It’s appropriations season, when Congress funds federal agencies—including those important to the nonprofit sector—for the coming fiscal year which actually starts, in theory, a couple of weeks from now. Are the Congressional deliberations on FY2012 spending really important, or is this all a charade? After all, these appropriations decisions can be undone when the Super Committee makes its recommendations for north of a trillion dollars in cuts over 10 years.
Nonprofit leaders cannot be faulted for wondering what exactly to do. In the spring, the President’s FY2012 budget proposal lasted only a few milliseconds on Capitol Hill before being voted down in the House, after which the House passed the budget introduced by Paul Ryan (R-WI). Of course, Ryan’s budget shows little signs of life because it voucherized Medicare, which polled terribly and led to a Democratic pickup in a special election in Jack Kemp’s old district near Buffalo, New York.
So we are left with trying to peek at the deliberations of House and Senate appropriators to uncover signs of the “brave new world” of federal budget spending cutbacks that nonprofits will confront in the months ahead. Here are some appropriations vignettes that signal hard times ahead for critically important social policies and for the nonprofits most closely associated with their design and delivery.
Money for Places to Live
In case people think the foreclosure crisis is over, here’s a news flash: it’s not. But in April, as Congress got around to playing with the elements of the FY2011 budget more than a half a year late, Congress wiped out the entirety of the appropriation for housing counseling services provided by the Department of Housing and Urban Development (HUD). To keep some counseling services in operations, HUD found $10 million in unspent dollars that it decided to use for counseling.
The continued elimination of housing counseling money is part of a larger set of cuts to the HUD budget, which has seen its total appropriation drop from over $40 billion in the approved FY2011 budget to $38.1 billion in FY2012 budget. Among the programs eliminated from the HUD budget are green building programs and sustainable communities efforts.
Unlike housing counseling and some other programs, however, not every element of the HUD budget took a hit. Funding for senior citizen housing (the Section 202 and Section 811 programs) was approved for a 50-percent increase to $600 million. Can anyone say “politics” in the run-up to an election year? Seniors vote.
Money for Top Guns
The Pentagon is doing reasonably well, suffering much less than HUD on a proportional basis. The Senate Defense Appropriations Subcommittee froze the Defense Department’s annual spending at $630 billion, which is $26 billion less than President Obama’s FY2012 request and $20 billion less than the number approved by the House of Representatives (another report had the Senate’s Pentagon appropriation coming in at $17 billion less than the House budget).
But the Pentagon and its Senate supporters pulled a fast one to hide some funding from the American taxpayer. Among the Senate-approved cuts were $3.3 billion from 22 different procurement programs, but 90 percent of those expenditures were moved off-budget to supplemental war accounts—funds held for use in Iraq and Afghanistan, but not used because of the troop drawdown. Similarly, other Pentagon expense items, ostensibly cut, were moved to these war accounts. (Unfortunately, HUD doesn’t have any overseas military-adventure accounts with which to camouflage its planned discretionary expenditures.)
Although slated for significant future cuts, which both House Republicans and the Obama White House have predicated on the end of U.S. military engagement in Iraq and Afghanistan, the Department of Defense stands in much better budgetary shape than do the nation’s diplomatic resources, particularly the “soft power” tools of humanitarian and development assistance through USAID that Secretary of State Hillary Clinton has touted as a necessary complement, at a minimum, to maintaining the nation’s military prowess. In the deficit-cutting budget deal reached earlier this year, the Department of State lost $8 billion, a good chunk of which came from cuts to USAID programs.
For FY2012, House Republicans have called for lopping an additional $8.6 billion from the State Department. The cost of development aid isn’t more than a rounding error in the Pentagon budget, but House Republicans have generally expressed underwhelming support for anything that looks like foreign aid or that doesn’t clearly measure up to bolstering U.S. military security. So development aid sits squarely in the chopping block. Smart power, which elevates aid, and diplomacy seem to be looking not so smart in FY2012. As Foreign Policy magazine noted in its comparison of military defense spending with development aid, “The truth is that future Congresses will determine how much gets cut from ‘security’ and how much from ‘defense’—and the Pentagon has a lot more friends in Congress than Foggy Bottom.”
The Economic Value of the Arts
During the run-up to the stimulus (the American Recovery and Reinvestment Act, or ARRA) in 2009, the group Americans for the Arts made a compelling case for the importance of the arts in economic development. That may have opened the door for ARRA funding of the arts when many members of Congress were casting a jaundiced eye at the notion. Now, under the aegis of the National Endowment for the Arts, a “consortium” of foundations and corporations are actively trying to bolster the appropriations case for the nation’s top public arts agencies through work on 34 projects around the nation. One NEA project, “ArtPlace,” is capitalized with $11.5 million in foundation grants plus $12 million in corporate loans and “aims to integrate artists and arts groups into local efforts in transportation, housing, community development and job creation as an important tool of economic recovery.”
Several foundations are funding ArtPlace with grants that average $350,000 apiece. Participating foundations include the Ford Foundation (with CEO Luis Ubinas also chairing the ArtPlace Presidents Council), the Andrew W. Mellon Foundation, the Rockefeller Foundation, Bloomberg Philanthropies, the James Irvine Foundation, the John S. and James L. Knight Foundation, the Kresge Foundation, the McKnight Foundation, and the Rasmuson Foundation. Providing the $12 million in loans will be Bank of America, Citibank, Deutsche Bank, Chase, MetLife, and Morgan Stanley. Federal agencies at the table functioning as partners while purportedly spending no money, are, in addition to the Endowment (which is coordinating the effort), the Departments of Housing and Urban Development, Health and Human Services, Agriculture, Education, and Transportation. While Rocco Landesman of the Endowment suggested to the New York Times that he is looking to “scale up resources in the field” in recognition that money for the arts “is not going to be through Congressional appropriation,” others see ArtPlace making the case for continued appropriations for the National Endowment.
Getting Legal Assistance Gets Harder
The consensus of legislators in the Senate and the House is that the Legal Services Corporation (LSC) is going to lose money in this appropriation cycle, though maybe there is a recognition that during this recessionary economy, poor people need access to legal advice on mortgage foreclosure, employment issues and unemployment benefits, food stamps, and family issues.
The Senate Appropriations Committee appears to have cut LSC funding by only 2 percent, although additional funding for local LSC affiliates may be cut by state and municipal agencies. However, the House is somewhat more skeptical of Legal Services, proposing a reduction of its $404 million budget by 26 percent. Reducing the LSC budget to $300 million essentially takes the agency back to 1999-level funding, a doubly damaging cut given the massive increase in poverty since then and a persistent recession. By the numbers, 60 million people in the U.S. qualify for the civil legal assistance provided by local Legal Services offices, but most won’t have a prayer of getting help if the agency loses one quarter of its budget.
Funding Government Oversight
Inadequate governmental oversight of the private sector contributed to the excesses of Wall Street, banks, mortgage brokers, and others that put the economy into a long tailspin. One would think that muscling up government monitoring and oversight of Wall Street would be all-but-automatic given the 2008 Wall Street financial crisis, but not so in the appropriations process.
Senate Democrats and House Republicans appear to see the regulatory world completely differently. The Senate Appropriations subcommittee on financial services has slated the budgets of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), both charged with Wall Street oversight, to rise by 19 percent. By contrast, Republicans in the House kept the SEC budget at the FY2011 levels and cut the CFTC budget.
One can only imagine what will happen to the budget of the Consumer Financial Protection Bureau, the highest-profile aspect of the Dodd-Frank Wall Street financial regulation law, since this regulatory structure is bitterly opposed by Republicans. Even though the nomination of Elizabeth Warren to head the bureau was jettisoned by the Obama White House in favor of former Ohio Attorney General Richard Cordray, Republicans are still fighting against the Bureau and could simply starve the agency of all but the barest minimum of resources it needs to function. All this bodes poorly for Congressional appropriations for the oversight and monitoring functions of the Internal Revenue Service’s tax-exempt division that the nonprofit sector depends on to enforce accountability among nonprofits and foundations.
Time for a Continuing Resolution
Remember why it seemed so odd to have no approved FY2011 budget earlier this year? The explanations for it vary, but the end result was that until the government-shutdown showdown in the spring, the FY2011 budget was actually a continuing-resolution extension of the FY2010 numbers. It appears that House Speaker John Boehner (R-Ohio) is looking at offering a continuing resolution on the FY2012 budget to keep government offices up and operating through November 18.
Apparently an “omnibus” budget bill will emerge during this time that replaces a dozen or so separate spending bills that are supposed to comprise the fiscal year budget. An omnibus bill would supplant the multiple appropriations decisions of the House and Senate appropriations committees. Why an omnibus? At this point, the House has only approved half of the required spending bills, and no debate on appropriations is on the schedule for the remainder of the fall, per House Speaker Boehner.
The omnibus budget bill would not only circumvent the regular appropriations process, but also Boehner’s Tea-Party bêtes noires, by bypassing specific debates on appropriations bills in favor of finding “one big bill” consistent with the Budget Control Act (the deficit reduction legislation born of August’s debt-ceiling standoff) which would cap FY2012 discretionary spending at a little over $1 trillion.
It is a complicated mélange of appropriations activity—House and Senate decision-making sometimes miles apart, some elements of the appropriations process missing altogether, and the likelihood that all might be for naught as a continuing resolution and an omnibus bill supplant all of this folderol. In all of this, where is the nonprofit sector? It is time for another nonprofit agenda like the one put together by OMB Watch and the National Committee for Responsive Philanthropy for the incoming Bush-or-Gore administration in 2000, that would lay out what the nonprofit sector writ large wants and needs to see in a FY2012 budget, so that the needs of our society can be met at this critical economic juncture.