Nonprofits face fiscal uncertainty
By PETER HIRSCHFELD
Vermont Press Bureau | December 05,2012
Nonprofits across the state could see their funding slashed if Congress can't reach consensus on a deficit-reduction plan before the end of the year, according to the head of a group that monitors the sector.
Nearly $55 billion in automatic cuts could affect everything from heating aid to food banks and harm a nonprofit sector that in many cases delivers critical human services on behalf of state and federal government, advocates warn.
Stuart Comstock-Gay, executive director of the Vermont Community Foundation, which aims to build philanthropic resources in the state, said cuts of that magnitude would heighten the need for human services while diminishing nonprofits' ability to deliver them.
“It would impose a real burden on the people who need assistance and the organizations that provide it,” Comstock-Gay said Tuesday.
As federal lawmakers seek the “grand bargain” needed to avert the fiscal cliff, Comstock-Gay said, nonprofits here are beginning to contemplate worst-case scenarios. Even if a deal is struck, he said, the terms of at least some compromise proposals could also deliver a blow to charitable groups.
That's because some lawmakers want to increase federal revenue by reducing tax deductions and exemptions instead of raising rates. Capping deductions, according to Comstock-Gay, could eliminate the tax write-offs that encourage philanthropic giving, especially among donors in the higher income brackets.
Officials in the Obama administration indicated Tuesday that's not their preferred method of increasing revenue, but “that doesn't mean it goes away, because there's been a lot of interest in that option,” Comstock-Gay said.
“The question for nonprofits is what would the scale of that drop-off be if we eliminated that exemption, and while we don't know the answer, we know there would certainly be some impact,” he said.
Vermont's $4.1 billion nonprofit sector accounts for 18 percent of the state's gross domestic product and is responsible for administering a large portion of the programs and services funded in the state budget. Comstock-Gay said human services nonprofits, like local community action agencies, supplement their state and federal funding with private fundraising.
While Vermont nonprofits are in most cases doing better now than they were at the height of the recession, when year-to-year giving actually declined, he said charitable donations in 2012 aren't keeping pace with inflation and rising demand.
“What we're seeing is donations to nonprofits have already been a little flat this year, so organizations are already in a bit of a pinch,” Comstock-Gay said.
He said nonprofit leaders have begun coming together to discuss contingency planning.
“It's about saying OK, we need to provide housing to people, we need to make sure they have heating oil,” he said. “So how can we accommodate these things and at the same time not lose funding for things like the arts and environmental protection?”