the federal agency, as they did during the 2011 budget talks.
Like other advocacy groups, the coalition is trying to mobilize its supporters to lobby members of Congress when they are in their home districts in August.
Martin Shupack, director of advocacy at Church World Service, a global antipoverty group, chose to express his concerns about the debt agreement in a more dramatic way: He was among almost a dozen religious leaders who were arrested last week while praying in the Capitol Rotunda.
Mr. Shupack planned to get arrested as part of an 18-month interfaith campaign that seeks to persuade Congress to exempt programs that help people in need from budget cuts.
“We don’t know in detail how the cuts are going to be implemented,” he says. But the magnitude of the planned cuts and the vow by Republicans not to raise taxes “causes us great concern that the burden is going to disproportionately fall on impoverished people in the U.S. and abroad.”
Conservatives argue that budget negotiators should take a hard look at such programs, saying some have locked recipients into dependence on government aid rather than helping them move up the economic ladder.
“The Good Samaritan didn’t use a government credit card,” says a recent advertisement in Politico placed by the American Enterprise Institute’s Values and Capitalism project in response to the “Circle of Protection” campaign by liberal Christian leaders to protect antipoverty programs from budget cuts. “As our runaway debt hinders economic growth, those most harmed will inevitably be the poor.”
The debt accord does in fact offer some protection to antipoverty programs: The initial $917-billion in spending cuts affect only “discretionary” programs so will not touch entitlement programs like Medicaid and food stamps that must serve everyone who qualifies for help. What’s more, if the super committee fails to find enough savings, thus triggering the automatic spending cuts, the new legislation excludes both Social Security and programs for low-income people from any of those cuts and says half of the reductions must come from defense programs. (Congress could limit Medicare payments to health-care providers, however, which could trim revenues to nonprofit nursing homes and hospitals.)
Robert Greenstein, president of the Center on Budget and Policy Priorities, a liberal think tank that was generally critical of the debt agreement, praised that strategy. He said in a statement that it would be virtually impossible for the super committee to find $1.2-trillion in budget savings without considering tax increases, something Democrats generally want and Republicans generally oppose.
That means chances are high that the automatic cuts will be triggered—which would provide leverage to get Republicans to consider tax increases after the 2012 elections. (Many Republicans want to cut entitlement programs and oppose deep defense cuts.)
At that point, however, Medicaid would be back on the table. And a discussion of taxes could also revive proposals that would alarm some nonprofits—for example, says Mr. Wasserman, proposals to trim the tax breaks that donors can get for charitable donations or even to curtail some nonprofit tax exemptions. He notes that Sen. Charles E. Grassley, a senior Republican lawmaker from Iowa, has raised questions about whether nonprofit hospitals and universities should earn their tax-exempt status by doing more for low-income people.
Charity Budget Balancing
Whatever the outcome of the budget deliberations, charities need to start planning for a world with less government money, says Bill Shore, executive director of Share Our Strength, an antihunger charity, who also heads a management-consulting firm.
“It’s bad enough that the nonprofit sector has been AWOL in the national debate about spending priorities,” he wrote in his blog. “But what’s even worse is the failure of most nonprofits to aggressively invest in building their own capacity so that they might have even a chance of meeting the challenges of the future.”
Mr. Shore, who has been through budget battles as an aide to several senators, says the pressure to cut spending could ease if the economy improves, as it did during President Clinton’s administration. But, he said in an interview, “certainly for the next couple of years, it’s going to be very, very tough.”