How far we have come

I’ve written before about the lack of awareness of the role and scope of the nonprofit sector at all levels of government in the US.

Amazingly now, given the severe fiscal challenges of State governments, the sector is being attacked on new fronts. State and municipal administrations are even seeking to impose additional fees and taxes on nonprofits to boost revenue, in spite of these being the very same organisations that are already massively subsidising the delivery of essential services.

A report by the National Council of Nonprofit Associations shows these trends starkly. Tim Delaney, their CEO, described to me the scale of the problem. The vast majority of the sector’s interaction with government takes place at the State level of below, yet 48 of the 50 states are in serious financial difficulty. In Arizona they have sold the state building and the government is leasing it back just to bring in some short term cash. This fiscal crisis is leading on to three broad trends which are hurting nonprofits and those who use their services.

Firstly, many programmes are being slashed or simply stopped all together, and these include the programmes which are providing essential support to those most affected by the recession.

Secondly, government is getting worse and worse at contracting with the sector, with agreements signed sometimes a year after work began. In New York over 75% of contracts with the sector are signed late. California owes the sector more than $2bn and was paying some organisations with IOUs at the end of the last budget cycle.

Thirdly, and most shockingly, governments are seeking ways to bypass tax exemptions and create new taxes and fees for nonprofits to pay. Examples include taxes in Minnesota on streetlamps outside your office, taxes on sick-bed occupancy in Cleveland, and taxes on any students you may be teaching in Pittsburgh. Remember that it is almost unheard of for a nonprofit to recover the full cost of service delivery from the government here in the US (hence there is so much interest in our work on full cost recovery). Nonprofits are already massively subsidising the delivery of essential services, and yet their tax exempt status has made them a prime target for additional fees.

Tim believes the worst may yet be to come. He argues that because of the lag time in the recovery (first the market has to recover, then business have to recovery, then government has to refill its coffers and finally the sector will be funded again) it may take until the end of the decade for things to get back to how they were before the crisis.

There is huge synergy between the work of NCNA and ACEVO and I am really excited about building the partnership – we have a lot to share. The situation here is completely unsustainable and NCNA are working on their own version of the “Big Offer” to break the cycle, presenting to government the reasons why they need the sector now more than ever to fix the expensive social problems. But they have a tough job ahead as much of the architecture that we take for granted in the UK (such as the Office of the Third Sector, the Compact, Capacitybuilders and the Social Investment Business) simply does not exist here. Tim’s first job is to get a seat at the table, and for his members to have seats at the tables of government in each State. It’s a humbling reminder of how far we have come in the UK over the last decade.