A Republican majority in the House of Representatives for 2011, including some tea party activists promising to cut government spending, could be bad news for nonprofits. “For a nonprofit community already worried about service delivery, it’s not going to be a pretty picture,” said Gary Bass, founder and executive director of Washington, D.C.-based OMB Watch.

A showdown between tea party activists and the Republican establishment early next year regarding the debt ceiling could spell gridlock, he said. Congress must approve the extension of debt otherwise government shuts down because it can’t borrow any more money.

“We are entering a time of really blinding austerity,” said William Schambra, director of the Bradley Center for Philanthropy and Civic Renewal at the Hudson Institute in Washington, D.C. It will be a time when government is perceived as way too big, out of control and spending too much. The future of large nonprofits subcontracting with government or living off government-supported subsidies is in question. The nonprofit sector will have to make up its mind whether to fight for spending and higher taxes to preserve government programs as they are, said Schambra.

“Or, it can tap into the American understanding of what the nonprofit sector is, the true charitable sector not an adjunctive government, but grassroots civic organizations that are solving problems on behalf of citizens,” said Schambra. “The latter picture of the nonprofit sector is the one that everyone in the nonprofit sector is foolish, retrograde, etc., not the modern nonprofit sector. I think it would be a terrible waste of the sector’s good will among the American people to pursue that course, but I am afraid it will,” he said .

“The American people right now are very much angry with large bureaucratic institutions that are expensive and ineffective; my fear is that the leadership of the sector doesn’t understand that,” said Schambra.

The last time there was a shutdown of the federal government was after the 1994 midterm elections — when Bill Clinton was president and Newt Gingrich was Speaker of the House — and the federal government shut down for 21 days.

A shutdown has reverberating impact not just on nonprofits that deal with the federal government through contracts but the people that organizations serve, Bass said, such as those getting food stamps or Social Security, or even in terms of nonprofits doing business with states because of the amount of revenue that comes from the federal government. “It has a snowball effect. It really is quite devastating for the nonprofit sector,” he said.

Steve Gunderson served in Congress from 1980 to 1996 so he was right in the middle of the 1994 GOP takeover and the subsequent government shutdown. The president and CEO of the Council of Foundations, an Arlington, Va.-based coalition representing more than 2,000 grantmakers, Gunderson called gridlock a very risky political strategy. “If we had any lesson at all (from the election), it was an economic message and an indication from the American people that they believe that government doesn’t work and they’re impatient with the lack of government’s positive response. I would not advise them (Congress and the president) to pursue a strategy of gridlock for the next two years because they will pay for that in the 2012 elections,” he said.

Turnover after the 1994 midterms was even more historic than this year, not because of the numbers, but because the GOP had not held the majority for a half-century rather than just four years. The shutdown occurred in an era when there was more interest in government and what was happening, said Gunderson. “There was not an election that was premised on reducing’ the size of government. Today if there was a shutdown, a lot of people who voted [this year] would be pleased,” he said.

The government shutdown in 1995 was devastating for nonprofits, according to Jatrice Martel Gaiter, executive vice president of external affairs for Volunteers of America (VoA) in Alexandria, Va. “People were taking out loans but the economy wasn’t in the same situation it is now. Loans are not as available to nonprofits and individuals as they were in 1995,” she said.

Some VoA affiliates are not getting paid in a timely fashion, if at all, for government contract work already completed, Gaiter said, which hurts because small nonprofits don’t have large cash reserves. Nonprofits often are undercapitalized, living hand to mouth to serve their clients, she said. “If Congress catches a cold, we catch pneumonia,” said Gaiter.

There are reasons for the frequent comparisons to the 1994 mid-term elections. “To understand (President Barack) Obama, you need to look back at history of eight years of Clinton, who came into office, pursued an activist agenda, tried to appeal to his base, and lost control of the Congress two years later but moved to the center and was easily re-elected two years after that,” Gunderson said.

From the Republican perspective, he said the platforms in both ’94 and 2010 were all about economics and the size of government, without getting into social issues. “The challenge that the Republicans have, understanding the diversity of their coalition, is whether they can manage that coalition in the next two years in a way that focuses on economics and the size of government and not get into social issues. If they get into social issues, Independents who supported them [in November] will move away from the party,” Gunderson said.

Diana Aviv, president and CEO of Independent Sector in Washington, D.C., said the big question is how Congress will deal with healthcare reform and deficits. The House majority leader, Eric Cantor (R-Va.) has said he’s aiming to cut $100 billion in federal funding. “We assume it’s not from entitlement programs but from non-defense discretionary programs,” she said.

What hasn’t received as much attention, though, is the impact of gubernatorial and state legislature races, said Bass. Almost 40 governors were up for election this year — including California, Florida and New York — all of whom will play key roles in redistricting next year.

The important work for nonprofits to do early in the 112th Congress is get out and meet the 100 or so new members of the House and their staff. There are lots of new members with no history in Congress, making for a great opportunity for nonprofits to meet new members, Aviv said, be it in the capitol or in their home districts.

“The big change we’ll see next year [2011] is that in the House, and to some degree the Senate, there’s going to be a lot of new staff,” she said, which is allocated based on ratios of the majority and minority. “There is a huge amount of work to be done, in which there will be lots of veteran staff but lots of new faces. It’s a great opportunity to take advantage of that and go out and introduce their program,” Aviv said.

Gaiter called for the nonprofit sector to make its language “more crisp, visual and effective. We cannot have vague abstractions that talk about our services and what they need. We really need to work on our language to make it more clear and compelling,” she said.

Organizations should make sure their voice is heard and engage the American public in the dialogue about the nation’s priorities.

“There are hard choices around fiscal constraint so can we engage in a meaningful and honest dialogue about those choices versus a polarizing conversation that doesn’t actually address the true challenges we face,” said Michelle Nunn, CEO of the Points of Light Institute in Atlanta.

Nunn said voters wanted to see change and believes that hope can be applied in the nonprofit sector. “It should be aimed at civic engagement and involvement in the system, good activism and activation come from a variety of perspectives,” she said.

“There is going to be a changing set of tides in terms of atmosphere in Washington, a nonprofit needs to be gearing itself toward bipartisan efforts. We need to tap into the frustration, anger, fear, optimism, idealism demonstrated in this election and seek engagement and be really clear of the efficacy of the sector to meet the needs of the public,” said Nunn, who’s father Sam represented Georgia in the U.S. Senate until 1997.

“Clearly people are looking for how we can join hands to solve problems,” Nunn said. “There is a huge frustration with the inability of the two parties to work together, and I think service is one of those unifying platforms.”

Sen. Orrin Hatch (R-Utah) is expected to replace Sen. Max Baucus (D-Mont.) as chairman of the Senate Finance Committee while Dave Camp (R-Mich.) likely will replace Sander Levin (D-Mich.) as chairman of the House Ways and Means Committee.

Nonprofits likely will welcome the committee leadership changes, said Schambra, because Hatch is a “moderate Republican” who has a feel for the nonprofit sector, having co-sponsored the Serve America Act with the late Ted Kennedy. The national service legislation was approved in spring 2009. “He is not going to create any serious problems and probably isn’t even going to be as aggressive as Grassley was in terms of looking at nonprofit hospitals, university endowments, etc. That is not Hatch’s style, so some pressure in that respect will be eased up a bit,” Schambra said.

The shift in power could mean significant change that affects the postal community. With Republicans taking control of the House, Rep. Darrell Issa (R-Calif.) is in line to move from ranking member to chairman of the House Committee on Oversight and Government Reform, which has a subcommittee on postal issues.

“More muscle and a high-level focus” on postal service issues means a better chance that something might get done, said Tony Conway, executive director of the Alliance for Nonprofit Mailers, a Washington, D.C.-based coalition. A fiscal conservative, Issa has signaled in the media several times a strong interest in tackling problems with the United States Postal Service (USPS), Conway said, so it’s expected to be one of his top priorities. NPT