President Obama’s FY2015 Budget: Live Wire or DOA?

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March 4, 2014; The White House

President Obama just released his FY2015 federal budget proposals. This event is normally less than scintillating due to the just-about-automatic rejection by congressional Republicans of anything he might propose with a dollar sign attached. This time around, due to the glimmers of bipartisan comity in the last budget agreement, the president’s ideas might get something of a hearing.

Nonprofit Quarterly will do a fuller analysis of the budget proposal next week after this week’s preoccupation with Philanthropy Week in Washington, but some comments on the nonprofit relevant aspects of the budget are relevant to what foundations and the assorted nonprofits mixed in to their teams might be saying on Capitol Hill.

Speaking at Powell Elementary School in the Petworth neighborhood of D.C., President Obama said his FY2015 budget proposals were based on the concept of an “opportunity agenda” with four components: “More good jobs and good wages; making sure that we’re training workers with the skills they need to get those good jobs; guaranteeing every child access to a world-class education; and making sure that our economy is one in which hard work is rewarded.”

That’s fine language that crosses ideological and party boundaries, but the devil’s in the details. In fact, don’t look at the hype and language. Look at the numbers to see what the priorities in the budget really are. For nonprofits, some of the critical elements of the proposals are these:

  • Although for most nonprofits, the components of what the President’s proposed budget calls for to help people and rebuild the tattered social safety net will be important, for many others, perhaps most, the item that will grab them is the president’s renewed call for capping charitable deductions—and all other deductions—at the 28 percent tax level. If examined in balance with what the president is proposing as safety-net spending, perhaps nonprofits and foundations might not be so aghast at the idea, but in a framework of piecemealing budget proposals for their impact on this constituency or that, expect the White House to receive a lot of guff for this, especially during Foundations on the Hill lobbying.
  • The budget calls for extending the earned income tax credit (EITC) to childless adults and young workers to serve as a work incentive. The EITC, which was a policy creation during the administration of President Gerald R. Ford, apparently gets a nod of conceptual approval in the budget being designed by House Budget Chairman Paul Ryan, but the president’s budget calls for expanding EITC eligibility to some 13.5 million people at a cost of $60 billion, which would be paid for by closing the never-closing tax loopholes for the rich and getting hedge fund millionaires and billionaires to pay regular taxes on “carried interest.”
  • $300 million would go to a new round of the Department of Education’s “Race to the Top,” aimed at reducing the achievement gap facing disadvantaged students. The new version of RTTT would be named “Race to the Top Equity and Opportunity.” While the RTTT/RTEO program has had critics from the moment of its inception, particularly due to the influence of high-stakes-testing, foundation-supporting charter schools, the president’s budget does include more funding for early childhood education programs, and even some new money for Head Start.
  • Persons with disabilities have been hoping that the president’s budget would call for full funding of the Individuals with Disabilities Education Act, meant to pay for 40 percent of the costs of special education, though the federal government has never topped 18.5 percent of special ed costs. It’s not going to happen, as the proposed FY 2015 IDEA funding is $11.6 billion, roughly the same as the previous year’s, with only a $100 million increase to pay for “Results Driven Accountability” incentive grants to improve special ed services.
  • The administration envisions every state in the nation expanding Medicaid for lower-income persons acquiring health insurance coverage and therefore includes money in the budget for the federal portions, but recalcitrant states seem to be resisting expansion, federal money or no. The budget also calls for $1.8 billion to pay for the continued rollout of the Affordable Care Act on the health exchanges, $1.2 billion of which to be paid by fees from insurers, the remaining $600 million from congressional appropriations. Although Republicans may have stopped their incessant votes on undoing “Obamacare,” their strategy of starving it for funding may mean tough sledding for the $1 trillion budget of Health and Human Services.
  • On the discretionary side of the Veterans Affairs budget, the president is calling again for a Veterans Jobs Corps, with $1 billion to put veterans to work doing work on parks, roads, trails, and natural habitats. It sounds a little like the Civilian Conservation Corps of the FDR era. He has proposed this before, but to no avail.
  • Regarding development aid, USAID administrator Rajiv Shah announced that the budget for the programs that USAID administers or partially administers would be $20.1 billion, which he says reflects a decision to reduce the number of USAID program areas by 29 percent since 2010. Shah’s number probably reflects a number of programs that exist as items separate from the USAID budget authority in the proposal, but specifically on USAID, the president’s budget offers a small boost above FY 2014, but still a major decrease from the agency’s discretionary budget authority of FY 2013.

Perhaps it is worth asking why we ought to devote so much attention to the president’s budget when in all likelihood it may not get much of a hearing on either side of the aisle in Congress. Perhaps the president knows how unlikely serious consideration of his proposals might be, evidenced by his unusual willingness in the staged event at the Powell school to take reporters’ questions so that he could address, not the budget, but the situation in the Ukraine.

Here’s why nonprofits should take it seriously: He’s the president, he has an important bully pulpit at his disposal, he even has the ability to take actions unilaterally on issues due to prolonged congressional stalemates. Unless the president is simply a fan of dumping a couple of thousand pages of text on an innocent public, nonprofits might want to use his proposals as a wedge for bringing important issues into public discussion. Regardless of the PR-tested rhetoric, it’s the actual budget proposals that merit public debate. The president should be leading that, and nonprofits should be pushing for it.—Rick Cohen