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General Ramblings: Two Imperatives

By Paul Clolery - December 31, 2013

The year-end talk around the sector was of fundraising and cash. The big #GivingTuesday promotion was held a second time last month to significant growth for that social media-driven event. The early part of this month will be the release of data regarding where those donors came from and if they gave early and often through the holiday season.

We’ll soon know if #GivingTuesday heightened giving or if it just moved cash around. It undoubtedly brought in some new donors for the event. The question to be answered is if those donors gave once and thought that they were done.

The U.S. economy is doing better and giving has seen an uptick. The challenge is whether Americans can yet afford to give substantially more. This is why sector leaders must engage in a two-track strategy this spring. One track is external, the other internal.

The external track is on Capitol Hill and in every state legislature in the nation. The charitable deduction and budgets for programs for which the states contract with nonprofits are under close examination. The federal budget deal struck last month eased some of the forced funding cuts – so-called sequestration. Make no mistake: There are still dramatic cuts in the federal budget. What the budget did not mitigate in the potential federal tax implications was basically how to raise significantly more revenue. That’s where the federal tax deduction comes into focus.

The American Enterprise Institute (AEI) estimated the effects of capping the charitable deduction in a study “Give Til It Hurts?: The Great Recession, tax policy, and the future of charity in America.” It projected that capping the federal deduction at 28 percent for the nation’s highest earners would mean a more than 4 percent drop in giving at that level and that secular giving would dip by more than 7 percent as a result. Hitting the deduction will hurt the broader sector.

Government is the largest purchaser of nonprofit services. Lawmakers must be convinced that the combination of budget cuts and then restrictions in the ability to generate other income will damage the nation’s social safety net. They must also be swayed that paying on time is essential. With all of the rules and regulations involved in government contracts, perhaps nonprofits should insist on late payment penalties.

 

Sales Pitch

Federal and state officials must be converted to advocates for nonprofit sector services and be sophisticated enough to be willing to pay for them.

Those contracts have a serious impact on the second track, internal economic issues at nonprofits. The negotiated contracts are so barebones that service providers often cannot pay the living wage that staff need. It is quite the contradiction when full-time staff can’t pay their bills or need services while working to ensure the health and well being of others.

Labor isn’t cheap. It is a hard cost. Ensuring that a pool of competent and committed workers remain in the sector should be the number one item on every chief executive’s agenda.

This is not a call to create millionaires. Being able to pay the rent and feed the kids is basic to the American dream that the sector attempts to make certain for everyone.

Saying that a salary exceeds federal poverty guidelines is not a persuasive argument. That guideline for an individual living in the contiguous lower 48 states is $11,490 annually. Suggesting anyone can “live” on that, or that a family of four can survive on $23,550 a year puts stress on the safety net those people are employed to strengthen.

Many aspects of the sector illustrate the old fable of the shoemaker’s kids not having footwear. The tax-exempt sector is a vital element of the U.S. economy and should lead by example and pay a living wage to all.  NPT

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