A Plea for Nonprofit Priorities

When President Franklin D. Roosevelt put together the New Deal in his bid to lift the country out of the Great Depression, he created the Civilian Conservation Corps, a program that employed people on projects to protect and improve the country’s parks and other natural resources.

As President-elect Barack Obama and Congress start work this month on an economic-stimulus plan to conquer today’s financial crisis, some nonprofit leaders and experts are hoping they will take a cue from Mr. Roosevelt — and use some of the money to pay for workers who devote themselves to solving the nation’s pressing problems.

“Today, as in 1933, our nation needs an ‘all hands on deck’ strategy that mobilizes Americans to help the families and communities most affected by the economic recession, to invest in the nation’s human capital, and to increase our competitiveness,” says a letter to Mr. Obama and lawmakers that has been circulated by several coalitions of groups promoting national and community service — America Forward, ServiceNation, and Voices for National Service — and signed by more than 800 nonprofit and civic leaders.

Not only would such spending help the new administration meet many of its social goals, proponents argue, but it would help rescue nonprofit groups that are feeling the ravages of the recession themselves.

Among the proposals that have been floated for the stimulus package:

• Enact Mr. Obama’s campaign pledge to greatly expand national-service programs like AmeriCorps and adopt the Serve America Act, a bill that would create a Clean Energy Service Corps, Education Corps, Healthy Futures Corps, Opportunity Corps, and other new programs. That would create 125,000 new fulland part-time jobs in 2009 and an additional 50,000 new jobs, according to the service coalitions.
• Create a “nonprofit stimulus fund” patterned after Mr. Obama’s campaign pledge to create a Social Investment Fund Network, which would distribute money to innovative charities working on issues like poverty, education, health care, and the environment. The money would be matched by foundations, other private sources, or local governments. The service coalitions say that could help nonprofit groups that provide vital services stabilize and grow.
• Create a Community Services Protection Fund that could quickly distribute money to help charities meet basic needs — channeled through “grants distribution centers” operated by representatives from community and private foundations, state nonprofit associations, and United Ways. The National Council on Nonprofits, a group in Washington that represents small and medium-size charities, says that would help groups weather “skyrocketing” demand for services and shrinking revenues.
• Set aside 10 percent of the stimulus dollars for nonprofit groups. Isabel Sawhill, a senior fellow at the Brookings Institution, says that would help a “rapidly growing and important part of the economy.”
• Create a $15-billion federal bridge-loan fund to help nonprofit groups that have cash-flow problems because states with budget problems are behind in their payments. Independent Sector, the coalition in Washington of big charities and foundations, says that would help groups that are having trouble getting credit from financial institutions that have tightened their lending. (See article.)

National Infrastructure

President-elect Obama has pledged that when he takes office on January 20, he will give top priority to adopting an ambitious spending measure that would save or create three million jobs over two years, calling it “the single largest new investment in national infrastructure since the creation of the federal highway system in the 1950s.”

Spending is expected to be in the neighborhood of $775-billion to cover public-works projects, tax cuts, and aid to states. But details of how the money would be spent must be negotiated with Congress, and help for nonprofit groups has so far not been publicly discussed.

Some economists warn that the stimulus plan needs to work quickly to rescue the sinking economy, so proposals to set up new programs to help nonprofit groups could be at a disadvantage when Congress is weighing its options. “If you don’t get the economy going with a good stimulus in the first year, all the other stuff is much less effective,” says Chad Stone, chief economist at the Center for Budget and Policy Priorities, a research group in Washington.

But some nonprofit leaders argue that groups that are on the front lines of helping people who have been harmed by the recession, in some cases under government contracts, deserve help as much as the financial institutions or automakers that have already received bailouts.

“Where is the storm of media coverage, the persuasive rhetoric, the public outcry to save critically needed services, such as child care, assisted living, home health care and hospital services?” Teresa DeCrescenzo, executive director of GLASS Youth and Family Services, in Burbank, Calif., wrote in an opinion article published in the Los Angeles Times. “Where are the desperately needed cash infusions to help us restructure in this troubled economy?”

Ms. DeCrescenzo says her organization, which provides health and social services to gay and lesbian young people, is close to filing for bankruptcy protection, and her lawyers give it only a 25 percent chance of surviving, while many social-services agencies in California have been forced to shut down or curtail services because of state budget cutbacks. (See article.) “I have nothing but sympathy for the guys who shower after they go to work,” Ms. DeCrescenzo said in an interview, referring to auto workers. “But they seem to forget the entire nonprofit sector.”

When Mr. Obama discusses money for “infrastructure,” he refers to roads, bridges, schools, broadband communications, and health-care technology. But nonprofit experts are urging him not to forget “human infrastructure,” as represented by charities that provide social services.

“The nonprofit sector is in partnership with the government, created to contribute to the public good,” says William Daroff, vice president for public policy at United Jewish Communities, an umbrella group for Jewish groups that finance social services. “Our infrastructure should be considered part of the public infrastructure.”

His group has proposed that Congress allow governors to use some federal infrastructure money to help charities complete building projects that would help them respond to pressing needs — expanding a soup kitchen, for example.

Spreading Dollars Widely

But some experts are thinking much bigger than physical infrastructure. Ms. Sawhill of Brookings, who served as associate director of the Office of Management and Budget in the Clinton administration, says setting aside 10 percent of the stimulus spending for nonprofit groups, which represent 10 percent of the work force, would get to organizations that “will spend the money quickly, that have the capacity to spread the dollars widely, and that in the absence of such help will need to shrink and thus become another drag on the economy.”

In an essay posted on the Brookings Web site, Ms. Sawhill proposes that the money be distributed to secular charities based on the revenue they report to the Internal Revenue Service, with a cap on the amount going to any one organization and limits on how the money could be spent. She acknowledges that debates might ensue about “whether the Metropolitan Opera needs more than Aunt Martha’s soup kitchen,” and whether money should also be set aside for religious charities, but, “it would be unwise to leave this sector out of any initiative to restore the health of the economy.”

Independent Sector’s proposal for a federal loan fund — possibly administered by a body modeled after New York’s September 11th Victim Compensation Fund of 2001 — would help keep shaky nonprofit groups afloat, and provide vital services, while the nation emerges from its economic crisis. But at least one nonprofit leader sees the plan as too little too late.

Anthony Romero, executive director of the American Civil Liberties Union, in New York, says his organization has resigned its membership with Independent Sector partly because it acted too slowly to propose government intervention to help ailing nonprofit groups.

It should have proposed the loan fund long before lawmakers started drafting an economic-stimulus package, he says. “Trying to squeeze yourself into the middle of that package at this late time is going to be a Sisyphean exercise.” (Diana Aviv, Independent Sector’s president, said it is “always disappointing when an organization decides to discontinue membership” but declined to comment further.)

More Money to the States

The letter asking for new service programs and a nonprofit stimulus fund has been promoted by a variety of nonprofit groups, including America’s Promise Alliance, Be the Change, Citizen Schools, City Year, Civic Enterprises, and the Points of Light Institute. Hundreds of representatives of charities, national-service organizations, universities, and other groups have signed it.

The proposal should appeal to lawmakers because government will get more bang for its buck by creating relatively low-paying nonprofit jobs, says Edward Skloot, director of the Center for Strategic Philanthropy and Civil Society at Duke University. (Nonprofit groups pushing the idea say one job could be created for every $30,000 spent.) Furthermore, Mr. Skloot says, the country should take advantage of the rapidly growing number of young people who are lining up for national-service spots. (To read more about Mr. Skloot’s views, see an opinion article he wrote with his colleague, Joel Fleishman.)

John Fortier, a research fellow at the American Enterprise Institute, a think tank in Washington, says he is not sure such proposals would fit easily into plans for the stimulus package, which is expected to favor formulas for spending money in certain “shovel ready” areas, like state transportation projects. However, it is possible they could be considered under separate budget appropriation procedures, he adds.

While many people refer to an economic “stimulus” package, Mr. Obama is referring to a two-year economic “recovery” plan, notes Mr. Stone of the Center on Budget and Policy Priorities, so some proposals that would not have an immediate effect might be planned for the second year of the package. But he says getting more money to state governments, which have been hit hard by declining tax revenue, is the most effective way to help charities right now.

For example, his organization strongly advocates raising temporarily the amount of money the federal government provides for state Medicaid programs — thus ensuring that they don’t have to cut back in other parts of their budgets to respond to rising caseloads.

Some charities are also calling for measures that directly help the people they serve, like increases in food-stamp benefits, rental assistance, unemployment benefits, and payments under the Temporary Assistance to Needy Families program.

“The nonprofit world seems to be speaking with a very clear voice about the need for any recovery package to address these aspects of family life, of children’s needs, that at this point are not now being addressed,” says the Rev. Larry Snyder, president of Catholic Charities USA, in Alexandria, Va. He says he hopes that charities can work with the new administration and Congress to forge a new “social contract” that will strengthen government’s responsibility to build a safety net for its weakest citizens.

Spending on the Arts

While nonprofit advocates rally for the needy, arts groups, which have also been hit hard by the economic turmoil, are worried they will get left behind. (See article.)

“As we print billions of dollars in bailout money, isn’t it time to ensure that we are saving our soul as well as our economy?” Michael Kaiser, president of the John F. Kennedy Center for the Performing Arts, in Washington, asked in an opinion article in The Washington Post. Saying that the arts world provides 5.7 million jobs and $166-billion in economic activity annually, he proposed an emergency grant program for arts organizations and immediate tax breaks for corporate giving and said Washington should encourage foundations to increase their spending during this crisis.

James Ferris, director of the Center on Philanthropy and Public Policy at the University of Southern California, says that any help offered by the economic-stimulus package would inevitably favor some groups over others, given how varied the nonprofit world is.

“I think in the long term what matters is something that strengthens the sector as a whole, something that provides stronger incentives for giving,” he said.

Indeed, some groups have proposed that the stimulus package include measures to encourage charitable donations in general, for example by expanding and making permanent a law that allows people age at least 70½ to transfer money from their individual retirement accounts to charities without paying taxes on it, or by adopting measures to increase the mileage tax deduction for nonprofit volunteers.

But some nonprofit leaders warn that shaky charities must look beyond government help to solve some of their structural problems, exploring options like restructuring, merging, sharing operations, and finding new revenue sources.

Ms. Aviv, of Independent Sector, has been organizing briefings of Congressional aides to show them the impact of the economic turmoil on nonprofit groups. But she is also urging her members to recognize that they may have to change the way they operate because they cannot rely on previous revenue levels, noting that many foundations have lost between 20 percent and 40 percent of their assets over the past year.

“There’s less money, and therefore organizations are going to face adaptation or extinction,” she says. “That’s the reality.”