Sequestration has been a confusing topic lately with the top questions being: ‘Do I even need to pay attention to this?’ and ‘Is there going to be any real impact to me?’. With all of the talk of the fiscal cliff fizzling out, people are suggesting this is all political hype and that Congress is shouting ‘Wolf!’ one too many times. However, some of the very real impact of the sequestration is starting to hit home, particularly on state funded education programs. One of our interns, Jasmine Cook, is a student at the University of Maryland and we invited her to write about her personal experience with how the sequestration is affecting her.
Growing up in the Prince George’s County Public School System, the topic of budget cuts is by no means foreign. At the prime age of nine, I attended a school board meeting to defend against the disbandment of the Talented and Gifted Program (TAG), of which I was currently enrolled. My view was limited at the time, but it was only my first of many tense encounters of financial stalemate. In eighth grade, the orchestra was cut and I traded in my violin for a French horn; the façade of any influence over the system disappeared and adaptation became crucial. In high school, two out of the three academic programs stopped allowing students to enroll from neighboring districts, in order to cut transportation costs. Students feared displacement and teachers experienced layoffs; the Russian program was diminished to what was assumed to be eventual termination. However, it was public school. No tuition fees meant little to no say, and the realization both angered and jaded my fellow students.
Non-profits may lose the discount for postage rates but could that be just the push they need to focus on using the internet to raise funds? In early October 2012, the United States Postal Service (USPS) announced their proposal for postage increases to take effect on January 27, 2013 and which has since passed the Postal Regulatory Commission (PRC) review.
Opposition to the new rates includes among its leaders Jason Lee, General Counselor for the Association of Fundraising Professionals, and the Alliance of Nonprofit Mailers, a US national coalition of nonprofit organizations. Opposition retorts that nonprofits are besieged from a budget standpoint as our nation’s leaders attempt to rein in federal spending and this assault will impede the efforts of nonprofits to fill in the gaps for state and local government aid programs for the poor. The argument is that the legislation will punish nonprofits and the people they serve, and the USPS should not punish nonprofits for its own inability to control its own costs. Ultimately, in the long run, nonprofits will end up using less mail as a response to the change in rates, which will in the end hurt the USPS.
The New Markets Tax Credit (“NMTC”), under IRC §45D, was created as part of the Community Renewal Tax Relief Act of 2000. This act encouraged qualified equity investments (“QEIs”) in community development entities (“CDEs”) directed towards low-income communities. President Obama recently extended the NMTC in January of 2013 as a part of the American Taxpayer Relief Act of 2012. The NMTC rewards investors with a 39% tax credit of the total QEI, which is split over a seven year period. There is also additional return to investors who make a low-return project viable.
The CDEs also benefit with a 25% reduced cost of borrowing and lower interest rates than could otherwise be attained. Programs must apply to become CDEs; awards totaling up to 3.5 billion are announced annually. The stimulated investments lead to job and material improvement in the residents of struggling communities. Many CDEs serve as intermediaries for providing loans and investments in low income areas, which lead to increased economic activity.
To qualify as a CDE, the program must be located in a distressed community which displays at least one of the following characteristics:
It’s not just you. If you work in the nonprofit sector in the D.C. Metro region, you may be feeling like there has been an ongoing decline in revenue and an increase in demands for your services. You aren’t alone. The Center for Nonprofit Advancement released its fifth regional study of nonprofits in the Greater Washington D.C. area and the study indicates there is some positive news in spite of ongoing declines in revenue and increases in demands for services.
The study’s key findings note that the overall diversity in funding streams is continuing to shrink among area nonprofits while more than half of study participants anticipate increased demand for their services. More than half of the participants are operating with 3 months or less of reserves.
The good news, according to the Center, is that “nearly half have heard from funding sources that they will maintain or give more in 2012.” That is significantly improved over the state of things in 2009, when only 15% were reporting confirmed support.
Read more about the study here.
The Philanthropy Journal has released its special report on Corporate and Foundation Giving for 2011 which examines trends and expectations, along with providing information about what corporates, foundations, and nonprofits need from each other now.
After the economy collapsed in 2008, foundations and corporations seriously cut back on their funding of nonprofits. Many of the plans put in place after the fall-out have become an ongoing business strategy even after some bounces towards recovery. The fact that I’ve seen the word “austere” (defined as a rigorous economic approach of no luxuries or comfort) used more in the media over the last 24 hours than I have in years is just an indication of current attitudes.
So how to approach corporate and foundation grantors in this climate? The Philanthropy Journal’s study urges grantseekers to be clear, candid and work on building purposeful partnerships.
For more detail on their advice and the study findings, visit the Philanthropy Journal.