In establishing the national budget, the Executive proposes, and Congress—specifically the House of Representatives—appropriates the moneys.

President Barack Obama’s proposed Fiscal Year 2010 budget just received the House Appropriations Committee treatment—with nonprofit interests among the winners and losers in the final tally.  The dynamic of note to the nonprofit sector revolves around 5 key factors cited by the Committee for its decisions at variance with President Obama’s budget recommendations:

  • If an agency is a managerial nightmare, best get its house in order before asking for a major budget increase (example: the Corporation for National and Community Service).
  • If a program has just been launched with through the stimulus, perhaps with funding not even yet allocated to recipients much less spent on needy communities, best wait until there are some demonstrable results before asking for a program re-up (example: the Strengthening Communities Fund).
  • If the Executive Branch wants to fund a new program, best make sure that Congress has passed legislation authorizing the program in the first place (example: the Choice Neighborhoods program at HUD).
  • If Congress has worked long and hard to reauthorize a program, best the White House carefully consider that fact before zeroing it out (example: the HOPE VI program for redeveloping distressed public housing).
  • If budget recommendations are based on questionable evaluation findings, best to get better data before rescissions and terminations (example:  the Even Start program).

Of course those rationales may be in part covers for successful lobbying by interests for or against various programs, so some of these decisions may simply reflect solid program constituent mobilization.  Nonetheless, the rationales are worth noting for ongoing and future nonprofit budget advocacy.  What is clear is that President Obama is not getting exactly what he wanted, and in some cases, the messages from Congress convey implications that even though Congress and the White House are both controlled by Democrats, they do not always see eye to eye.

Here is part—and only a small part–of the Housing Appropriations Committee FY2010 budget scorecard of particular interest to the nonprofit sector.

Turbulence in the field: cuts in the high profile nonprofit initiatives

The Corporation for National and Community Service took it on the chin, overall and in specific programs.  The appropriators cut $90 million out of the President’s proposed CNCS budget.  Of specific interest to the nonprofit sector, the House cut $15 million out of the $50 million proposed for the much ballyhooed Social Innovation Fund (the Committee also zeroed out CNCS’s Volunteer Generation Fund, authorized in the Serve America Act for $50 million in 2010 and meant to grow to $100 million in FY2014, cuttingly suggesting that the funds were need for other “higher priority initiatives in CNCS”).  The committee also cut $41 million from the President’s request for AmeriCorps Sate and National Grants (though it is still $60 million more than the FY2009 total) for a total of $331.5 million (the committee noted that $89 million for AmeriCorps was provided by the stimulus program, which the committee felt was enough for “putting AmeriCorps on a growth path toward achieving the long-term goal of reaching 250,000 members by 2017”).

Was this a message for the President?  If so, it is one he probably knew when he sent his budget to Capitol Hill.  The Corporation has no leader in the wake of Maria Eitel’s withdrawal for previously unknown unspecified health reasons (though her background as a supporter and flack for Nike’s overseas sweatshop operations got some mention by Nike critics).  With the Administration’s firing of the CNCS Inspector General in a contretemps about his findings about an AmeriCorps grantee in Sacramento—led by now mayor and former basketball star Kevin Johnson—the agency is mired in political controversy.

But the biggest problem facing CNCS is the House’s perception that the agency is a managerial nightmare, as summarized in this devastating paragraph from the committee’s report: “the Committee believes that significant steps need to be taken by the  Corporation’s management to strengthen its policies regarding budget formulation and execution, human capital management, contracting, and information technology processes. The Committee believes that the Corporation’s ability to effectively manage a significant expansion of service programs and initiatives requires a robust administrative governance process and technological infrastructure. The Committee directs the Corporation to provide a comprehensive plan to address these management gaps, particularly deficiencies in financial management.”  Addressing the impending expansion in the Corporation’s program responsibilities as a result of the Serve America Act, the Committee gave the Corporation a very clear vote of no-confidence.

At Health and Human Services, the Committee zeroed out the Strengthening Communities Fund, President Obama’s replacement for the Bush Administration’s faith-based Compassion Capital Fund.  The first phase of the Fund received its initial capital infusion in the American Recovery and Reinvestment Act (the stimulus) and hasn’t even started yet.  The Committee decided to wait until the stimulus version gets implemented and evaluated before re-upping for another $50 million.

The Committee also reminded President Obama about another dimension of role of the legislative branch in the separation of powers, that the White House needs to get legislation that establishes programs before they are put into the budget.  At HUD, the Committee removed the entire $250 million proposed for the Choice Neighborhoods Initiative, with the explanation that the program was “unauthorized”.  Rather, the appropriators took the money and put it into the HOPE VI program for restoring severely distressed public housing, a program President Obama had eliminated, pointing out that the Financial Services Committee had worked to reauthorize HOPE VI and was ignored.

Thumbs up and thumbs a little bit down

Nonprofits have a stake in the entire FY2010 budget, but some programs are clearly critical to many of the readers of Nonprofit Quarterly and this column.

Housing and community development

  • The Committee added $40 million to the President’s request of $310 million for the Housing Opportunities for Persons with AIDS program at HUD, explaining that HOPWA funding” has been virtually flat for the past decade, despite the fact that new communities become eligible for funding each year.”
  • The Community Development fund got $150 million above the President’s recommendation, jumping to $4.6 billion ($700 million above the FY2009 level).  In there is $4.17 billion for Community Development Block Grants (CDBG), $25 million for a Rural Innovation Fund (as requested by the President), $150 million for a sustainable communities initiative, $25 million for the University Community Fund, $151 million for economic development activities, and $18 million for neighborhood initiatives.  Read the economic development and neighborhood initiatives lines as code for earmarks.  The Cohen Report will detail the winners of the earmarks scrum in a subsequent posting.
  • At HUD, the HOME program (one of the capitalized federal acronyms without a meaning) got $175 million more than the White House requested.  This is important to nonprofits because Community Housing Development Organizations (CHDOs), what most readers think of as Community Development Corporations, get at least 15 percent of each participating jurisdiction’s HOME allocation.  That means $300 million of the $2 billion HOME program must go to nonprofits for their affordable housing programs and operations.
  • The appropriators gave a big proportional increase to the Self-Help and Assisted Homeownership program for nonprofits, which had been at $64 million in FY2009 and was proposed by President Obama for $77 million.  The committee allocated the program $85 million, for competitive grants to “national and regional nonprofit organizations and consortia,” including $27 million specifically for the Self-Help Homeownership Program (SHOP), $5 million for capacity-building and training programs, and an impressive $53 million for the Section 4 program which is distributed to CDCs and other local nonprofit community developers through the Local Initiatives Support Corporation (LISC), Enterprise Community Partners, and Habitat for Humanity ($5 million of the $53 million is designated for rural and tribal areas).  The Section 4 money is what usually goes through the Living Cities program, through which foundations provide significant funding matching (or leveraging) the HUD Section 4 funds.  The Committee justified the big number for these national intermediaries by pointing out that the FY2007 Section 4 allocation of $29.7 million generated $1.9 billion in community and economic development activity.
  • Housing providers for senior citizens have to be pleased with an increase of $235 million in the Section 202 program boosting the total to $1 billion, including money for expiring project rental assistance contracts ($128 million) and service coordinators ($90 million).
  • Worth noting is the Committee’s agreement with the Administration in recommending $243 million for the Community Development Financial Institutions (CDFI) program in the Department of Treasury, almost double the FY2009 total.  Included in that total is $80 million for the Capital Magnet Program to increase investment in the development of low and very low income affordable housing and economic development activities in support of affordable housing (this program was supposed to have been funded by allocations from Fannie Mae and Freddie Mac, but their financial implosions made a direct appropriation a necessity).

In the subprime mortgage foreclosure crisis that has enveloped the nation for the past two years, the national nonprofit seen as having been out front and on top of the situation is the Congressionally-chartered Neighborhood Reinvestment Corporation (doing business as NeighborWorks America).  Oddly, President Obama had slated Neighborhood Reinvestment for $166.8 million as its annual federal appropriation, lower than the $181 million it got in FY2009.  The House Appropriations Committee sharply disagreed, adding $30 million to the request—and pulling $30 million from HUD’s budget for housing counseling funds (primarily pre-purchase and foreclosure counseling at this time of the economy, which has been NRC’s specialty).

According to the Committee, while agreeing that counseling funds are important, “foreclosure prevention counseling has been performed extraordinarily well by the Neighborhood Reinvestment Corporation for the past three years and that entity will continue to serve as the lead agency on post-purchase counseling….(I)t does not make sense to duplicate these efforts by significantly increasing HUD’s counseling activities.”  Citing an Urban Institute study commending the NeighborWorks program, particularly its FY2008 administration of $119.8 million in emergency foreclosure counseling funds ($50 million of which it allocated to local housing counseling agencies within 60 days of the enactment of the appropriations bill), the Committee rewarded the Corporation by designating $63.8 million of the Neighborhood Reinvestment Corporation appropriation for NRC’s National Foreclosure Mitigation Program.

Labor, Health and Human Services, Education programs

The budget message on these other federal departments is consistent with the dialogue on the housing and community development groups:

  • YouthBuild was already the recipient of $50 million from the stimulus on top of $70 million in FY2009 funds. Here, the committee cut $14.476 million from the President’s FY2010 request for the program, leaving it with $100 million.  The Committee report politely hints at a desire to see documentation of YouthBuild’s success, remarking that the “YouthBuild program is conducting a rigorous nationwide evaluation of program year 2009 grantees and the Committee looks forward to receiving the results of the evaluation.”  Appropriators also hinted that YouthBuild and its subrecipients might have more money than they can digest, suggesting that “the Committee believes continuity in funding is important for the long-term stability of the YouthBuild program and encourages the Department to consider three-year grants instead of the current policy of two-year grants.”   As the committee summary explained the cut, “further increase not justified.”
  • The Committee clearly loves the Community Service Employment for Older Americans program (grants to nonprofits and public agencies to subsidize part-time work by unemployed older persons with incomes below 125 percent of the poverty level), upping the budget to more than $615 million which is $40 million more than the White House requested—on top of $120 million already provided in the stimulus.  Notable in this budget line is the Committee’s explicit recognition of the “funding cliff” built into the stimulus:  “The Committee’s recommendation is intended to avoid a drastic reduction in the program slot level as funds from the Recovery Act expire on June 30, 2010.”
  • President Obama zeroed out the Even Start program which supports family literacy programs, early childhood education, adult education and parenting education, for low-income families and their children, from birth to 7 years old, whose parents are not in school, are above the State’s age of compulsory school attendance, and have not earned a high school diploma (or its equivalent).  In restoring the program’s $66.5 million, the Committee faulted the administration for relying on flawed 2003 evaluation of the program that “was based on a very small sample (1.5 percent) of Even Start projects, was not representative of Even Start participants and programs, and predated new accountability measures for the program.”
  • All the weatherization groups should be very happy with the Committee, which boosted the funding fro the Low Income Home Energy Assistance Program (LIHEAP) to $5.1 billion, the same as the FY2009 level and a stunning $1.9 billion above the request from the Obama Administration. The Committee’s explanation was that the Obama request of only $3.2 billion would have led to states eliminating LIHEAP assistance to 1.7 million households and reducing average benefits.
  • It was difficult to understand in the original budget request the funding for colleges dedicated to serving minority populations, but the Appropriations Committee’s decisions clarified things.  The 5-year grants to Historically Black Graduate Institutions for endowments, scholarships, and assistance to grad students, got refunded at $61.425 million, exactly as requested by the White House.  The program for Strengthening Predominantly Black Institutions (PBIs), focused on enhancing capacity to serve low- and middle-income African Americans and encouraging college prep and student persistence in secondary and postsecondary education, got almost $14 million from the committee, which was $5.8 million above the White House request
  • The committee topped the Administration’s request for Historically Black Colleges and Universities by $33 million to put $283 million toward the support of HBCUs (plus, Howard University in Washington DC got an additional FY2010 appropriation for $235 million, though the Department of Education communicated concerns about Howard’s internal controls as a result of troubling audit findings).  And the largest increase in this field was topping the Administration’s request by $39 million to appropriate $137 million for Hispanic-serving colleges and universities.
  • Some colleges serve other minority populations.  The program in the Department of Education for strengthening Asian American and Pacific Islander institutions drew a recommendation for $4.575 million, which was $1.95 million more than the request from the Obama Administration, and an almost identical increase helped the fund that assists Native-American non-tribal serving institutions.  An increase of $5.852 million boosted the budget for serving Alaska Native and Hawaiian-serving institutions to $18 million, and the Committee made a very large increase, $11.7 million, toward the $36 million program for strengthening tribally controlled colleges and universities.

The Committee was largely in accord with the Obama Administration’s recommendations for other programs long associated with nonprofit providers:  an increase of $122 million in the Head Start budget to $7.2 billion (on top of $2.1 billion for Head Start and Early Head Start in the stimulus act); $700 million for the Community Services Block Grant (CSBG) for activities such as employment, housing, nutrition, energy, emergency services, child care, job training and placement, parenting education, adult literacy classes, domestic violence prevention, and emergency food assistance, and within which $36 million is set aside for “community economic development corporations (CEDCs) to make loans to or investments in private business enterprises that provide employment, training, and business opportunities for low-income individuals in poor communities;” $24 million for Individual Development Accounts (IDAs); a $6 million increase above the Administration’s budget request to appropriate $133.8 million for Family Violence Prevention and Services and Battered Women’s Shelters; and $2.1 billion for the Child Care and Development Block Grant program.

Worth noting are the areas where the Committee took issue with the Administration’s recommendations on education programs.  While supporting the $10 million requested for the new Promise Neighborhoods program, one-year planning grants for community-based organizations to design comprehensive neighborhood programs addressing poverty and educational outcomes for children from birth to college (the program is modeled on the Harlem Children’s Zone), the Committee diverged from the Administration over its strong support for charter schools.  While authorizing $256 million (including facility incentive grants and credit enhancement for new facilities) to help start 1,300 new charter schools, the total is $12 million less than the White House requested.  The Administration has made support for charter schools a key plank in the Department of Education’s priorities, even keying stimulus money to previously recalcitrant states’ willingness to open up their educational systems to charter schools.  But the Committee was less convinced about the value of charter schools than the Administration:

The Committee notes that there is growing evidence of mixed student achievement in charter schools compared to other public schools. Most recently, a June 2009 comprehensive assessment of charter schools across 16 States found wide variation in performance. In the aggregate, nearly half of the charter schools were found to have student achievement results no different than other local public schools and more than a third delivered learning results worse than traditional public schools. Overall, these studies indicate that more attention should be given to the quality and performance of charter schools as the number of these schools increase over the next several years. Accordingly, the Committee recommends increased funding for charter school grants, but not the entire amount of the Administration’s request. The Committee also recommends new measures designed to increase monitoring and oversight of charter school performance.”

No one should be surprised to find special earmarked grants going to charter schools courtesy of the Appropriations Committee, but the overall flavor of the appropriations report is that the committee isn’t yet quite as sold on charter schools as Secretary Duncan at the Department of Education.

Messages in the text and subtext

The Executive Branch proposes, but it needs the support of Capitol Hill to get the money it wants into specific programs.  There has been a ton of nonprofit attention to the Executive Office of the President, lots of focus on social innovation and other high profile program initiatives of the White House.  But Congressional appropriators possess immense power over the resources—and earmarks—of concern to the nonprofit sector.  The FY2010 budget decisions of the House Appropriations Committee speak powerfully to the nonprofit sector about where additional time and attention must be spent.