News Column

Nonprofits Hurt by Uncertainty of Fiscal Cliff Talks

Dec. 26, 2012

Tammie Gitt, The Sentinel, Carlisle, Pa.

Nonprofit organizations are watching closely as the clock ticks down on the fiscal cliff negotiations as potential budget cuts, tax increases and changes to the charitable deduction create an air of uncertainty around future funding and undermine donations.

Last week, news emerged that President Barack Obama and House Speaker John Boehner had significantly narrowed their differences. Both were offering a cut in taxes for most Americans, an increase for a relative few and cuts of roughly $1 trillion in spending over a year.

Last Thursday, Boehner's Plan B, which would have allowed taxes to rise on million-dollar-plus incomes, collapsed when House Republicans couldn't be convinced to vote for the plan.

Appearing on CNN's "State of the Union" on Sunday, Sen. Joe Lieberman said "it's the first time that I feel it's more likely we'll go over the cliff than not," meaning that higher taxes for most Americans and painful federal agency budget cuts would be in line to go ahead.

"If we allow that to happen it will be the most colossal consequential act of congressional irresponsibility in a long time, maybe ever in American history because of the impact it'll have on almost every American," said Lieberman, a Connecticut independent.

Uncertainty

Economic uncertainty surrounding the fiscal cliff comes at a time when nonprofits are already struggling.

Ann Shields, executive director of Domestic Violence Services of Cumberland and Perry Counties, said her organization relies solely on donations.

"We are totally nonprofit. We get no county money," Shields said. "We really operate on our own."

Earlier in the negotiations, Boehner offered $800 billion in new revenues to be raised by reducing or eliminating unspecified tax breaks on upper-income people. There are more than 100 tax breaks ranging from well-known deductions for charitable donations and the income exclusion for employer-provided health insurance to obscure tax incentives for capturing carbon dioxide emissions or maintaining railroad tracks.

The impact of a cap on the charitable giving deduction on Domestic Violence Services would probably depend upon the level at which the deduction is capped, Shields said. Overall, the organization receives smaller donations from a number of donors instead of a few large donations.

"I can't see them eliminating (the charitable donation deduction) altogether," said Jerry Nicholas, executive director of Cumberland Valley Habitat for Humanity. "That would be bigger than the fiscal cliff itself to the culture of America."

Nicholas pointed to churches as having the potential to face losses related to the changes in charitable deductions.

"At the local level, the churches would have the most to worry about at that cap," he said.

Scott Shewell, vice president for community relations and development at Safe Harbour, said most donors are dedicated to the mission of the organizations they support, so donations are likely to still come in.

"I don't think you'll see people who won't donate at all. I think what you'll see there is people who reduce the amount they donate," Shewell said. "Many people do not donate solely because of the tax benefits."

But there are some who do abuse those tax breaks, using them for the wrong purpose, said Elaine Livas, executive director of Project SHARE.

"Are you giving because you want to help or is it just hiding your money away?" she asked.

Livas said she can understand that nonprofits are worried about being able to raise less money, but her frustration is with those in power who just keep putting off decisions.

"I'm just mad that they aren't getting it done," she said. "People in my kind of world don't get paid if they don't get their work done."

Talk of tax cuts also has an impact on how Americans see each other, Livas said.

"It pits the rich against the poor, which I think is an artificial dichotomy," she said. "It leaves us with a sense that we aren't all in this together."

Effect

Maddie Young, CEO of Big Brothers Big Sisters of the Capital Region, said her organization has potential to see donations affected by income tax increases.

"Larger donors seem to be hesitant to make a commitment or pledge until they understand what will happen with the tax situation," Young wrote in an email. "Many people donate stocks or year-end bonuses or even tax return dollars so as we see people's resources shrink, we will also see those donations go away."

Most donations come from people who make less than $250,000 a year, Young added.

Over the past few years, Big Brothers Big Sisters have seen decreases in funding available to serve children and families in poverty while the need for such services is increasing.

"These cuts compounded with the confusion and anxiety around the fiscal cliff conversation is making donors hesitant to give at a time when the human service community is seeing daily increases in community need," Young said.

Kelly Gollick, executive director of CONTACT Helpline, agreed, saying that her organization's capacity has already been affected by budget cuts.

"As an organization, I would say we have been cut so much by the government that we have been planning even before the fiscal cliff stuff to raise more money," she said. "The quicker it gets resolved, the more we'll know what we're dealing with."

Across the board cuts triggered by the fiscal cliff are definitely a concern for nonprofits, Shewell said. For Safe Harbour, that would mean a loss in funding from the Department of Housing and Urban Development.

Shewell said the cuts wouldn't affect Safe Harbour immediately, but would make an impact on the next fiscal year, which begins in July.

But, the federal fiscal battle isn't the only budgetary battle nonprofits face. Even if the fiscal cliff is negotiated away, local nonprofits face a battle to maintain funding in the state budget.

"As far as a lot of nonprofits are concerned, this is just the beginning of not knowing," Gollick said. "The message we need to get out is that it's just not OK to continue to balance the budget on the back of human services."

Politicians should turn their attention to other programs when looking for places to cut, Livas said.

"Don't cut it from the poor because they're the ones that can't say anything about it," she said.

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The Associated Press contributed to this report.



Source: (c)2012 The Sentinel (Carlisle, Pa.) Distributed by MCT Information Services


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