Immediate Attention Needed: Oregon Nonprofits and the People We Serve are at Risk

 

Unless Congress acts before Dec. 31, when federal budget cuts are due to take effect and personal taxes set to increase, Oregon communities will lose tens, possibly hundreds, of millions of dollars, severely impacting many of the people that we serve as well as the very fabric of the nonprofit sector.

 

What is Sequestration?

 

Federal spending cuts of $1.2 trillion over 10 years are scheduled to phase-in starting Jan. 2, 2013. These cuts, referred to as sequestration, were caused when the Congressional "Super Committee" charged with recommending a deficit reduction plan failed to reach an agreement. Sequestration is part of the so-called "fiscal cliff," which includes the scheduled expiration of Bush-era tax rate cuts for all taxpayers on Dec. 31, and a reversal of Obama-era payroll tax reductions that act together to effectively raise taxes, leaving individuals with less money to pump into the economy. In addition, the Congressional Budget Office has said the pending federal spending cuts and tax rate hikes would trigger a recession. The fiscal cliff is very much a human cliff and something that Oregon nonprofits must pay attention to as the consequences for the individuals we serve.

 

There are four specific ways that the fiscal cliff hurts nonprofits and the people we serve:

 

1. Reduced federal funding and cuts to public programs. Across the board spending cuts mean cuts to public services. Many of the programs that are at-risk of being cut include federal funds that are granted to the states and then implemented by nonprofits through grants or contracts. As an example taken from Under Threat, a report by Sen. Tom Harkin, Chairman of the Senate Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies, the following cuts could be put into place in Oregon:
 

In addition, cuts to programs like Medicaid, food stamps, Head Start, and other critical programs also pose challenges for individuals served by nonprofits. It is extremely difficult to get exact numbers on the human impact (lost jobs, lost services) as there are multiple proposals and plans for cuts, but by NAO rough calculations, tens of thousands of jobs are at stake, and Oregon stands to lose tens of millions dollars in vital services. Several reports are available for more specific information about the federal cuts in Medicaid, child welfare and federal education programs.

 

 

2. Possible reductions to the charitable deduction. Some proposals for deficit reduction include weakening the charitable giving incentive or placing general restrictions on itemized deductions for taxpayers. There are several different plans being floated which would cap charitable or even all itemized deductions. Several plans propose caps on charitable giving anywhere between $17,000 to $50,000/year. Those plans are being looked at favorably by both the Democrats and the Republicans as a means to raise revenue, reach compromise on no or limited tax increases, and close so-called loopholes. The effects on charitable giving could be catastrophic. The Giving in Oregon Council conducted a report for the Oregon Community Foundation (OCF) entitled Giving in Oregon - 2011 Interim Report. The report states that, "despite Oregon's higher than national average unemployment rate and lower than national average incomes, Oregon consistently ranks above average in terms of individual giving, and in 2009 ranked 19th, ahead of California (ranked 31st) and Washington (ranked 36th)." The proposals to cap tax exemptions for giving at any rate would affect Oregon giving broadly, but especially at the highest levels of giving, where again, Oregon has among the most generous donors in the nation. The OCF report continues, saying, "the wealthiest Oregonians (those making more than $200,000/year), who in 2009 gave an average of 3.4% of their incomes, compared to an average for wealthy Americans of 2.95% nationally." 

 

3. Greater burden of caseload onto nonprofits. As federal and state grants are cut for specific human service programs, there is a significant expected off-set of those services onto the nonprofit sector. Additionally, the higher unemployment as a consequence of going over the fiscal cliff will increase demand for nonprofits' services particularly in healthcare, human services, education, and employment services. There are no good numbers yet indicating what the off-sets may look like, but it's clear that Oregon nonprofits, already stretched by an anemic economy and slowed charitable giving, will not be able to fill the gap created by this new caseload.    

 

4. Slow economic growth impacts support for nonprofits. Oregon nonprofits are already struggling to recover from the last four years of recession. Further increases to unemployment not only undermine quality of life in general, but it also depresses individual and corporate giving. Reduced giving means potential cuts to nonprofits' programs, operations, and personnel creating a vicious cycle of unmet needs for many of Oregon's most vulnerable citizens.

 

Jim White, NAO's Executive Director, stresses, "there are far-reaching implications for the fiscal cliff that include issues all Oregonians should be concerned about, and there are specific issues that would be catastrophic to nonprofits and devastate the social safety net that cares for our most vulnerable Oregonians."

 

NAO asks Oregon nonprofits to take action!

Speak Up: Let the administration and Congress know that sequestration is not an option (Here's information on how best to reach your representatives.)

Advocate for the charitable giving inventive: Let your congressional representatives know they must protect the charitable giving incentive.

Insist that nonprofits have a place at the table:
We need to all work together, and nonprofits must be part of the discussions if the intent is to off-load cases for human services from the public sector to the nonprofit sector.

Strengthen our collective voice: Our voices are stronger together so let NAO know how the fiscal cliff will impact your organization and the people you serve. What discussions have you had with relevant public officials about your programs? Contact Jim White at jwhite@nonprofitoregon.org or Carrie Kaufman at ckaufman@nonprofitoregon.org.
 

NAO will continue to update our sector as this issue moves forward in the coming weeks.