2013 is shaping up to be a defining year for the nonprofit sector, both locally and nationally. The question for us all to consider is: are we going to define ourselves or be defined by elected officials as part of some grand bargain? Wrapped up in Congress’ fight to find a politically acceptable balance between revenue and spending are complex urgent issues, including tax reform and our tax exempt status, that go to the core of our identity. And this is on top of the unresolved questions Congress averted as part of the post-election fiscal cliff showdown.
As I was listening to the President’s inaugural address, which shared his vision of a democracy defined by mutual obligations to each other, I was struck by the irony of how nonprofits’ work undergirded nearly every aspect of his vision---and yet we have been absent from much of the public discourse and political rhetoric surrounding fiscal cliff negotiations and upcoming sequestration, despite the massive impact these decisions will have on nonprofits and those they serve.
Locally, nonprofits in Illinois have endured the
double punch of doing business in a state that leads the country in lateness
of payments, and is near the bottom when it comes to paying the full cost of services provided to
the state. At the federal level,
nonprofits are likely to absorb the impact of $42.6 billion in across the board
cuts from almost every major federally funded domestic program if a full, or
partial, sequester takes place on March 1.
At the state level, Illinois could lose as much as 8.5% of its total
budget due to significant losses of federal revenue for many critical
programs providing food to families with children and shelter to the homeless. And the outlook for 2013 at the state level is no better. Unless
Illinois Democrats and Republicans can agree on how to fix the state pension
mess, all other solutions, like a debt restructuring bill to pay back unpaid bills to
providers, are being pushed aside.
There’s a lot more at stake for our sector than the survival of the charitable deduction. We need to do a better job conveying our real value. We run the risk of appearing narrowly self interested when our conversations with lawmakers, and messages to the media, focus narrowly on the revenue stream nonprofits stand to lose.
What's at stake is larger than revenue. It’s poverty and homelessness, access to healthcare and domestic violence counseling, educating our youth, and feeding our children – all of which are fundamental services that help buffer the ever widening socioeconomic gap in this country and ultimately contribute to the stability of our communities. This is the message we need to communicate with lawmakers.
Nonprofits are vital buffers for communities across Illinois, whose residents are experiencing increased unemployment and homelessness and hunger. In Illinois, according to the most recent report from the Commission on Poverty, our income disparity gap has increased 40% since the recession hit in 2008. What’s confounding is the disconnect in our public discourse where lawmakers don’t understand a consequence of further cutting funding and other revenue sources for nonprofits, will be the disappearance of these buffers.
To be clear, increased revenues is a cause we all must continue to fight for, and “increased” is a relative term when you consider that in Illinois the funding streams for programs that pay nonprofits to deliver vital services have been slashed 25% over the past decade. The sector needs to continually remind policymakers who slash our budgets that we are a vital economic engine for local and state economies, in the same way that businesses are, contributing jobs and revenue to local economies. In Illinois we are the fourth largest employment sector, with nearly 10% of the workforce. Seventy five percent of the businesses that provide social services in the state are private employers—it’s been estimated that these cuts over the past decade in Illinois have led to a loss of over 18,000 jobs and $2.14 billion in economic activity.
And we need for our leaders to demonstrate they understand that nonprofits are necessary partners to fulfill the intention set by President Obama in to be a nation that “care[s] for the most vulnerable and protect[s] its people from hazards.”
~Laurel O'Sullivan, Vice President, Public Policy, Donors Forum
Laurel -
I wonder if you might elaborate on the following point in your post: "...we are a vital economic engine for local and state economies, in the same way that businesses are, contributing jobs and revenue to local economies."
The equal standing of our sector to the private sector regarding the contribution of jobs and revenue is not clear to this reader. It may help to explain what you mean by "engine" and by "contributing"?
Posted by: Clark McCain | February 07, 2013 at 08:52 AM
Thanks for your question, Clark.
Based on a recent study from Johns Hopkins that we commissioned (http://bit.ly/X9btfq), the nonprofit sector is a significant employer in Illinois. Our sector supports over half a million jobs (517,600), which is more than the number of workers in transportation, construction, and real estate combined.
The wages those nonprofit jobs produce amount to $24.3 billion. When nonprofit employees spend those wages, that money circulates through local economies, producing $459 million in tax revenues for the state, as well as $2.3 billion in federal tax receipts. The circulation of our wages, in turn, helps support other jobs, other wage earners, producing more tax benefit – as well as the social benefit of our work.
Posted by: Donors Forum | February 07, 2013 at 10:02 AM
Thanks for your response, Laurel. Without question, our sector employs many individuals whose wages contribute to the vibrancy of local economies and generation of tax revenues to fund future sector activities. This fact demands recognition and appreciation on the part of policymakers. If your definition of an engine is an organization that uses fuel to create jobs and revenue, then most nonprofits are engines.
I would go on to agree with you that certain nonprofits can be considered to contribute "in the same way that businesses" do in the creation of jobs and revenue. These would be nonprofits who secure their fuel exclusively from private sources such as earned income, fees and philanthropic support (particularly that received from individuals).
However, those that are fueled largely by public sources are certainly employers but are not analogous to businesses as economic engines which create their own fuel. They receive fuel which enables them to do their important work, employ their staffs and add to the cycle you describe.
Of course in using oversimplified labels such as "businesses" and "nonprofits" to describe the world, we are likely to get into trouble. Our sector is an critical part of our society and our economy and should stand on its own merit. Comparisons to other actors in our economy may distract us from the unique role our sector plays rather than accurately describe it.
Posted by: Clark McCain | February 08, 2013 at 02:18 PM
You make some very good points, Clark. But here’s a question: Can the nonprofit sector rest on its missions alone, in this new policy environment? Have our missions protected our community from the threat of sequestration or, at the state level, being underfunded to the point of starvation? Where exactly are we on a policymaker’s list of priorities?
I agree that being painted as a ‘business’ may open a door to some unwanted comparisons or policy making (eg., recent legislative efforts in Springfield demanding more transparency from nonprofits.) But it can also go a long way toward positioning the nonprofit community as an equal stakeholder in public decision-making. Because, so far, we haven’t been. And while nonprofits theoretically receive fuel from government, it is in exchange for services that we provide for the good of the community on government’s behalf. It is not largesse.
My fear is that while we quietly perform to our missions, noses diligently to the grindstone, we risk being pigeon-holed as passive supplicants. The image I have is of Oliver Twist asking for another bowl of porridge. I’m afraid that’s the image policymakers have of nonprofits, as well.
We can’t let policymakers ignore the fact that nonprofits, like other private organizations, have grown in complexity over time. Our community, for the most part, has transformed from being a collection of alms-houses to complex organizations. Our community has practitioners of experience, education and specialized knowledge, all of which lead to innovation and informed practice. We have financial management structures and systems that need to account transparently for both public and private funds. We have governance structures that require responsible oversight and accountability. We bring something to the table and should be at it.
Our sector absolutely plays a special role in our society. Nonprofits are how good happens, but policymakers are overlooking that.
~Delia Coleman, Director, Public Policy, Donors Forum
Posted by: Donors Forum | February 19, 2013 at 01:10 PM