The President’s Plan

Proposed federal budget holds few changes for charities

President Bush’s proposed $2.4-trillion budget for 2005 holds few changes in spending for most federal programs that support charities and

the people they serve, such as aid for soup kitchens and runaway or homeless children. Spending increases were largely concentrated in defense and domestic-security programs.

However, a few charity programs would get increases under the president’s plan. Spending on “sweat equity” programs to build homes for those who lack them, for example, would rise by 140 percent.

In addition, the budget offers a number of tax breaks aimed at helping charities as part of a $1.1-trillion package of tax cuts. Mr. Bush is also proposing new requirements intended to prevent donors from claiming inflated charitable deductions. (See article on Page 41.)

Among the key budget proposals that affect nonprofit groups and the people they help:

• Arts and humanities. Mr. Bush is seeking $139.4-million for the National Endowment for the Arts, $18-million more than current spending and the largest increase in 20 years. The money would support a new program designed to bring dance, visual arts, and music performances to all 50 states as part of a three-year tour. He also wants to increase spending on the National Endowment for the Humanities to $163-million, from $135-million in 2004. The increase would continue to support the We the People program, which promotes better understanding of American history through school programs and local projects.
• Social services. Child-care services would receive $2.7-billion, down from $2.9-billion this year. Funds for the Legal Services Corporation, which helps provide lawyers for poor people, would be trimmed from $341-million this year to $329-million next year. Funds for charities that support people with disabilities would be flat, as would money to support soup kitchens and food banks, and grants to help ensure that the elderly receive adequate nutrition. A program created four years ago that makes grants to charities that help victims of domestic violence would be eliminated. The administration says the Justice Department would like to consolidate that program and others into what it believes would be a more efficient unit to help battered women and children.

The president would maintain or increase funds for several efforts begun last year, including $50-million — the same amount as last year — to pair mentors with children who have one or more parents in prison. The Compassion Capital Fund, which makes grants to small and religious charities, would double in size, to $100-million. And the president would provide $50-million for a new program to help the chronically homeless, which he proposed last year but which did not receive funds.

Big Impact

Some nonprofit leaders say the impact of the proposed federal budget could be greater than the numbers first suggest. That is because states, many already struggling with budget cuts, stand to lose some federal funds in 2005, which could in turn further reduce their ability to provide money for nonprofit groups. The National Priorities Project, a nonprofit group in Northampton, Mass., that studies the impact of federal spending decisions on state and local governments, says that some states could lose billions of dollars each in federal funds if Mr. Bush’s budget is enacted.

Whether Congress will adopt Mr. Bush’s plan is uncertain. The House and Senate have already begun examining the president’s budget as they draft their version of a spending plan for fiscal 2005. Some lobbyists for charities say Mr. Bush has proposed cuts to some programs that are popular with lawmakers, and similar proposals by Mr. Bush in the past have been rejected by Congress. For example, Mr. Bush last year proposed to reduce funds for the Commodity Supplemental Food Program, which provides nutritious food to low-income mothers and the elderly, by $9-million; instead, Congress increased funds for the program by $6-million.

While many charities are worried about the cuts or flat spending levels, other groups say the president’s plan doesn’t go far enough. Alison Fraser, director of the Thomas A. Roe Institute for Economic Policy Studies at the Heritage Foundation, a conservative think tank in Washington, says the president’s budget is a “first step” but that more needs to be done to reduce the deficit. “A good start would be an outright freeze” on all spending except defense and homeland security, she says.

Changed Approach

Mr. Bush has apparently laid aside his plan to transfer some of the biggest federal programs to the states to administer. Last year, he sought 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 to poor people who rent their homes. Instead, he wanted to give states a “block grant,” or lump sum of money, to spend on such programs as they see fit. Nonprofit officials protested 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.

In releasing his budget, Mr. Bush said that he continues to support “programs that promote hope and compassion,” but that the government needs to do so while limiting spending growth and cutting wasteful spending.

A table summarizing items in the Bush administration’s budget that are of interest to charities and foundations appears below.

Among the key proposals:

Community service. President Bush seeks a 10.6-percent budget increase for the Corporation for National and Community Service. The Corporation oversees AmeriCorps, the program that offers stipends and scholarships to encourage people to spend a year or more performing community service.

The overall budget of $1-billion for AmeriCorps would allow the program to support 75,000 participants in 2005, the same amount as the year before, despite the fact that Mr. Bush has sought $20-million less in AmeriCorps grants, according to spokesman Sandy Scott. Mr. Scott says last year’s budget included extra money to be held in reserve for AmeriCorps scholarships.

The Peace Corps would receive $401-million, nearly $100-million more than last year. Mr. Bush announced that he wants to double the number of volunteers to 14,000 over the next five years. The Peace Corps has received requests for volunteers in 20 new countries, and wants to expand its efforts to fight AIDS and HIV.

Education. Mr. Bush would increase funds for educating poor children and those with disabilities. But funds for adult education would remain the same as last year, at $590-million, and Mr. Bush would like to eliminate funds for vocational education entirely. Instead, he wants to direct the money to high schools and community colleges to improve career and technical education.

Housing. The President asked to double a relatively small program, the Self-Help Home Ownership Opportunity Program, which helps pay for programs such as Habitat for Humanity that build low-cost homes for those in need. He also sought additional money for another program that offers grants to help build and renovate low-cost housing.

The Community Development Block Grant program, which provides funds to local governments to be disbursed to charities and other groups for housing and economic development, would be cut by about $300-million, the amount the administration says members of Congress spent under the program that was “earmarked” for projects in their home districts last year, a practice the administration has condemned.

Public broadcasting. The Corporation for Public Broadcasting will receive $390-million in the 2006 fiscal year, a cut of nearly $50-million, or 11 percent, from spending for the 2005 fiscal year. (Public-broadcasting money is approved two years in advance of the time it is needed because of the timetable involved in producing shows.)

Social services. President Bush proposed to eliminate a juvenile-justice program that gives money to groups that help young offenders. Instead, the administration would consolidate and shuffle the money into new programs with a focus on domestic security and the fight against terrorism. This shift would mean that funds for some nonprofit groups that provide alternatives to prison and other programs aimed at helping juvenile offenders would dry up, advocates say. “There are simply a lot of programs that will not be here a year from now,” says Daniel Macallair, executive director of the Center on Juvenile and Criminal Justice, in San Francisco.

Justice Department officials say many current juvenile-justice programs are duplicative or ineffective.

Some of the programs created by Mr. Bush would fare well under the budget plan: A program to keep children with their families through counseling or other alternatives to foster care would receive $505-million, up from $404-million. About half of the roughly $200-million increase in funds for the Substance Abuse and Mental Health Administration would pay for a program that provides grants to community and religious groups that treat drug addiction.

Other programs that would receive increased funds include those to assist refugees and others, which would grow by $25-million, to $419-million.

The Bush administration’s 2005 budget plan and related documents can be viewed on the Government Printing Office’s Web site at http://www.access.gpo.gov/usbudget.