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April 28, 2020; National Council of Nonprofits

Throughout this crisis, NPQ has repeatedly and consistently emphasized the importance of national networks, which can advocate for the best interests of nonprofits and the communities they serve as rapidly as policy is made and implemented. So, we thought we would open a window onto what exactly this means.

The problem at hand was in guidance issued by the Department of Labor that would have cost nonprofits across the country very dearly. It involves tens of thousands of nonprofits nationally who agreed to self-insure for unemployment and make lump-sum payments for unemployment when layoffs occur.

As NPQ noted earlier this month, “Historically, that has been an effective cost-savings strategy because layoff rates in the nonprofit sector tend to be much lower than in the for-profit private sector; the occasional lump-sum payments to the unemployment fund were less costly than monthly payments. Now, because of unprecedented levels of unemployment, this is going to be a tremendous hit to nonprofit employers who self-insure.”

We wrote that sentence when nonprofits leaders believed that CARES at least covered half the payments—and even that, nonprofit state association leaders told us, threatened to sink a number of nonprofits. What is described by the National Council of Nonprofits, however, is far worse. As the National Council writes:

DOL [US Department of Labor] guidance issued late on April 27 instructs states to bill certain tax-exempt employers immediately for 100 percent of the costs of unemployment benefits paid to employees laid off as a result of the COVID-19 pandemic. And worse, the guidance informs states that if they show compassion and forgive nonprofits of the burden of these crippling expenses, the federal government will shortchange the state for much of those costs—despite express language in the CARES Act to allow states to interpret their own unemployment compensation laws “in a manner that would provide maximum flexibility” to those nonprofit employers. The Labor Department’s draconian guidance declares that affected nonprofits must pay, they must pay now, and any state that cuts the nonprofits slack will be punished by the federal government. At a time when nonprofits are dealing with unprecedented levels of need in their communities, DOL decided to take even more money away from this vital work—and threaten more jobs in the process. Breathtakingly cruel, indeed.

Congress is spending trillions to keep people on the job and called on the Labor Secretary to provide the states “maximum flexibility” on the issue. Yet this misguided guidance from the Labor Department fixates on the word “reimbursing,” forcing an unnecessary and burdensome double-reverse reimbursement: First, nonprofits must divert funds from paying their current employees and conducting operations for their communities in order to reimburse the state for the full cost of benefits paid out. And then nonprofits must wait without crucial operating funds until overburdened state unemployment offices can find the time and money to reimburse the nonprofits half of that amount. This absurd guidance will force nonprofits to lay off even more employees to come up with initial funds to pay unemployment bills and curtail serving their communities. The White House and Congress must step in immediately to reverse course and enable America’s charitable organizations to serve their communities to the best of their abilities in these difficult times.

Here is where the network comes in. Yesterday, the National Council cohosted a town hall where the issue was brought up. The issue was apparently surfaced through analysis of DOL guidance by David Heinen of the North Carolina Center for Nonprofits (Problematic DOL Guidance on Nonprofit Unemployment…and How to Fix It). The event was cohosted with two state associations of nonprofits in New York—the New York Council of Nonprofits and Nonprofit New York. The guest presenters were the state’s two US Senators, Minority Leader Chuck Schumer and Kirsten Gillibrand. Here is a recording of the webinar that includes a clip of Chuck Schumer vowing to fix the problem ASAP.

While the proof is always in the pudding, this is an excellent example of how a national advocacy network can and should work. We hope that you are a card-carrying member, because it takes a national village!—Ruth McCambridge