How can nonprofits at the state and local level influence the federal policies that affect them? While large, national organizations have staff and offices in Washington that represent their interests, nonprofits on the front lines have a harder time being heard, even though federal polices can have an enormous effect on their work.

In the fall of 2000, four national nonprofits, the Advocacy Institute, the National Center for Responsive Philanthropy, OMB Watch and The Union Institute, put together an online survey asking nonprofits around the country to rank ideas on things the next president can do to strengthen the nonprofit sector. Project sponsors launched the online initiative to give small state and local nonprofits a chance to tell the new administration what their needs are. Over 1,000 nonprofits from every part of the country responded. An advisory committee of state and local nonprofit leaders then held a series of virtual meetings to generate specific recommendations on the top ranked items.

The result is The Nonprofit Agenda1—25 detailed recommendations that would increase resources, enhance our ability to serve communities and promote civic engagement. They reflect the top-ranked items from the survey, which were:

• Reduce the corrosive influence of money on politics
• Invest in the people served by nonprofits
• Strengthen nonprofit participation in public policy
• Promote increased giving, volunteering and nonprofit careers
• Simplify the federal grantmaking process
• Strengthen community based organizations
• Strengthen nonprofit accountability

The recommendations were submitted to President Bush shortly after he took office in January, and project sponsors are now organizing a meeting with administration officials.

Early proposals from the Bush administration, including a White House Office of Faith-Based and Community Initiatives, present a curious mix of similarities and differences with the nonprofit agenda articulated here. Where similarities exist, nonprofits will need to be proactive in influencing the implementation of policies that have only bare outlines. Where there are differences, nonprofits need to educate federal policymakers on the negative impact some current proposals could have. State and local nonprofits will play a key role, since many of the proposals directly affect programs they support or operate.

One example of this incongruous medley is President Bush’s tax plan, which includes provisions for increasing charitable giving by allowing non-itemizers to deduct charitable contributions from their taxes and permitting people age 59 and over to use funds withdrawn from individual retirement accounts for charitable contributions without tax penalty. Both of these proposals were included in The Nonprofit Agenda.

However, the administration is also proposing to eliminate the estate tax, which affects only the wealthiest two percent of Americans and provides a major incentive for bequests to charities and foundations. The Treasury Department has predicted that elimination of the estate tax would reduce charitable bequests by $5-6 billion a year. A 1997 study commissioned by Independent Sector projected the loss at $7 billion a year. Actual losses could be higher, but whatever the final number, elimination of the estate tax would substantially offset expected gains in giving from the non-itemizer deductions or the IRA rollover. The Nonprofit Agenda opposes repeal of the estate tax, since it would cause “increased concentrations of wealth inconsistent with a democratic society.” The document calls instead for revisions protecting family farms and small businesses.

Recognizing that nonprofit advocacy efforts will be ineffective until the influence of money in politics is minimized, nonprofits ranked campaign finance reform as their number one priority in the online survey. The Nonprofit Agenda proposes a ban on soft money, public financing for federal campaigns and expansion of nonprofit advocacy rights. The president has expressed support for a limited ban on soft money, and several bills on campaign finance reform have been introduced in Congress. The primary bill, sponsored by Senators McCain (R-AZ) and Feingold (D-WI), would prohibit labor unions and corporations from paying for broadcast ads that mention a federal candidate within 30 days of a primary or 60 days of a general election. The failure to exempt charities appears to be an oversight, correctable by amendment, since charities currently have the right to air ads for public education and lobbying purposes regardless of proximity to an election.

The language of the president’s faith-based initiative embraces many of the ideas suggested by nonprofits but emphasizes the expansion of “charitable choice” as the vehicle for providing federally funded services through religious congregations. This is contrary to constitutional and practical reservations expressed in the recommendations. The reports states, “Charitable choice is a concept that has general appeal, but the devil is in the details. While the concept of delivering services through organizations that are close to communities and driven by a sense of mission makes sense… many secular nonprofits, including those affiliated with religious organizations, are also close to their communities and driven by a sense of mission. Their contribution and potential should not be ignored.”

Additional administration proposals that are compatible with nonprofit recommendations include simplification of the federal grantmaking process, training and technical assistance for groups that wish to apply for federal funding, and a special emphasis on grassroots organizations. The new White House Office of Faith-Based and Community Initiatives provides for five liaison offices in the departments of Health and Human Services, Housing and Urban Development, Justice, Labor, and Education. These offices could be valuable resources for nonprofits if the information and assistance they offer is made equally available to religious and secular organizations.

The Nonprofit Agenda seeks to strengthen the historical partnership between government and nonprofits through special liaisons in all federal agencies, not just the five with offices for faith-based initiatives. The mission of these liaison offices must be broader than merely brokering the federal grantmaking process. By improving communications, federal agencies can get input from nonprofits in the development of policies and regulations that impact the communities we serve. The report emphasizes that this collaboration should take place in the regional and local offices of federal agencies so that state and local nonprofits can participate. It also calls for expanded use of technology, including government Web sites, to strengthen the ties between nonprofits and the federal government.2

While President Bush has stated that federal funding should be based on program results, he has proposed no mechanism for determining what those results should be or how to measure them. The Nonprofit Agenda recommends that federal agencies consult with nonprofits in determining performance goals and measures in order to ensure that program goals fit community needs and are reasonably measurable. Although the Government Performance and Results Act does not require nonprofit input, federal agencies are free to seek it, and nonprofits should take advantage of the new faith-based initiative offices to make their views known.

The nonprofit sector is not a substitute for adequate government programs. Increased input and simpler grant procedures will not help the people served by nonprofits unless there is a corresponding increase in funding for the programs involved. The nonprofit community has recognized the importance of this point by ranking investment in people served by nonprofits as its number two priority—second only to campaign finance reform. If tax cuts eat up too much of the surplus, and if funding for human services programs, environmental cleanup and education proves inadequate, the president’s faith-based initiative will simply not succeed.

During the coming months it will be crucial that nonprofits add their voices to the debate over tax policy, government priorities, program goals and performance measures, and the role of religious congregations in providing government services. In order to influence these outcomes, state and local nonprofits must significantly increase their public presence by staying informed3 about emerging policy trends and breaking developments, meeting with their representatives in Congress and district staff, commenting on proposed programs and rules at federal agencies, and educating their home communities about their work.

1. Download the full text of The Nonprofit Agenda at the OMB Watch Web site.
2. See the U.S. Nonprofit Gateway and the new federal Web portal, FirstGov.
3. Signup for OMB Watch’s bi-weekly online newsletter, “The OMB Watcher,” or send a blank e-mail.

While applauding the limits on contributions in the campaign finance legislation, nonprofits have several concerns with the bill introduced in late January by Senators McCain (R-AZ), Feingold (D-WI) and Cochran (R-MS). The bill’s key provision prohibits “soft money” contributions to political parties; however, nonprofits fear that overbroad language would restrict some legitimate advocacy activities.

The current draft prohibits unions and corporations (including most nonprofits) from referring to federal candidates in broadcast communications made within 30 days of a primary or 60 days of a general federal election. It covers a range of broadcast communications, including paid advertisements and public service announcements.

Nonprofits with 501(c)(4) or 527 status would be allowed to broadcast ads referring to federal candidates within the 30/60 day windows, provided they disclose the names and addresses of anyone contributing $1,000 or more and payments over $200. Social justice groups have expressed concern that disclosure requirements might expose contributors to the threat of violence from extremist opponents.

Another concern is McCain-Feingold’s broad definition of “coordination” with a federal candidate. Federal law currently defines any corporate activity undertaken at the suggestion of a candidate, party, or campaign as coordinated activity—equivalent to a political contribution. If enacted without revision, McCain-Feingold would broaden the definition of coordination, potentially prohibiting many otherwise innocent activities.
OMB Watch will continue to monitor the progress of this legislation. As the debate in Congress unfolds, a number of changes are likely.

Kay Guinane is counsel and manager of the Community Education Center at OMB Watch.