Governments in Crisis

Charities that rely heavily on government grants and contracts will find little relief in 2010. The recession continues to take a bite out of tax revenues, and the recent climb in the unemployment rate will make things worse.

The National Governors Association’s prognosis is bleak: States are in for a “lost decade,” it says, thanks to the recession’s severity, the projected slow recovery, and future demands to meet neglected needs.

“Leaders of nonprofits must get engaged in the policy process because this problem is not going away,” says Tim Delaney, president of the National Council of Nonprofits.

BEHIND THE TREND:

State spending cuts. More than 40 states have reduced spending on services, including health care, education, and help for the elderly and disabled, in this fiscal year — which for most states ends on June 30 — as they struggle to close shortfalls totaling $190-billion, the Center on Budget and Policy Priorities reports.

End to stimulus money. Federal economic-stimulus money to help states pay for Medicaid and avoid drastic budget cuts eased some of the pain this year. But the lion’s share of that money will end on December 31, 2010.

County and local budget crunches. More than 80 percent of both counties and cities expect to see shortfalls in the next fiscal year, according to recent surveys by the National Association of Counties and the U.S. Conference of Mayors.

As a result, more cash-strapped local governments may try to seek money from nonprofit groups, steps some cities have already pursued in 2009.