Bush’s Budget Plan

Charities urge Congress to drop cuts proposed by the White House

By Elizabeth Schwinn

President Bush this month proposed to cut or freeze many of the programs that benefit nonprofit organizations. But the outlook for his budget is uncertain: While last November’s election brought in new Congressional

leaders — many of whom oppose spending proposals made by Mr. Bush — lawmakers still face pressure to balance the federal budget and curb spending.

The administration’s 2008 budget proposal would make permanent some tax incentives to encourage charitable giving, such as a law that encourages older Americans to give money in their retirement accounts to charity. But those proposals cost the government significant sums, so it is unclear whether they will be passed.

At the same time, Mr. Bush would essentially freeze government spending at this year’s levels for most programs of interest to charities and would make significant cuts to some of those programs, say budget experts and nonprofit groups. What’s more, to meet his goal of balancing the budget in five years, the president proposes very deep cuts in most programs after 2008.

Lobbying Under Way

The budget proposal is similar to Mr. Bush’s 2007 plan for federal spending. But charities say now that Mr. Bush is in a weaker political position than he was in past years, they hope they have a better chance this year of persuading Congress not to pass big spending cuts.

Many groups have already begun their lobbying efforts, a break with past practice of waiting until lawmakers debate particular programs.

And rather than focus advocacy efforts on their specific causes, a broad array of groups have joined forces, through a program called the Emergency Campaign for America’s Priorities, to petition Congress by phone, mail, and personal visits to increase spending on social, educational, and other programs.

Last week, for example, child-welfare advocates, labor-union officials, and pediatricians peppered Capitol Hill with calls, asking lawmakers to spend $12-billion more per year on a children’s health-care program that they say has been inadequately financed.

But pleas for increased funds may be premature when the nation faces about a $250-billion deficit this year, budget experts say.

“Once the deficit is under control, there could be rapid growth in domestic programs,” says Scott Lilly, a former Democratic staff director of the House Appropriations Committee and now a senior fellow at the Center for American Progress, a research and educational institute in Washington. “But we have some years of serious pain before we get there.”

Local Aid

The president’s request covers spending in the 2008 fiscal year, which begins October 1.

But Congress has not yet completed all its work on the 2007 budget, even though it was supposed to go into effect five months ago. As a result, year-to-year comparisons are tricky, but the White House used estimates of what it expected would be spent in 2007 to compare with its spending plan for 2008.

Many charities that count on federal aid would be harmed by President Bush’s budget.

For example, the administration proposed a $2.4-billion reduction in spending on local and regional development grants, which cities and states distribute to nonprofit organizations, and would slow the growth in Medicare and Medicaid, federal health-care programs for the elderly and the poor, by $101.5-billion over the next five years. Mr. Bush also would decrease by 18 percent, to $1.8-billion, funds for a program that helps people pay their heating bills.

Mr. Bush singled out 141 programs for elimination or steep cuts, a move that he said would save the government $12-billion over five years.

Among other programs that would be cut: subsidies for arts education and school programs for children with mental disabilities, as well as for an effort that provides food to more than 400,000 needy elderly people.

If approved by Congress, such changes could mean that tens of thousands more Americans would be forced to seek charities’ assistance in receiving help with health care, food, and other needs.

Mr. Bush says some cuts are needed to make money available for his plan to balance the budget and send 20,000 more troops to Iraq.

Opponents of increased government spending praised many of the proposed cuts, and some even called for more.

President Bush’s budget doesn’t go far enough, says Citizens Against Government Waste, a Washington watchdog group that tracks federal spending and has offered a list of 602 programs it says could be cut. “Congress has no excuse for failing to identify and eliminate wasteful spending,” says Tom Schatz, president of the group.

Not all charities lose under the president’s plan. Mr. Bush sought more money for some health-care programs. For example, he requested that Congress provide money for an additional 340 new or expanded local health-care clinics for low-income Americans. About 1,200 such clinics will be in operation by the end of this year, according to the Department of Health and Human Services.

He also asked lawmakers to approve a $50-million increase in grants to organizations that provide assistance to homeless people, a $20-million increase to nonprofit groups that help develop “sweat equity” home-ownership programs, and $4.2-billion for an emergency program to fight HIV/AIDS globally, more than double the $1.9-billion the United States is expected to spend on the program this year.

President Bush also asked Congress to stimulate charitable giving by permanently extending several tax incentives, including a new law that allows people older than 70 ½ to donate up to $100,000 a year to charity directly from their individual retirement accounts, as well as another tax break that encourages landowners to conserve environmentally sensitive property.

Both incentives, which are popular with charities, will expire at the end of 2007 unless the House and Senate take action.

Among items in the budget of particular interest to charities:

Arts and humanities. President Bush proposed that the National Endowment for the Arts receive a 3-percent increase, to $128.4-million — the first increase he has proposed in three years. Robert L. Lynch, president of Americans for the Arts, called that “a step in the right direction,” but said in a statement that Congress should restore funds for the endowment to the 1992 level of $176-million.

President Bush proposed that the National Endowment for the Humanities receive $141-million, $2-million more than last year, while seeking a $41-million increase in the budget of the Smithsonian Institution, and a $29-million increase for the Institute of Museum and Library Services, which makes grants to museums and libraries.

Education. Mr. Bush sought $10.7-billion to educate the handicapped, a reduction of $855-million. At the same time, he proposed a $1.2-billion increase in money for local schools to aid children from needy families, in part through high-school tutoring programs by nonprofit groups. In addition, money for school vouchers, which could be used to pay for private or religious schools, would grow by $300-million.

Health. The administration’s proposal would increase grants for local health centers by $223-million to pay for a total of 340 new or expanded health centers. Those centers, along with about 900 existing ones, will serve an estimated 16.3 million patients. The centers are nonprofit health clinics in poor neighborhoods or regions without enough doctors that treat people even if they cannot afford to pay.

At the same time, Mr. Bush would reduce projected spending on Medicare, the federal health program for the elderly, and Medicaid, the federal health program for the poor. The result, says the Center on Budget and Policy Priorities, would be that hospitals and other health-care providers would be expected to pick up additional costs of serving needy people.

Housing. Mr. Bush asked for $2.7-billion for the Community Development Block Grants program, a $1.5-billion reduction in the program that supports numerous housing and economic-development efforts by nonprofit organizations. Programs to develop low-cost housing for the elderly and disabled would also face sharp reductions. More money would go to housing for people with AIDS and programs to fight homelessness.

International aid. Mr. Bush proposed increasing the overall budget for international programs by about $2.8-billion, to $35.4-billion. In addition to the increase in spending on HIV/AIDS, the budget for the Millennium Challenge Corporation, an agency that aims to reduce poverty through grants to developing countries that have met certain governance requirements, would rise to $3-billion (from $1.1-billion). However, spending on traditional development aid in areas such as education, health, and agricultural development would fall by almost one-third — from $1.5-billion to slightly more than $1-billion.

That drew criticism from InterAction, a coalition of U.S. international relief organizations. “The fight against diseases like HIV/AIDS and malaria cannot succeed if basic health needs are not met, if children — especially girls — do not receive an adequate education, and if those forced to flee their homes from conflict are not provided for,” Samuel A. Worthington, the group’s president, said in a statement.

Public broadcasting. The administration would take away $50-million of the $400-million previously set aside by Congress for the Corporation for Public Broadcasting for 2008. (Traditionally, federal funds for public broadcasting are committed two years in advance to help the organization plan its radio and television programming.) Mr. Bush’s efforts to cut federal aid to public broadcasting failed last year; instead, Congress increased the Corporation for Public Broadcasting’s 2007 funds from $400-million to $464-million.

Social services. Mr. Bush proposed to freeze state grants for the primary welfare program, Temporary Assistance for Needy Families, at $17.1-billion, the same amount as 2007.

Funds for the food-stamp program would increase to $1.6-billion next year, but Mr. Bush also proposed changes in eligibility rules that would take 300,000 people off the rolls. Charities say those people, many of whom are already reaching out to them for aid, still need food.

Among the other programs that would be cut is one that provides fuel assistance, which has helped poor Americans heat their home in a year when energy costs have skyrocketed.

Last year, lawmakers added an extra $1-billion in emergency funds to help victims of Hurricane Katrina and other disasters. This year, Mr. Bush has proposed no emergency increase; instead, he wants to cut the program by 18 percent, to $1.8-billion. Fuel-assistance charities, which said private donations were sluggish during the holidays because of unseasonably warm weather, face increased demands for aid now that bitter cold grips much of the nation.

For the second consecutive year, the Bush budget proposes to eliminate the Commodity Supplemental Food Program, a $107-million program that provides needy elderly people with monthly deliveries of basic food supplies, such as cereal, tuna fish, and fruit juice.

“This program is the key senior nutrition program that we have to offer in this state,” says Cherie Jamason, president of the Food Bank of Northern Nevada, a charity in Sparks that uses volunteers to distribute food provided through the federal program to more than 2,000 Nevada residents. “For a lot of the people we serve, this box is what keeps them going to the end of the month in food.”

President Bush wants to expand the food-stamp program to replace the food distributions. Ms. Jamason, however, says that is not practical in her rural location, where grocery stores are few and the poor often lack transportation.

Mr. Bush’s plan again this year calls for completely eliminating the Community Service Block Grants, which received $630-million this year.

The grants help 1,100 local antipoverty groups that run job-training and preschool programs, as well as provide other social services. The president said the grants are not awarded competitively and the program does not ask grantees to account for the results of their work.

The Compassion Capital Fund, which provides grants to local charities to help religious and social-service groups improve the way they serve the needy, would get $75-million, $9-million more than last year.

Taxes. Charity fund raisers have worked for years to persuade Congress to allow people to give money from their retirement accounts without penalty fees or new taxes, and Congress passed the idea into law in August.

The cost of Mr. Bush’s proposal — $120-million in 2008, and $1.9-billion over 10 years — is likely to make lawmakers queasy, given the federal deficit.

The conservation tax breaks, which also became law in August, cost less. Mr. Bush said making them permanent would cost $48-million in 2008 and $265-million over 10 years. Sen. Max Baucus, the Montana Democrat who chairs the Senate Finance Committee, and the committee’s senior Republican, Sen. Charles E. Grassley of Iowa, have introduced legislation to make the conservation incentive permanent.

Mr. Bush also proposed to make permanent a law that allows any business to deduct extra for food that it donates to food banks and other charities.

That tax break is now due to expire at the end of the year. The cost of the provision is $44-million in 2008 and $1.3-billion over 10 years.

In addition, Mr. Bush sought to lower the federal excise tax on private foundations to 1 percent. Foundations currently must pay an excise tax of up to 2 percent on their investment income. Foundations say that lower taxes would enable them to give more money to charities. That would cost $61-million in 2008 and $1.2-billion over 10 years.

The budget plan also urged Congress to make the repeal of the estate tax permanent. Under current law, the estate tax will be phased out gradually over the next few years, then will be repealed entirely for one year in 2010.

After 2010, without a new law, the tax will be restored. Many nonprofit organizations worry that permanent repeal of the tax would eliminate a powerful incentive for wealthy donors to make charitable bequests.

Volunteerism. Federal programs designed to increase the time that Americans give to charities did not fare well. Spending at the Corporation for National and Community Service would be cut by nearly $50-million to $829-million, and the budget of the National Civilian Community Corps, which sends teams of workers to help localities fight fires, clean up after hurricanes, and conduct other public-service projects, would be slashed by more than half, to $11.6-million.

Grants for AmeriCorps community-service workers would be reduced by $78-million, to $256-million. One major volunteer effort would get an increase: Mr. Bush proposed $334-million for the Peace Corps, $10-million more than it now receives.

The president’s plan is available online at http://www.whitehouse.gov/omb/budget/fy2008.

Brennen Jensen and Suzanne Perry contributed to this article.