News and analysis
September 23, 2015

In Case of Federal Shutdown, Many Charities Hope Pain Will Be Short-Term

Kathryn Scott Osler, The Denver Post, Getty Images

If the government closes, many nonprofits on a tight budget hope the shutdown will only be for a short period of time.

If Congress fails to reach a budget deal and the federal government shuts down at the end of the month, Seattle’s Downtown Emergency Service Center will still open its doors to homeless people looking for a safe place to sleep. It will still provide treatment for addiction and other health services for nearly 1,500 people a day, and it will continue to provide subsidized housing for more than 1,000 clients.

Daniel Malone, the center’s executive director, says he’s not making contingency plans in the event of a government shutdown, even though more than 60 percent of his support comes from a mixture of federal and state payments. Like many nonprofit leaders who worked through the last shutdown, when the government closed for 16 days in 2013, he’s betting any government closure will be fleeting.

"We’re really not doing much in the way of planning," he said. "We’re taking a risk that any shutdown will end relatively quickly."

Republicans and Democrats seemed no closer to breaking a budget stalemate on Tuesday. They have passed none of the 12 annual spending bills required to keep the government running, and conservative Republicans have threatened to thwart progress on a temporary spending bill that would avert a shutdown unless $500 million in spending for the nonprofit Planned Parenthood is stripped from the bill.

If the government closes, the spigot of federal cash that supports many nonprofits won’t be immediately turned off.

Because federal grants are issued throughout the year, rather than on the start of the federal fiscal year, the immediate impact of a federal shutdown is likely to be muted, according to David Thompson, vice president for public policy at the National Council of Nonprofits.

But for many social-service providers that operate on tight budgets, the federal lifeline is essential. For them, a shut down of just a few weeks could cause major problems.

"Short term, it’s a nuisance," he said. "Long term, it’s a disaster."

Tight Budgets

About 30 percent of the Seattle Downtown Emergency Services Center’s support comes from Medicaid payments and housing vouchers administered through the State of Washington, which would keep flowing in the event of a federal closure.

The center will be able to keep providing other services, such as emergency shelter, for at least a month because it doesn’t need cash upfront from the federal government — Mr. Malone files for reimbursement from the federal government and state offices that manage federal programs.

Perhaps the biggest headache during a shutdown, Mr. Malone says, is that he and his staff will be unable to get answers from furloughed government workers about grants or reporting requirements.

If a shutdown lasts longer, however, "we’d start wringing our hands," he says.

After the last shutdown, the Nonprofit Finance Fund asked 164 nonprofits how they were affected by the pause in government operations. Of the nearly 100 nonprofits that responded, nearly half said their government payments were delayed because of the shutdown. Some of the nonprofits closed programs (5.7 percent) or furloughed staff (6.3 percent), but nearly 56 percent said they did not make any personnel changes in 2013.

The Nonprofit Finance Fund said its "snap poll" gave a sense of the experiences of nonprofits during the last shutdown, but was not a scientific survey.

Contingency Plans

For some nonprofits, even a short shutdown could hurt. As the fiscal year winds toward a close on September 30, the prospects of a brief federal closure are beginning to feel real to Marlena Suazo, executive director of Laramie Head Start.

The Wyoming nonprofit, which provides all-day educational programs for about 100 young children, has enough cash to run its classrooms through October.

"We have zero dollars to operate on November 1," Ms. Suazo says.

Ms. Suazo says she has been talking to local banks about taking out a loan or putting a lien on the Head Start’s bus.

The United Way of Albany County has offered to advance the charity its next quarterly payment of $4,100 if the shutdown does happen. That would be appreciated, Ms. Souza says, but wouldn’t even cover two weeks of operation. "We’re really on edge here."

Send an e-mail to Alex Daniels.