Eye

Now that President Obama has released a proposed budget for Fiscal Year 2014, the ideological battle of taxation and spending is now joined in something close to what Congress calls the “regular order.” Unlike the past couple of years of federal budget-making, left to a handful of Congressional leaders to negotiate behind the scenes, the President’s proposal, along with budgets passed by the U.S. Senate and the House of Representatives, moves the nation back into the process of congressional committees holding hearings, calling witnesses, issuing reports, and recommending legislation for the floor votes.

The order isn’t quite “regular” in this instance; the President’s budget proposal, several months late, follows rather than precedes the budgets crafted by the Senate Budget Committee, chaired by Senator Patty Murray (D-WA), and the House Budget Committee under Rep. Paul Ryan (R-WI). Nonetheless, nonprofits should be able to do more this time around than lobby members of Congress, who are not very close to or involved in the budgeting process and are often very frustrated by their exclusion. And the President’s budget—all 244 pages of it, plus 508 pages of analytical perspectives—provides lots of specifics for nonprofits and legislators to examine, debate, and plan for.

 Posture toward the Nonprofit Sector

In their focus on message discipline, the nonprofit leadership organizations are trying to utter relatively little that would divide 501(c)(3)s as they advocate for no changes to the charitable deduction. Although, as before, there is no Democratic Party appetite for the President’s returning proposal to cut the deductibility of itemized deductions, including but not limited to the charitable deduction, to 28 percent, charities are nonetheless mobilized. Despite recent research that the impact of the President’s proposal would be minimal and potentially would undo the negative budget impacts of sequestration on nonprofits, secular and religious charities have warned the President not to “tamper” with the charitable deduction, as though the White House were full of mischievous children tinkering with and breaking toys.

Without being drawn into the policy sinkhole of the charitable deduction, which for many nonprofits overwhelms the remaining content of the budget, this analysis focuses on other budget substance.

The President’s budget, however, offers nonprofits a variety of conceptual sweeteners as an overall promise as to what the White House would do for nonprofits. In a release with a compound title drawn from multiple tested messages, “Strengthening and Supporting Non-Profits, Philanthropic, Faith-Based and Other Community Organizations Working to Grow the Middle Class,” the White House largely suggests the following approach toward nonprofits in the budget:

  • In committing to “finance to scale proven community solutions,” the budget puts $49 million into the Social Innovation Fund and adds $4 million for “a pilot to improve grantee access to State and federal administrative data.” Assuming the SIF were funding proven solutions, which the short-lived production of the program hasn’t demonstrated to date, $49 million doesn’t look like a program moving to scale. The posted report on the SIF investments covers only the first two years of SIF implementation through FY2012, and lists all the disbursements but shies away from definitive statements of SIF success.
  • The budget adds $215 million to the Investing in Innovation (i3) program, $150 million for the Workforce Innovation Fund, and $260 million for the First in the World program, the latter focused on “cutting-edge innovations that decrease college costs and boost graduation rates.” While these may or may not be good programs, they don’t necessarily have strong, much less dominant, nonprofit roles as grant recipients or implementers.
  • A variety of programs have comprehensive neighborhood or community-wide emphases, including Promise Zones (largely in HUD), Promise Neighborhoods (the Department of Education, modeled on the Harlem Children’s Zone), Choice Neighborhoods (again in HUD), and Byrne Criminal Justice Innovation Grants (Department of Justice). To the extent that nonprofits mobilize and organize, they can play significant roles in these programs. However, as the Promise Neighborhoods initiative showed, there are a lot of applicants, a relatively small amount of money, and lots of competition for the dollars from other non-nonprofit players and partners.
  • The Administration doubles down on the Pay for Success program, basically adopting the as-yet-unproven social impact bond concept. Started in FY2012, the Pay for Success program allowed the Department of Justice to make two grants for experiments to reduce recidivism and, in FY2013, allocated money for the Department of Labor to consider job training program efforts. For FY2014, the budget includes a new allocation of $185 million for efforts in job training, education, criminal justice, housing, and disability services, plus five percent of the proceeds from sales of excess federal properties to go toward Pay for Success efforts focused on reducing homelessness. Another $300 million will go to a Pay for Success Incentive Fund administered by the Department of Treasury to “provide credit enhancements for philanthropic investments and outcome payments for successful, money-saving services.” The dual theory of the Pay for Success (or social impact bond) program is that the risk is borne by private investors and the taxpayers ultimately save through cost-saving innovations. What hints at the lack of proof of concept is the offer of credit enhancement to foundations to get them to support Pay for Success initiatives.
  • Much like the Promise Zones’ mixes of incentives and the Pay for Success program’s promise of innovative service approaches with rigorous evaluation on their performance results, the budget commits to “a limited number of Performance Partnership pilots designed to improve outcomes for disconnected youth, including young adults who have dropped out of school and are not employed.” The implication is that these pilots would blend discretionary funding from Education, HHS, Labor, Justice, HUD, and other agencies “in exchange for greater accountability results.” No specific funding target is attached to Performance Partnerships in the proposed budget, making it difficult if not impossible to know what resources will be required or how much federal government performance and follow-through can be expected.
  • The Corporation for National and Community Service is largely flat-funded, but has not been cut back in the President’s budget. The $1.06 billion for CNCS is roughly the same as its FY2012 appropriation, capable of supporting, according to budget documents, 82,000 Ame