Editors Note: This is part one of a two part series, read Part II here.

Are you ready to have a tough conversation? Are you ready to talk about staggering state budget shortfalls and difficult decisions about whether to tax nonprofits or cut programs? Are you ready to become active and engaged citizens in the midst of this chaos? Whether you are ready or not, these threats to nonprofits affect you.

NPQ regularly reports on shifts in policy, practice and budgets at the state and local levels, but information is useless unless we do something with it.

So are you ready? Let’s talk.

Have you joined your state association?  Click to visit NCN for more info.Tim Delaney, president and CEO of the National Council of Nonprofits, will guide us through this uncomfortable conversation. The National Council of Nonprofits is the nation’s largest nonprofit network with more than 24,000 member organizations across the country connected through their state associations of nonprofits.

This will be a discussion in two parts. Today, Delaney describes how state and local governments, starving for revenues, have shifted their fiscal burdens onto nonprofits and foundations in three ways. Tomorrow he will explain why policymakers are shifting their public fiscal responsibilities onto the backs of private foundations and nonprofits – hint: it’s not what you might think. He will conclude with suggested action steps and a request for your ideas.

Again, this is a conversation. NPQ invites you to add your observations and assenting or dissenting opinions to give body and life to this discussion.

Three dangerous policy trends threaten the missions of nonprofits across the nation. These trends are interrelated and need to be addressed proactively with the nonprofit sector’s focused collective energy.

The trends are:

  1. State and local governments shifting their fiscal burdens onto nonprofits and foundations;
  2. Policymakers still know frighteningly little about nonprofit organizations; and
  3. A steady marginalization of nonprofits from the public policy process that, in turn, represses the voice of the American people.

This purposefully provocative article documents each of these interrelated trends and, through an innovative community dialogue facilitated by The Nonprofit Quarterly, invites you to share your experiences and insights. The mini-series concludes with an opportunity for readers to share your proposed action steps for reversing these dangerous trends.

State and local governments, starving for revenues as the lengthy economic recession continues to wear down their budgets, have been shifting their fiscal burdens onto nonprofits and foundations in three ways: (1) withholding payments they owe nonprofits for contracted services; (2) taking money from nonprofit programs by imposing new fees and taxes; and (3) eliminating essential programs by slashing funds yet expecting others to fill the voids they create. Consequently, people in many communities receive fewer services for basic human needs. Left unchallenged, this shifting of public responsibilities to private entities will continue, as government officials concede that their fiscal conditions are getting worse, not better.

State and Local Governments Are Starving

The Census Bureau reports that state government revenues fell almost 31 percent in 2009, which is the sharpest decline since it started collecting such data in 1951. As states now prepare their next fiscal year budgets, “they are bracing themselves for what is likely to be the hardest year yet in what already has been the most difficult budget periods in modern history,” according to the Pew Center on the States. State budget officials in 40 states forecast an additional $130 billion in deficits over the next two years. The National League of Cities and the National Association of Counties predict that fiscal strains on governments are so severe that “local government job losses in the current and next fiscal years will approach 500,000,” which will “curtail essential services, and increase the number of people in need.”

It gets worse. Consider the following sets of burdens that state and local governments now face: immediate economic drains, inherited ticking time bombs, and recent self-inflicted wounds.

Immediate Economic Drains

  • Unemployment Costs: Unemployment hovers between 9 and 10 percent across the country, with about 15 million Americans out of work, draining resources and depleting revenue streams.
  • Health Care Costs: States’ health care expenditures are skyrocketing – especially with Medicaid – as the numbers of uninsured and underinsured grow and health care costs continue to increase.
  • Stimulus Ending: The federal stimulus dollars rescued state budgets during the last two years, but the end of the program means states will lose $37.9 billion next fiscal year – a massive drop that is so deep and wide that officials have given it a name: the “ARRA cliff.”

NPQ wants to hear from you! Submit your experience of the ARRA cliff and join the discussion.
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Inherited Ticking Economic Time Bombs

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