As the federal government struggles to execute on time and at scale with the core elements of the CARES stimulus bill, states have to execute their own large-scale responses for unemployed residents and vulnerable, if not already shuttered, businesses. Where do nonprofits fit in governors’ and state legislatures’ calculus of who needs what, and how urgently?
Tim Delaney, CEO of the National Council of Nonprofits, wrote last week in NPQ that “the mounting health and economic challenges ahead will require increasing policy work at all levels and branches of governments” and writes about that topic today. To add to this developing story, we talked directly with leaders of nonprofit associations in three states with large, diverse sectors—California, Illinois, and Minnesota—to learn about what some their COVID-related advocacy priorities are.
Maintain Payments on Nonprofit Contracts
Critical to many nonprofits’ survival, of course, is continuity of state funding. In California, more than 1,000 organizations have signed on to CalNonprofits’ March 21st letter to Governor Gavin Newsom and state legislative leaders requesting immediate policy shifts to protect nonprofit contract revenue despite nonprofits having to shift or delay their services to comply with social distancing requirements. Similarly, in Illinois, Forefront wrote to Governor Jay Pritzker and Illinois lawmakers requesting “suspension of nonprofit contract deliverables and reporting during the COVID-19 pandemic.” According to Forefront’s chief operating officer, Dawn Melchiorre, their recent survey of some 1,300 Illinois organizations found that “over 80 percent are experiencing a significant impact on their services, programs, and revenue.”
CalNonprofits also requested expedited budget modification—a process that can be protracted in normal operating circumstances—so that California nonprofits can make necessary shifts in spending across budget line items to respond to COVID-19. Both organizations requested that their state’s nonprofit organizations gain equal access to their for-profit counterparts of any state-level COVID-19 emergency relief funds.
CalNonprofits and Forefront are advocating that their governors use the executive order process to enact these timely policy shifts. Executive orders issued by state governors are not the same as statutes passed by state legislatures but have the force of law, like in the federal system. State executive orders are usually based on existing constitutional or statutory powers of the governor and do not require any action by the state legislature to take effect.
Addressing Unemployment for Nonprofit Workers
In Minnesota, as in other states, nonprofits can opt out of making monthly state unemployment insurance payments. According to Jon Pratt, CEO of Minnesota Council of Nonprofits, roughly 4,200 of Minnesota’s 9,100 nonprofit employers self-insure in this manner. Nationally, Pratt estimates that over 100,000 qualifying organizations in the US—both nonprofits and local governments—have this status. Instead of paying into the state system, they wait to see if they have an unemployment claim and then reimburse the state. In other words, rather than having to make monthly unemployment insurance payments to the state funds, the nonprofits only have to pay into the fund when they lay off a worker.
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. The CARES Act does include 50 percent coverage of these “catch up” payments. Still, the cost of the other 50 percent is considerable.
Many nonprofits have reserves through an unemployed services trust (UST), which helps nonprofits pay these claims. But the COVID-19 wave of claims would wipe out the reserves immediately. (Also, perhaps not surprisingly, reserves had been invested in the stock market, which has dropped markedly during the pandemic.) The bottom line is that failure to address this funding shortfall could jeopardize a number of otherwise financially viable nonprofit organizations.
What can states do? Pratt notes that his organization has been talking with DEED (Minnesota’s Department of Employment and Economic Development) to see if their state employment agency would pay the difference, as the equivalent state office in Montana has agreed to do. Nationally, the National Council on Nonprofits and UST are also paying close attention to this issue.
Promoting Equity and Transparency Throughout
Jan Masaoka, CEO at CalNonprofits, also raised concern about “COVID Emergency Funds” being created across California and in other states. “So many of the new COVID response funds—whether at community foundations, corporations, or elsewhere—publicize how to donate to the funds but not how nonprofits can apply to them,” she said. After previous disasters, she reminds us, community advocates were too often left saying, “What a disaster the disaster funds have been.” CalNonprofits is advocating for more transparency this time around about how the funds are distributed and where they go.
And regarding how charitable funds are equitably distributed, we are starting to see data at the state level about how marginalized communities are faring in this pandemic. In Wisconsin, for instance, ProPublica reported that “the coronavirus entered Milwaukee from a white, affluent suburb. Then it took root in the city’s black community and erupted.” Blacks make up almost half of Milwaukee County’s 945 cases and 81 percent of its 27 deaths in a county whose population is 26 percent Black, they reported. And according to Bridge, residents of Michigan communities with large Black populations are disproportionately sickened and killed by the coronavirus. There is no question that the COVID-19 outbreak is having a more significant effect on marginalized and poorer communities, particularly communities of color,” Michigan’s chief medical executive, Dr. Joneigh Khaldun, told Bridge. Also, as Debby Warren writes today in NPQ, American Indian communities are also highly vulnerable to the pandemic’s spread.
For Masaoka, these data should certainly influence how state associations and their members advocate. “Inequality accelerates the spread of the virus, and the virus makes inequality worse. It is a vicious downward cycle.” At the same time, she argues, the general public has never been more aware of inequality and its consequences. “This is the time to do policy about it.”
Correction: This article has been altered from its initial form. NPQ thanks Jan Masaoka for the contribution of a complete, more comprehensive quote.