News and analysis
April 06, 2011

Charities Prepare Anxiously for Possible Government Shutdown

Richard White/Chronicle of Philanthropy

If the federal government shuts down, 134 children could be locked out of the Head Start program in the Boston neighborhood of Charlestown. And it will be tough for poor people in Boston to get rental assistance or nonprofit child care.

Still, John J. Drew, president of Action for Boston Community Development, which finances all those services, says he will open his organization’s doors next week, just as he did during the last federal budget shutdown in 1996.

“I’m going to pay a payroll. I’m not sure when the cash will stop,” says Mr. Drew, who oversees an annual budget of $120-million.

But he worries how he will keep paying fuel vendors that the charity reimburses to provide heating aid to needy residents. And if he runs out of cash to pay the teachers at day care centers, “then the kids will have to stay home and parents won’t be able to work”

“Eventually you shut down basic services,” he adds. “It’s very unhealthy; it’s reprehensible. We’re playing with people’s lives here.”

With Congress and the White House locked in an impasse over spending and a federal shutdown looming, nonprofit officials nationwide are scrambling to prepare for the worst: The closure of government agencies would halt grants to many nonprofits and stop payments to charities that have contracts to provide emergency food shipments, vaccination clinics, care for the elderly, and home heating aid.

What’s more, many of the clients nonprofits serve might not receive benefits on the usual schedule, especially if the shutdown is prolonged. Charities are also bracing for requests for help from low-paid government workers who need food, rent money, and other basic assistance.

Risks for Charities

Most nonprofits and their programs are expected to continue running, but they will do so at great risk, several charity leaders say.

Charities may not be reimbursed for the services provided in a shutdown, as nonprofits were during the federal halt during the Clinton presidency.

And with House Republicans hoping to slash social-service costs, federal aid could be eliminated for the rest of the year for many charities, causing the ones that are already in a financially precarious position to close.

A shutdown would also slow government reimbursements, which already can lag by weeks or months, further straining the budgets of many charities that are barely managing to keep their doors open.

“If they’re not getting payments, they may have to look at furloughs and layoffs,” says Tim Delaney, president of the National Council of Nonprofits, a Washington umbrella group with more than 25,000 members. “Payments are notoriously late coming from the government.”

Some nonprofits have already resorted to seeking lines of credit to continue services, says Chuck Bean, executive director of the Nonprofit Roundtable of Greater Washington, which represents 200 charity leaders.

“I’m anxious that food stamps, housing vouchers, veterans’ benefits could all be delayed because of the shutdown,” he says. “And these delays could mean more people showing up at the doorsteps of nonprofit organizations,” straining services further.

'Sober Up’

Some of those seeking help may themselves be government employees.

United Way Worldwide, in Alexandria, Va., has alerted its nationwide network of “211” hotlines—which refer people in need to social services—to prepare for calls from government employees if a shutdown lasts more than a few days.

“If it becomes an extended furlough, where people are actually missing a paycheck, that’s when we expect to get calls,” says Steven S. Taylor, United Way’s vice president for public policy.

He said some government workers live from paycheck to paycheck, and the hotlines could tell them how to get help paying their utilities or their rent, for example.

Despite all the gloom, one nonprofit expert sees a silver lining in the potential stop in government aid: more fiscal prudence. “It might sober up some boards of nonprofits. It will certainly inject some fear into those who are government-dependent,” says Paul Light, professor of public service at New York University.

'Uncharted Territory’

Federal officials have taken pains to say that “vital services” would remain in effect: air-traffic control and law enforcement, for instance.

That hasn’t clarified the work of nonprofits that provide humanitarian and disaster relief in the U.S. or overseas.

Todd Shelton, senior director of public policy at InterAction, in Washington, a coalition of 195 nonprofits that provide international aid, said his group has been seeking information about a shutdown from federal agencies that run development programs and other overseas work. “They’ve not been able to get back to us with clear guidance,” he says.

He assumes that his organizations’ activities will fall under “national security” and be protected, but he isn’t sure. “I think we’re into some degree of uncharted territory,” says Mr. Shelton.

Catholic Relief Services is rushing to develop contingency plans, including seeking a cash cushion, a spokesman for the Baltimore aid group says. On Wednesday, charity officials were trying to learn if a shutdown would limit work in overseas clinics.

“One of the big concerns we have: if there is a major emergency around the world. Another Haiti. Another tsunami,” says Christine Tucker, chief of staff at Catholic Relief Services. “It does leave the response to emergency situations somewhat vulnerable.”

The American Red Cross, in Washington, says its affiliates will continue to respond to local emergencies.

But if any disaster exceeds the resources of one chapter—say, a large bridge collapse, or an earthquake in California—it’s not clear if the federal government will provide financial assistance, says Renita Hosler, a spokeswoman for the national organization.

Mr. Drew, of Action for Boston Community Development, says he has enough contingency savings to run his programs for a while but says the situation would be worse for the tinier charities.

“There are a lot of small nonprofits that deal with a lot of people in need,” he says. “If this went for a week or two, I don’t know how long they could hold on.”

One of the programs his group supports would face that stress. The John F. Kennedy Family Service Center gets federal block-grant money that keeps open a school program for 134 children ages 3 and 4.

“The block grant is the only thing that gives me discretionary money to hold things together,” says Kate McDonough, the executive director. “If the government shuts down, we’ll probably close our Head Start program.”

Suzanne Perry contributed to this article.