Nonprofits fear big budget gaps due to fiscal cliff
Loss of funding, cuts in deductions may be double trouble for charities
Colorado nonprofit groups are worried about the federal fiscal cliff.
They’re not just concerned whether the nation will fall off that much ballyhooed deadline of automatic budget cuts and tax increases that could send the nation’s economy back into recession. They’re also worried that part of any agreement to avert the cliff will result in even more problems, at least for them.
A proposal to address the fiscal crisis that includes cuts to federal programs that aid some of the same people that nonprofits serve, and a cap on how much in donations taxpayers can deduct from their income threaten to put a crimp on nonprofits.
“The nonprofit community not only helps people in emergency situations, but throughout the year, doing things that strengthen a community and make it healthy,” said Renny Fagan, president and CEO of the Colorado Nonprofit Association. “Our message to the Congress and the president is that nonprofits return manyfold the public investment they receive through the charitable deduction.”
In an effort to forestall additional financial problems, the association is spearheading a campaign to let the state’s nine U.S. senators and representatives know they can’t take any more hits.
More than 160 nonprofit organizations across the state, including half a dozen in the region, have signed onto a letter to that congressional delegation asking them not to support any fiscal cliff compromise that hinders their ability to provide much-needed services.
“During this recession the workload of many of our state’s nonprofits has increased as government programs have been cut and individuals have turned to charitable nonprofits for the services they need,” the letter reads. “Congress cannot continue to cut public programs and expect nonprofits to fill in their gaps and pick up the slack. After years of a struggling economy, nonprofits simply do not have the capacity to continue to bear this additional burden.”
Continuing to cut federal dollars to programs that help the needy is only half of the equation, the letter points out.
Limiting how much charitable contributions people can write off on their taxes would exacerbate the problem.
Some proposed solutions to the fiscal crisis not only include eliminating specific deductions, but also placing a cap on all itemized deductions taxpayers can use.
The nonprofits argue that such a cap would be consumed by fix-cost deductions such as mortgage interest and government taxes, leaving little room for discretionary charitable donations.
Gai Wildermuth-Gunter, program coordinator for the Community Food Bank of Grand Junction who signed onto the letter, said the recession already has caused her charity to operate in the red. She’s fearful any fiscal cliff fix would make matters worse.
The nonprofit is facing a perfect storm of sorts. Not only are donations down and demand up, but grocery prices have gone up, too.
“It’s a scary proposition,” she said. “We just had a board meeting last week discussing what we’re going to do starting in January because we’ve gone into the hole with our budget already.”
Spokesmen for two members of Colorado’s congressional delegation said their bosses are aware of the nonprofits’ concerns. While they appreciate nonprofits’ importance to the community, they said it’s too soon to know what, if any, impact a solution might have on them.
“There are any number of scenarios that could play out in terms of what may or may not be included in a fiscal cliff solution,” said Josh Green, spokesman for U.S. Rep. Scott Tipton, R-Colo. “Negotiations are ongoing and speculation on anything but what ultimately is put on the table for a vote is premature.”
Mike Saccone, spokesman for U.S. Sen. Mark Udall, D-Colo., said the senator believes the main goal in addressing the fiscal cliff is to reduce the deficit without hurting the middle class or the most vulnerable.
That means some tax deductions could be left alone, some capped and some eliminated entirely.
“Senator Udall has said time and again that the only way we can reach a deal is for everyone to set aside their rigid pledges and uncompromising positions,” Saccone said. “All options must be on the table as we figure out the best way forward.”
While Fagan said he appreciates that the lawmakers understand the role nonprofits play, particularly during trying economic times, he’s a bit dismayed that they are on the table at all.
Charitable nonprofits were the first deductions allowed under the nation’s tax laws for good reason: Their services are sorely needed, he said.
“It allows people to freely give away their own money for the public good, and it’s much more beneficial to charities in the public sector than it is a loss of revenue to the federal government,” Fagan said. “Because of the role that nonprofits play in fulfilling services that might otherwise have to be funded by government, it really doesn’t make sense to reduce tax incentives for charitable giving.”
The association has set a Wednesday deadline to get more nonprofits to sign onto its letter before it’s mailed later this week.