These are strange times for the nonprofit sector, strange times indeed. I mean, something is happening to the position of nonprofits in society that is disconcerting, and the reaction of the nonprofit sector’s leadership is in question. The backdrop, of course, is that the U.S. government had imploded in a demonstration of breathtaking dysfunctionality, an unbelievable and entirely avoidable scenario that elevates the challenges facing the nonprofit sector to new dimensions.
Nonetheless, even without the partial government shutdown, the nonprofit sector has a number of new things to confront. Some may seem odd and picayune, but they add up to major new threats to the role of the nonprofit sector in our society.
One concerns the Affordable Care Act, which many people call Obamacare, but the implications are much bigger than healthcare. In August, the Department of Health and Human Services gave out $57 million in grants to nonprofit and public sector entities to serve as “navigators” to help uninsured people make their way through the health insurance offerings on the federal and state insurance exchanges. It’s obviously an issue here, as Montana ranks in the bottom ten of states regarding the proportion of its population with health insurance coverage.
Leave aside the fact that the grants were only announced a month-and-a-half before the start-up of the exchanges, that the training materials for the staff to be hired as navigators didn’t show up from HHS until September, that Republican attorneys general in a dozen or so states sent letters to navigator groups asking for piles of information, and that several states generated their own laws and regulations covering the roles of navigators just to make their tasks more onerous—and that congressional Republicans are trying to destroy the entire national health insurance program. You can even, for the moment, not think about the fact that a bunch of states decided not to take up the offer of federal dollars and expand the coverage of Medicaid so that people with incomes of up to 138 percent of the federal poverty level could qualify for Medicaid coverage.
On face value, it seems designed to require heroic nonprofit efforts to make sure that uninsured people get the coverage that they need, deserve, and qualify for. That’s standard operating procedure. That’s what nonprofits do all the time with programs that are half thought out or even, like the Affordable Care Act, actively obstructed, but nonprofits make them work anyhow.
But the threat to nonprofits in this instance, a threat with huge precedential value, came in the actions of a committee of the U.S. House of Representatives, which wrote to roughly half of the navigators asking for volumes of information to explain what they were doing and how they had proceeded—even though they had only recently received the grant announcement and were probably just getting around to cashing the check and hiring and training staff. What the committee did is essentially initiate oversight of a program—that is, oversight of the grantees of a program—before the grantees had actually done anything to be overseen.
It was an example of the out-of-control function of the relationship between the legislative and executive branches of our nation, displayed over the role of the nonprofit sector in carrying out functions it was assigned to do. The committee could have called the federal agency that made the grants and asked how it did the due diligence to select the 105 or so groups that got navigators grants. It could have asked whether the agency was functioning according to the latitudes and constraints of the legislation. But to initiate oversight investigations of the largely nonprofit grant recipients before they had started the work was obviously meant to harass them, which it did, but also to establish a terrible precedent that was applied in this case not to military contractors like Lockheed, Boeing, or Northrup Grumman, nor to for-profits getting contracts in other programs. It was slapped on the sector that is least lawyered-up to fend off such an attack.
Here’s the precedent. At the federal level, the process of oversight has been stood on its head. Oversight of nonprofits need not wait to see them do something; it starts before they have acted, with an all-but-palpable presumption of wrongdoing despite the due diligence of the federal agency in charge.
Why pick on nonprofits? Especially nonprofits that, in the many cases of the navigators grants, are not huge groups? That’s a second concern. In some circles, nonprofits are easy—or easier—targets to attack than other sectors. If you need the indicators, look at the actions of cash-strapped cities, particularly mid-sized cities around the nation—though, of course, “cash-strapped” applies pretty broadly in municipal government right now.
Many state nonprofit associations and the National Council of Nonprofits have called out municipalities for their multiple creative strategies of finding ways of taxing the tax-exempt sector. You know the drill: payments in lieu of taxes, service fees, licensing costs, and more. If you think it is all focused on big universities and hospitals, it isn’t. Just look at the letters from mayors such as the mayor of Reading, Pennsylvania, asking any and all nonprofit property owners to help the city out with cash. In some cases, the voluntary requests made of tax-exempt property owners don’t look quite so voluntary, as in Scranton, Pennsylvania, where the City Council has been quite willing to play hardball with nonprofit property owners over city approvals regarding nonprofit property owners that don’t ante up. You can think of “payments in lieu of taxes”—PILOTs—as the mandatory-voluntary taxes assessed against nonprofit property owners.
But the antagonism is also expressed in other ways, and in some ways it is nastier. For cities that receive Community Development Block Grants, from that money, cities usually reserve 15 percent off the top for public services, which is generally a mechanism for funding nonprofit social services important to neighborhood revitalization, and other moneys in CDBG also go to and through nonprofits in housing development programming. City after city has cut nonprofits out of their CDBG programs to retain the funds for city staff, on the theory that nonprofits have other resources at their disposal. It has occurred at state government levels, as an increasing proportion of federal pass-through funds gets retained by the state government and less gets through into the administrative and management accounts of nonprofits.
The National Council of Nonprofits has done a very good job in documenting how this is occurring in government contracting and reimbursements. They’ve focused on slow reimbursements, the expectation of state governments that nonprofit vendors can front the costs and wait, but the anecdotes of actual experience are very powerful. In one state recently, for example, a well respected community-based nonprofit was negotiating a state contract and making the case that it needed some upfront capital in order to operate the program. The response from the state’s contract officials? Well, if you can’t wait for reimbursements on our timeline, maybe it means that you aren’t appropriately capitalized to be a state contract recipient. The subtext? For-profit vendors can do it; we don’t need you nonprofits whining about your contract and reimbursement needs.
Why not pre-audit the nonprofit navigators, given the increasing tensions between local governments and nonprofits over not only federal pass-through funds like CDBG, but even grants that local governments usually made out of their general funds because of the important role of nonprofit service providers? The roles of nonprofits are increasingly looked at with some disdain in various quarters. It is a reflection of our society’s intersectoral struggle over scarce resources, with nonprofits being a somewhat easier target to pull back on than other sectors.
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Where this shows in particular is over the sequestration issue. You know that public opinion polls suggest that the public doesn’t find sequestration all that troublesome. Of course, that was after the first year, when agencies juggled resources to soften the impacts of the first year’s cuts. The second year won’t be quite so easy. The second year’s sequestration cuts will be on top of the first year’s, and on top of the ones that preceded it that weren’t called sequestration. Do you think that in the budget impasse, this is being corrected? Not on your life. Look at the “clean” continuing resolution recently proposed by the Senate Democrats, with budget levels well below those of last March. Sequestration, sadly, is slowly becoming the “new normal.”
On Capitol Hill, it’s not clear that nonprofits have been heard—or if they have been, it’s not the message that works on federal budget cuts. Many members of Congress got a confusing message during the charitable deduction battle. The message discipline that was pushed by the nonprofit leadership lobbying for no changes to the charitable tax deduction was to not mention government spending, just to focus on charitable contributions. In fact, many nonprofits visiting Capital Hill did mention government funding, telling congressional legislators that government money was somehow not as valuable, not as useful as charitable contributions. So what do members of Congress think? Nonprofits can use charitable deductions—saved from a potential capping for rich taxpayers—and government funding isn’t as necessary for nonprofits as it is for the Pentagon. Members of Congress have been falling over themselves to protect the Defense Department, but not programs that constitute the social safety net.
And that brings us back to the government shutdown. What can you say? Oy vey iz mir! ¡Ay dios mio! The nation’s politicians are demoralizing a million federal workers who could lose wages due to furloughs. If the politicians agree to a deal, it will be a six-week spending agreement, so they’ll be back to this fight in mid-November, having presumably handled the debt limit in the meantime. Do you think much legislation is going to proceed in a six-week governmental period? Could you run your organization on new budgets every six weeks?
The problem is that critics—like this writer—are prone to lay out a rapidly encroaching doomsday scenario that sounds like a bad script for a horror film, and we don’t leave anyone with ideas on what actually to do. The typical call to action, with bugles blaring and images of all of us storming the barricades, doesn’t really do the trick. We all have jobs, we’re running or working in nonprofits, we have to get the work done, no one’s paying nonprofit leaders and staff to be Jean Valjean in Les Misérables.
The events and these crises are much like the dynamic during the early days of the recession, particularly around the foreclosure crisis, when the dynamic was so terrible, the magnitude of people losing their homes so huge, that it made people stymied and frozen. Nonprofits would try to cope, protect themselves, figure out ways of operating despite cutbacks, and wall themselves off from others in dire straits. But you’re not OK even if you wall yourself off from issues and say that somehow my nonprofit is getting by for the moment. Over the long run, coping is only temporizing; the underlying problem simply gets worse and each successive coping tactic is less effective.
So think about sequestration, think about the government shutdown, think about the creeping tendency of social enterprise to undermine the credibility and support of the nonprofit sector, and let’s think together about what can be done, not just by Tim Delaney in Washington leading the National Council of Nonprofits or Liz Moore at the helm of the Montana Nonprofit Association, but everyone, nonprofits large and small, to contribute to needed changes. There’s no magic bullet, no surprisingly innovative technological breakthrough that’s going to make Ted Cruz and the ideological zealots dissolve in a puff of environmentally pleasant smoke. So think about what you can do.
First, recognize your role as nonprofits. Amidst the hype and much of politics and business, nonprofits are—or should be—truth-tellers. No more “a little of this” and “a little of that” for balance. Some things have to be called out, publicly, straightforwardly, by people in the know. In private conversations, nonprofit leaders show more knowledge of what things mean as a result of public policies than is generally ever heard within the Washington Beltway or uttered by cable TV pundits. Nonprofits see and hear from the people who are the alleged beneficiaries of government programs all the time. They spend their efforts working through the limitations of what is available during the best of times—when government is purportedly at its most functional—and should be able to explain what the consequences are when government devolves into the dysfunctionality and irresponsibility that we see right now.
Second, nonprofits should be talking to political leaders and the press about those truths—and not as members of special interest groups about what nonprofits as institutions get or don’t get. It should be about what society is getting, or the hand that is being dealt to society, by these factors and issues. They should be constantly telling their representatives and senators, here’s what sequestration, here’s what the shutdown, here’s what throwing brickbats at the Affordable Care Act is doing to the districts you represent, the constituents you serve.
Third, you have to start talking, as the boring aphorism says, truth to power. Take the sequester. Do you know that the U.S. military budget is larger than the composite military budgets of the next dozen largest military spenders? Nonprofits dodged the fact that the nation spends way too much on the military at the expense of investment in education, health, and infrastructure. To hear nonprofits take on the Pentagon, you would have to listen very hard for very little.
Or take the specific debate issue in the shutdown: the Affordable Care Act. The ACA is hardly the national insurance program that many of us would have wanted, as adherents of single-payer healthcare systems. But the president negotiated with everybody under the sun to get the Affordable Care Act passed. The Republican strategy has simply been to throw anything and everything at it to make national health insurance unworkable—and then declare, ‘see, we told you it wouldn’t work.’ This is a deliberate strategy to make the program not work.
Remember the expansion of Medicare prescription drug coverage that was pushed by the second Bush administration? Democrats stridently opposed it, but when it became law, members of Congress through their constituent service helped their constituents understand it and figure out how to use it. This time around, the Republican strategy is total, unrelenting obstructionism. This is nuts.
Nonprofits have to be engaged in these issues and call out the politicians, not simply offer, like the press, on-the-one-hand and on-the-other-hand perspectives. That simply lets this dynamic persist as though it’s reasonable for the U.S. to spend ever-increasing amounts of money for war or to imagine that some people in Congress aren’t consciously trying to make the laws of our country (in this case, national healthcare) not work. You have to speak out about truth to the public, because nonprofits know this stuff so much better than so many other people.
And fourth is the issue of the states. Much of the game for nonprofits is to be fought in state capitals, not in the Washington beltway. But plenty of federal money is in the state capitals. In a few short years, the federal proportion of state government expenditures has topped 34 percent. For Montana in FY 2012, it was 36 percent. If you add in state matching funds for federal moneys, the average federally related proportion of state budgets is over 45 percent. You have to be involved in speaking to national legislators and to the press about national policy issues.
But the roots of national policies get formulated and developed at state capitals and in local governments. There is no question that as much as you have to be involved in working with your state association and with its national body on national policy, you have to work up on these issues through local and state policy. Public policy advocacy is the business of every nonprofit in this room. There is no room for people to be on the sidelines, not when cities and states are trying to tax tax-exempt entities, not when they are taking moneys that should be used for the social safety net but reprogramming them for other purposes, and not when ideologically obsessed politicians in Washington seem dedicated to making the dysfunctionality of the Beltway a national disease of governmental incompetence.
