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Get Ready For The Fiscal Cliff

By Mark Hrywna - December 3, 2012

As the so-called “fiscal cliff” looms in January, charities are wary of not only losing direct federal funding for some programs but also fear being overwhelmed to make up the difference in potentially lost services.

Sequestration is just one part of the so-called “fiscal cliff” coming at the end of this year. In addition to the automatic cuts that hit on Jan. 2, tax cuts from the administration of George W. Bush and elements of Barack Obama’s stimulus program are set to expire at the end of December unless Congress acts. Also on the agenda is an emergency extension of unemployment insurance.

When the Joint Congressional Committee on Deficit Reduction — often referred to as the Super Committee — failed to reach agreement a year ago, automatic cuts of $1.2 trillion went into motion that will begin Jan. 2, 2013 and continue until 2021 unless Congress takes action. Almost $55 billion will be automatically cut from domestic programs and another $55 billion from defense spending.

The challenge is the required cuts are based on the full federal fiscal year, which started on Oct. 1. The cuts will have to go even deeper in January since one quarter of the fiscal year already will have passed, warned Tim Delaney, president and CEO of the National Council of Nonprofits (NCN).

Many of those cuts will affect a variety of programs either provided by or through nonprofits via federal funding through the state, such as low-income housing and Meals On Wheels. “Those are nonprofit pro­grams that government turns to nonprofits to provide,” said Delaney, pointing to cuts such as $600 million to Head Start, $2 billion for rental assistance, $600 million for disaster relief, $1.3 billion for education, $1 billion for special education and $543 million for Women Infants and Children (WIC), which provides federal grants to states for supplemental foods and nutrition education for low-income women and their children considered at nutritional risk. “As a society, we said through our laws, these are people in need,” said Delaney.

Some areas are exempt, among them Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF) and Children’s Health Insurance Program (CHIP).

The big impact could be on those particular programs that are discretionary in nature, such as money that might go to food banks, or discretionary spending on education at the federal level. But, a number of items would be exempt, said Eugene Steuerle, Institute Fellow and Richard B. Fisher Chair, The Urban Institute in Washington, D.C. Independent of sequestration, the current federal budget is scheduled to decline significantly. “The greater danger is putting the economy in a tailspin,” said Steuerle. “A huge number of things have to give. A lot of the things that are most being squeezed now are activities favored by charities and foundations,” he said.

It’s not just the broad issue of the threat of economic collapse but the rising interest cost on debt that will start to shove aside everything else, he said. It can’t be done as the nation recovers from the recession but it needs to be moving quickly in that direction in the next few years, he said, “or we’re in real trouble.”

“Sequestration itself is a poor means for deficit reduction,” said Josh Gordon, policy director at The Concord Coalition, an Arlington, Va.-based nonpartisan nonprofit. “It’s stupid in the sense that spending cuts are indiscriminate. That’s not the way we should be budgeting and reducing the deficit,” he said.

Gordon said there could be some work done in the lame duck session between Election Day and the end of the year, or Congress could temporarily extend things until the next president and Congress take office.

The Concord Coalition is not opposed to deficit reduction, though too much too soon would be problematic for the economy, said Gordon. The coalition prefers reductions in target areas of the budget predicted to grow the most in the future. Gordon pointed out that no cuts are scheduled to Medicaid and food stamps and Medicare is limited to a 2-percent cut and only targeted at providers, while Social Security also goes untouched.

The direct impact to Martha’s Table from sequestration isn’t necessarily clear but officials at the Washington, D.C.-based poverty fighting charity are certain that the gaps they help fill in will get larger. The need for emergency food has tripled since before the recession and that hasn’t gone away, according to Anne Brookover, director of development at Martha’s Table.

“If families don’t have enough at home, it increases the burden on us, especially on daycare,” said Brookover. “Most families associated with us would be profoundly affected,” she said.

About 95 percent of families who participate in their programs receive WIC.

Michael Bartscherer, interim president of Martha’s Table, said the situation is similar with Head Start. While it might not be a Head Start facility, he said, Martha’s Table would get more people trying to get into its programs if local Head Start programs close or shrink, stretching resources to try to accommodate them, he said.

Chuck Gehring, CEO of Columbus, Ohio-based LifeCare Alliance anticipates a 10-percent cut, which he said could mean losing $180,000 for its Meals On Wheels program. “Ten percent across the board is flippant,” he said. The federal Older Americans Act provides about $2.11 per meal. The alliance fundraises the difference to cover the total cost of providing meals. “The effect would be fairly dramatic,” said Gehring. A loss of $180,000 would mean funding for more than 200 clients who get a daily meal. Those clients could end up in more expensive options, such as assisted living facilities, nursing homes or hospitals, he added.

“Maybe some sequestration will save money but in our world, you’re not going to save anything. I’m hoping cooler heads prevail, but we’re not likely to know until the last second,” said Gehring. Should sequestration occur in January, laying off employees won’t eliminate their costs overnight, said Gehring, since there’s still unemployment that must be paid.

“You can save 10 percent all you want and be tough but agencies cannot afford it, they’re living on the edge now. It’s not been a good five to six years of funding for us,” said Gehring. “In our world at least, it will cause less clients to be served; agencies just can’t take them on,” he said. NPT

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