Federal and state nonprofit public policy update

From the National Council of Nonprofits – Washington, D.C., March 22

New Report: State Budgets Threaten Nonprofits – As state governments across the country grapple with severe budget deficits, many are placing extraordinary burdens on nonprofits. The National Council of Nonprofits prepared a special report documenting how states are delaying contract payments to their nonprofit partners, slashing funds for essential programs, and imposing new fees and taxes on 501(c)(3) organizations. The report encourages leaders of governments, foundations, and nonprofits to work together to address challenges posed by state budget crises.

House Passes Historic Health Care Reform – On March 22, the House voted 219-212 to approve the Senate-passed Patient Protection and Affordable Care Act and will send it to President Obama for his signature, which could occur late Tuesday or early Wednesday. The legislation, among other reforms, extends access to coverage for the uninsured and prevents the denial of insurance for pre-existing conditions. The law guarantees most nonprofits access to newly created health insurance exchanges (on an equal basis with businesses) and includes the small employer credit that would provide assistance to small nonprofit employers to extend health insurance benefits to their employees. The House also passed a bill making changes to some of the funding and benefits provisions of the Patient Protection and Affordable Care Act. The package of revisions, or "fixes," was passed under a process known as "budget reconciliation" calling for expedited consideration in the Senate, prohibiting filibusters, and allowing passage by a simple majority of those voting.

Hiring Incentive Now In Effect for Nonprofits, Other Employers – On March 18, President Obama signed the Hiring Incentives to Restore Employment Act, a $17 billion dollar package that includes temporary tax incentives to encourage employers to hire new workers. The main job-creation incentive allows most employers, including nonprofits, to keep the employer share (6.2 percent) of Social Security taxes on certain new hires. For a newly hired worker earning $40,000 a year, the payroll tax forgiveness incentive would save the nonprofit about $1900 through the end of the year. The National Council has posted IRS information and the five things nonprofits should know about the payroll credit on our new website.

Senate Passes Giving Incentives, Economic Relief – The Senate took a major step toward restoring important charitable giving incentives and other provisions that benefit the nonprofit community when it approved the American Workers, State and Business Relief Act of 2010 (H.R.4213) on March 10. The legislation would extend the IRA rollover and other charitable giving incentives through 2010. Additionally, it would provide temporary funding relief for defined benefit pension plans sponsored by for-profit and nonprofit organizations, including the Girl Scouts and Easter Seals. To help states, it would provide an additional six months of federal payments to the states to cover Medicaid costs and extend unemployment insurance and COBRA benefits through 2010. The bill must now be reconciled with a version the House passed last year. 

Nonprofit Capacity Building – Despite the administration’s considering not funding the Nonprofit Capacity Building Program, members of Congress are the ones that exercise the "power of the purse" by developing and passing spending bills. State associations and their nonprofit members can make capacity building a priority by urging their U.S. Representatives to call for full funding of this important program. For more information, visit the NCN website.

Earmark Reform: Businesses Need Not Apply (in the House) – Earlier this month, the House Appropriations leadership announced that the House will no longer approve requests for "earmarks" that are directed to for-profit entities. "Earmarks," the nickname for spending decisions in appropriations bills that fund specific projects in states or congressional districts, have become controversial in recent years as legislators have been accused of yielding to pressure from business lobbyists and major campaign contributors to fund pet projects. Under the new rule, Congress can still designate funding for community projects run by nonprofit organizations or local governments. According to a fact sheet, all such designated spending proposals will be transparent because they will have to be posted on a website detailing the projects they fund and the Representatives requesting them. House Republicans have elected to forgo all earmarks for the year and the Senate reportedly has no intention of changing its rules on earmarks.

Banking Regulation, Consumer Protection Bill Unveiled in Senate – Financial regulatory reform legislation introduced last week by Senate Banking Committee Chairman Chris Dodd (D-CT) would impose new regulatory scrutiny over credit and mortgage counseling operations, but largely avoids creating new oversight of nonprofits that has been considered in the House. Many nonprofits have been advocating for a new consumer financial protection watchdog to regulate information over mortgages, credit cards, and other financial products, and protect lower-income individuals from hidden fees, abusive terms, and deceptive practices. The new Dodd bill would not regulate nonprofit financial literacy programs, which had been a major objection by nonprofits to the House-passed legislation (H.R. 4173). Both the House and Dodd proposals expressly exempt charitable giving advice from oversight.

Court Strips Nonprofit Hospital of Tax-Exempt Status – A nonprofit hospital in Illinois has lost its property tax exemption for failing to provide sufficient charity care under state law, according to a decision last week by the Illinois Supreme Court. Illinois law requires nonprofit hospitals to provide a higher degree of charity care than the "community benefit" standard applied by the Internal Revenue Service, but the Illinois statute is unclear as to how much care is required. State officials and hospitals from across the country have watched this case as states continue to grapple with massive budget deficits and declining revenues.

State Budget Updates:

Arizona: Arizona's recent budget cuts totaling $1.1 billion will cost 310,000 adults and 47,000 children their health insurance, according to Stateline. Arizona voters must also decide in a May special election whether to approve a temporary one-cent increase in the states sales tax, which, if rejected, will force the Arizona Legislature to cut another $867 billion from the budget.

New Jersey: Governor Christie has proposed a budget relying almost exclusively on spending cuts; an estimated 5 percent reduction in state spending. Cuts come primarily from education, state transfers to counties, and reduced payments for low-income housing. The budget largely spares cuts to state parks, food banks, prescription-drug coverage for the elderly, and health insurance coverage for children. While the Governor called for increases in charity health care for the indigent, but his budgets raises taxes on hospitals by $45 million.

Pennsylvania: Several mayors from small and medium-sized cities are lobbying their state's Legislature for greater authority for greater authority to raise revenue locally. The mayors are specifically seeking legislative approval of new powers that would allow them to apply local sales taxes to nonprofits and seek reimbursements on tax-exempt properties.

Minnesota: At the end of Minnesota's 2009 legislative session, Governor Pawlenty used a rarely invoked budgeting authority to "unallot" $5.3 million of previously appropriated program funds for a supplemental nutrition plan.  Individuals who rely on the program have sued and the Minnesota Supreme Court must now determine the constitutionality of the Governor's unallotment action. This is one example of several states that are currently facing litigation over the authority of the Governor or Legislature to redirect funds approved for other purposes. Other states that have or are currently facing litigation include Arizona, California, Illinois, Indiana, Kansas, and New York.

Washington, D.C.:  "Think Twice Before You Slice" is the name of the state-of-the-art advocacy campaign to protect human services funding in the Washington, D.C. area from budget cuts. The innovative campaign, run jointly by National Council member the Center for Nonprofit Advancement and the Nonprofit Roundtable of Greater Washington, is mobilizing their networks of 1000 organizations to urge local, regional, and state officials to act responsibly when making budget decisions. Activities include briefings on specific issues, communications training, and weekly teleconferences that highlight problems and progress on the budgets of each of the eight surrounding jurisdictions. The Think Twice Before You Slice campaign website provides up-to-the-minute information on the budget processes and details avenues for nonprofits throughout the region to advocate for continued "safety net" support.

The National Council of Nonprofits publishes the Nonprofit Policy News to share critical public policy information with nonprofits across the nation. Anyone interested in nonprofits - board members, employees, volunteers, students, and others - can subscribe to this free newsletter. But if you really care about nonprofits, then join your state's nonprofit association to add strength to the united power of the nonprofit sector at the national, state, and local levels.