President Bush’s Budget

White House plan to transfer federal assistance programs to states’ control worries some charities

The fiscal 2004 budget President Bush submitted to Congress this month proposes hundreds of

millions of dollars in new federal aid for programs that provide grants and contracts to charities. But it also would cut or eliminate some programs through which charities receive funds, while changing the structure of others.

The House and Senate have already begun examining the president’s budget proposal as they draft their version of a spending plan for fiscal 2004. It is unclear how much of Mr. Bush’s budget plan Congress will approve. The president proposes cutting many programs that are popular with lawmakers, lobbyists for charities say. With both chambers of Congress under Republican control this year, however, Mr. Bush may have some success enacting much of his budget, political analysts say.

Many charity leaders say they had feared the proposed cuts to domestic programs would be worse than they were, given the large price tags for antiterrorism efforts and preparations for a potential war against Iraq. Mr. Bush was able to keep his budget for many social programs unchanged from past spending in large part because he did not try to submit a balanced budget. If the administration’s budget were enacted, it would carry a projected deficit of $307-billion for fiscal 2004.

Brian Riedl, a senior federal-budget analyst at the Heritage Foundation, a conservative think tank in Washington, said the president’s budget plan includes an average spending increase of 4 percent for programs that are not related to national security and includes numerous tax incentives to increase charitable giving.

“The two most important priorities for federal-government funding right now are national security and reducing taxes to stimulate the economy,” Mr. Riedl said, adding that both have direct effects on nonprofit groups. “When the economy slows down, people donate less to charity, so when you help the economy you help philanthropy.”

Pressures on Charities

Officials at many other nonprofit groups, however, say some of the changes Mr. Bush is proposing could lead to added financial pressures on charities.

Chief among those is Mr. Bush’s plan to transfer some of the biggest federal programs to the states to administer. The president proposes to end federal guarantees of assistance to all who qualify, including benefits provided through Medicaid, the federal health program for the poor; Head Start, the preschool program for needy children; the federal foster-care program; and a federal voucher program that provides financial help for poor renters. Instead, states would receive a “block grant,” or lump sum of money, to spend on such programs as they see fit.

Some nonprofit officials say that once a program is converted to a block grant, federal funds in future years tend to fall behind actual need, leaving nonprofit groups to try to make up the difference.

“Charities that sort of filled in the holes in government programs when things were going well will be faced with a more and more impossible task as the holes get deeper,” said Richard Kogan, a senior fellow at the Center on Budget and Policy Priorities, a research group that studies the impact of public policy on low- and moderate-income Americans.

The administration has said the block grants would be large enough to make sure that those who need help will get it. In addition, it believes giving states control of the programs would help them run more efficiently.

The block grants would eliminate specific federal criteria for who is eligible for services under the programs and would leave most policy decisions in the hands of state governments.

Several advocates worry that putting those funds under state control — particularly at a time when almost every state government is facing budget deficits — would only encourage governors to use the funds to balance their budgets rather than serve the poor. “There will be temptations to cut quality, because quality is expensive,” said Joel Ryan, director of government affairs at the National Head Start Association.

Comparisons Complicated

Computing the size of budget gains or cuts this year is complicated by the fact that Congress had not made final spending plans for the 2003 fiscal year by the time the president submitted his budget for the 2004 fiscal year, which starts in October. Because of this difficulty, most comparisons here are to 2002 spending.

New social-service efforts promoted by the president for 2004 include $100-million to recruit and train mentors for young people and $50-million to pair mentors with children who have one or more parents in prison. Federal agencies would work with nonprofit, neighborhood, and religious groups that train volunteers to serve as mentors and place them with children in need. The president would provide $50-million for a new program to help the chronically homeless, and $25-million to support history programs, including museum exhibits.

Increased funds would bolster several existing programs, including an additional $200-million to provide vouchers to people with drug addictions so they can get treatment from programs of their choice, including those offered by religious institutions, as long as the programs meet certain effectiveness criteria. Funds for “sweat equity” programs, such as Habitat for Humanity’s projects that require low-income families to help construct the homes they will eventually own, would nearly triple to $65-million. Mr. Bush also would budget an additional $47-million to help museums and libraries bring technology and new programs to the areas they serve.

Many of Mr. Bush’s new proposals emphasize his desire to get more religious charities involved in the delivery of social services. “Governments can and should support effective social services provided by religious people, so long as they work and as long as those services go to anyone in need, regardless of their faith,” he said last week in a speech to religious broadcasters. “The days of discriminating against religious groups just because they’re religious are coming to an end.”

Programs Eliminated

At the same time, Mr. Bush proposed to cut or eliminate some programs that give federal money to nonprofit groups.

Some programs to prevent child abuse and domestic violence would be eliminated under Mr. Bush’s plan. Grants to prevent domestic violence, which totaled $185-million in 2002, would be ended. The administration says the Justice Department has consolidated many existing programs into what it believes will be a more efficient unit to help battered women and children.

The budget would provide more money for homeless programs and prospective homeowners, but fewer funds for public housing and some federal programs that aid poor people who rent their homes or apartments. While advocates for homeless people are applauding proposals to provide money to those without homes, they question whether the White House’s proposed housing budget for fiscal 2004 does enough to attack one of the causes of homelessness: a dearth of inexpensive housing.

Federal housing officials counter that there is no shortage of housing, just a shortage of money that poor people have available to pay rents. They say their proposal to send block grants to states would be a more efficient way to deliver financial assistance to the 1.7 million households across the country that need help with their monthly rent payments.

Mr. Bush would make substantial cuts in other programs, including refugee assistance, which would shrink by 7 percent from 2002, or $33-million. Refugee assistance funds are largely spent to resettle refugees, and the administration notes that it has reduced the number of refugees admitted into the country. He would trim $155-million, or 24 percent, from a program that makes grants to help nonprofit groups run education, fuel-aid, housing, nutrition, and child-care programs in poor neighborhoods. The funds “provide only a small part of these organizations’ budgets, and it is unclear what outcomes are produced as a result of these funds,” the White House noted in budget documents.

The Bush administration said its goal in making such cuts is to shrink or eliminate unsuccessful and wasteful programs.

But Audrey Alvarado, executive director of the National Council of Nonprofit Associations, said she believes cuts in federal programs will be compounded by decreasing state money for nonprofit service providers.

David Bradley, executive director of the National Community Action Foundation, a Washington group that represents antipoverty groups, said nonprofit human-services groups need to do more than just dig in their heels and refuse to consider any changes when arguing against the president’s proposals. He urged charities to try to build coherent arguments to persuade administration officials of their programs’ value.

“You have to assume there is some policy motivation behind the administration’s recommendations,” he said. “A lot of these programs that are time-tested can win a policy debate, but charities have to engage in it. What I fear is that the knee-jerk reaction on the part of advocates will be, ‘It works. We need it. End of discussion.’ In that kind of debate, the administration possibly wins.”