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Bush's "YOYO" Budget and Nonprofits' Angst
Published on Sunday, June 11, 2006 by the Inter Press Service
Bush's "YOYO" Budget and Nonprofits' Angst
by Katherine Stapp
 
NEW YORK - According to economist Jared Bernstein, the United States has entered the brave new era of the "YOYO" economy -- i.e., "You're On Your Own".

And if President George W. Bush gets his way in the five-year budget proposal now before Congress, those at the bottom of the economic ladder may be more on their own than ever before.

From senior centres to soup kitchens and housing for the homeless, millions of people have come to rely on the services provided by the nation's more than 837,000 nonprofit organisations.

But a recent analysis by Alan Abramson, director of the nonprofit sector and philanthropy programme at the Aspen Institute, a Washington-based think-tank, finds that Bush's 2007-2012 budget would cut federal spending on programmes of interest to nonprofits, outside of the massive Medicare and Medicaid programmes, by 78.6 billion dollars after inflation.

Spending on social welfare programmes, such as job training and community development, would be slashed by 13.6 billion dollars, and a total of 27.2 billion dollars would be cut from a wide array of housing, cash, and food assistance initiatives.

Direct federal funding of nonprofits, excluding support of health services providers, would fall by 14.3 billion dollars.

"Nonprofits are not important in and of themselves, but because of the people they serve," Abramson said in an interview. "And government support is very important in the balance sheet. If nonprofits are forced to stretch themselves thinner, and perhaps raise their fees, they may price themselves beyond the reach of many people."

The 1990s were a boom period for nonprofits in the United States. From 1992 to 2002, the number of charitable organisations registered with the Internal Revenue Service soared from 516,554 to 909,574 -- a 76-percent increase. Much of this expansion was directly due to increased levels of state and government funding.

"But starting last year, we saw a changing budget scenario at the federal level," Abramson said. "There was more concern about the deficit, as well as pressure to spend on the (Iraq) war and homeland security."

Abramson estimates that about 20 percent of nonprofits' resources come from private giving, including individuals, foundations and businesses, 30 percent comes from the state and federal government, while 40 to 50 percent is earned from service fees.

"Federal budget cuts do have a major impact," agreed Erica Greeley, deputy director of the National Council of Nonprofit Associations, which has over 22,000 members in 45 states and Washington, DC.

"There is no way that private giving can make up the difference," she told IPS. "While some nonprofits are trying earned revenues strategies that may be very innovative and entrepreneurial, their historical role is to provide services for those who can't pay for them."

"If the government outsources its safety net services and looks to nonprofits, while at the same time it is cutting their budgets, there will inevitably be a segment of society that is left out," Greeley said.

This is especially bad news in light of the country's widening income gap. According to the latest Federal Reserve report issued last month, the richest one percent of U.S. citizens now own a bigger piece of the pie (33.4 percent) than the poorest 90 percent together (30.4 percent).

Greeley argues that rather than judging social programmes according to easily measured outcomes, policy-makers should take a more cost-benefit, preventive approach.

"In California, for example, it was discovered that the majority of people in juvenile detention went through the foster care system," she said. "One of the biggest draws on California's budget is prisons. If you do the math, investing in the foster care system would clean up the juvenile justice system -- but they're having a hard time grappling with that."

Since the 1980s, there has been a policy shift from funding nonprofits directly to giving money to individuals in the form of vouchers. While this offers greater choice, it also means that charities are forced to spend money wooing potential clients, and in some cases, people actually end up with fewer services.

"The bottom line is that communities have needs and they should be met," Greeley said. "The best way to do this is a partnership between business, government and nonprofits. Each is best positioned to do certain things, so they need to come together and support what needs to happen."

Deborah Weinstein of the Coalition on Human Needs, an alliance of civil rights, religious, labour and professional groups, said that even some of the biggest nonprofits, like Catholic Charities USA, have been "completely up front in saying that they provide vital services, in partnership with all levels of government, and you can't take that money away and expect them to do their work."

New roadblocks are being set up that "make it harder for people to climb out of poverty and to reach stability," she told IPS. "Besides the fact that funds are diminishing, some programmes are now seeking proof of citizenship as a back door to deny services to truly eligible but low-income people -- such as poor, older African Americans born in the south, not in hospitals, without birth certificates and no money to get them."

"We are headed for very difficult times," Weinstein said. "The good news is that the states don't have as big budget gaps and revenues have started to pick up. But at the federal level, the reckless passage of tax cut after tax cut on borrowed money means tremendous pressure to make budget cuts that will in turn affect nonprofits."

Indeed, the Centre on Budget and Policy Priorities estimates that new tax cuts in Bush's 2007 budget will cost the states 38 billion dollars over the next 10 years. By 2016, they would lose 8.1 billion dollars in revenues annually.

Helmut Anheier directs the Centre for Civil Society at the University of California, Los Angeles, which helps train local and regional nonprofits in leadership and capacity building. He says he is "mildly optimistic" about the future of nonprofits in the state.

"If you look at Los Angeles, the whole nonprofit field is much less developed compared to the (U.S.) East Coast," he said. "State and local governments have historically played a more direct role in providing basic social services."

"That's changed over the last 20 years -- nonprofits are growing, but the population is growing faster, and they are forced to play catch-up. Because of California's recent budget crisis, it's been a roller coaster. We're now in a transition period, where the government wants to learn, but doesn't quite know how to pass on responsibilities."

Later this month, Anheier is flying to Scotland for a civil society summit, the CIVICUS World Assembly, where NGO leaders from around the world share their experiences on themes of civic and economic justice.

"After the Cold War, the genie was out of the bottle," Anheier said. "There is one superpower, and many people disagree with it, but the U.N. is ineffective and the question is what can the people of the world do with a system that is unwilling to reform itself? That's what CIVICUS is about."

"And that's where civil society comes in. We have a similar thing happening in California," he noted. "The federal government is not charting a course for society, so the state government and nonprofits are moving into this void. Still, I would like to see a much more visionary framework in place."

Jared Bernstein's new book, "All Together Now: Common Sense for a Fair Economy", puts it this way: replace the YOYO economy with a society based on the idea of "WITT" -- We're All In This Together".

Copyright © 2006 IPS-Inter Press Service

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