Nonprofit Harvest

On the Stimulus

• New York Times:
  • For States, Stimulus Offers Temporary Relief 
  • Economic Stimulus Special Section
• Washington Post:
  • Taking Apart the $819 billion Stimulus Package
  • States Counting on Stimulus Aid to Balance Budgets

Analysis from Center for Budget and Policy Priorities

• Statement by Robert Greenstein, Executive Director, on the Conference Agreement on the Recovery Package
• Economic Recovery Act: Key Provisions (With State-by-State Estimates)

The Nonprofit Angle

• From the Chronicle of Philanthropy:
  • Congressional Compromise on Stimulus Plan Includes Money for Arts, Social Services, and Volunteerism
• The Cohen Report:
  • Reading an Early Draft of the Stimulus Bill Conference Report: Compromise Provisions (Part I)-Spending 
  • Reading an Early Draft of the Stimulus Bill Conference Report: Compromise Provisions (Part II)-Safety Net Tax Relief 
• Washington Post Op-Ed: Where Stimulus Funds Can Make a Difference

Transparency and Accountability

• Recovery.gov
• From ProPublica (Hat Tip: Utne Reader)
  • Will We Be Able to Follow the Money?
  • The Stimulus Plan: A Detailed List of Spending
  • State-by-State Breakdown of the Economic Stimulus Plan?
• ShovelWatch
• ReadTheStimulus.org (Hat tip: A little light reading…readthestimulus.org)
• From the Sunlight Foundation: We Need Online Review of Stimulus Legislation
• Show Me the Spending

The Minnesota Angle (aka Budget Update)

• Minnesota’s stimulus take: About $9.1 billion
• MPR has a special section devoted to news on the Bailout (it complements their coverage of Minnesota’s budget shortfall)
• From Minnesota Budget Bites:
  • Minnesota quick to prepare for infusion of federal funds
  • Revenue-raising options, with their price tags and impact on tax fairness
  • Legislature asks for your opinion about budget solutions at forums around the state
• pubTalk: MN Legislature: Please Fix the Governor’s Budget
• Political Animal (from Pioneer Press): Pawlenty must redo his budget
• Politics in Minnesota does a great daily roundup of stories on the budget and other related news.

Nonprofits and Credit

• Billions in Nonprofit Projects on Hold Due to Credit Crisis, Report Finds
• Charities Set $166-Billion Worth of Construction Plans on Hold
• Credit Crisis Is Leaving Charities Low on Cash

Other News

• NY Times Op-Ed: Soup-Kitchen Accounting
• From pubTalk: New opportunity for “economies of skill”? 
• Half a Million Nonprofits Could Lose Their Federal Tax Exemptions
• POLICY MEMORANDUM: A Scan of Nonprofit Policy Recommendations for the Obama Administration

 On the Bailout

The Center for Budget Policies and Priorities

The Center for Budget Policies and Priorities has a Special Series Economy Recovery Watch where they post regular updates and analysis on the stimulus package, the state budget crisis, and other economic news.

• Recovery bill’s “Fiscal Stabilization Fund” is important to protecting education and averting state and local budget cuts that would further weaken the economy

The Stabilization Fund would provide funds to partially close state and local budget shortfalls and allow states to avoid some of the most harmful actions they otherwise would have to take to meet their balanced budget requirements.  In particular, it would help avert damaging cuts in state aid to education at a time when school districts are reeling from declines in property taxes caused by sinking property values.

Additional Useful Resources

• What Nonprofits are Saying About the Bailout: A Fast Roundup from Blue Avocado

• From the Cohen Report:
  • What Can Nonprofits Look Forward to in the Economic Stimulus Bill
  • Ensuring a Timely Economic Stimulus: The Benchmark of CDBG Expenditures

• The Artful Manager asks Stimulus or pork byproduct? on the NEA’s possible inclusion in the stimulus package

• Economic Stimulus Package’s “Infrastructure Financing Tools” - a Boost to Charities

The Minnesota Angle

• Impact of federal economic recovery bill on Minnesota

• Update: The stimulus challenge from MPR

Updates

• Sources: Tentative deal reached for $780 billion stimulus package

• Democratic officials say tentative stimulus deal reached

Harvesting the Web

• From Philanthropy Potluck:
  • Nonprofit Survival: Four Steps to Take Now
  • Filling the Gaps: Expectations vs. Reality

• Blue Avocado: The Nonprofit Layoff Issue

• From Scott Russell at MinnPost: One more way nonprofits can save a little money

• Q&A with Nell Edgington - Accelerating Social Innovation

• Global Social Investment Exchange on Philanthropy 2173
  

• Avoiding the Sirens Song of Social Media Fundraising - The Great Social Media Debate?

Minnesota Budget Update

• From Smart Politics a Humphrey Institute blog: Minnesota’s 2010 Budget Deficit Among Top 10 Largest In Nation

• Pawlenty budget makes things worse a Star Tribune editorial written by Dane Smith of Growth and Justice and Nan Madden of the Minnesota Budget Project

• Finance and Commerce
  • Even the small state agencies are taking a hit
  • Pawlenty’s HCAF proposal could cost Minnesota federal stimulus dollars
• Politics in Minnesota:
  • How much would it cost to leverage the additional $2 billion in health care money in federal stimulus package? No one knows
  • The T Word: Which taxes to raise? Five ideas that are circulating at the Capitol

• State think tank leaders find little common ground on economic issues

• From the Star Tribune: Editorial: Tobacco bonds aren’t a lasting fix
  

The Nonprofit Angle

• Nonprofits lobby for fair tax hikes to avoid drastic cuts from MinnPost
  

The Local Government Angle

• The City of Minneapolis: Cuts to the City’s 2009 budget

Tuesday’s budget announcement was just the beginning:

The budget debate is just beginning, and Governor Pawlenty said his proposal will need some adjustments in the coming weeks to reflect new financial information.

One change will come when Minnesota learns the amount of its share of the federal economic stimulus bill. Another will come next month, when finance officials update the state economic forecast, which is expected to project an even larger budget deficit.

Deferring Revenue and One-Time Solutions

The Governor proposed a number of one-time solutions which will reduce our budget for the upcoming biennium, but will not address the underlying problems that impact our state.

The impact of these decisions have been addressed more eloquently by others (here, here, here, and here). Concerns about their feasibility can be found here and here.

What strikes me is that we have a problem with our business model. Our expenses outweigh our income.

To fix that problem, we must both cut spending and increase revenue. As D.J. Leary writes in his reaction to the budget, we have a structural problem:

This governor has faced two multi-billion dollar budgetary shortfalls since first being elected in 2002 and he still doesn’t appear to have grasped the reality that Minnesota has a structural defect in its overall fiscal configuration.  Minnesota simply has too narrow an income stream to provide government services at the level its people want and need.  The governor’s budget is nothing more than state government’s version of Three-card Monte.

The Governor is proposing some ways to generate revenue - such as additional fees for service - but has taken off the table one way to do this.  “Don’t increase burdens by raising taxes” was one of the Governor’s underlying principles when crafting this budget.

Taxes are a loaded topic.  Deciding to raise taxes, especially in the midst of a recession, is not easy. What concerns me is that the Governor is not willing to consider this revenue stream.

As an example, can you imagine a nonprofit being unwilling to consider an earned income venture or an individual giving campaign when trying to bridge a 14% funding gap? Or an organization that solved this through problem a large one-time grant, using restricted funds for another purpose, and deferring payments to vendors to the next fiscal year.

Unconvinced? Mr. Leary and I are not alone.

Minnesota Budget Trends Study Commission

Minnesota Budget Trends Study Commission was established at the end of the 2007 session to analyze the factors that were contributing to our state’s ongoing budget volatility.  In particular, they looked at the implications of our shifting demographics:

The State Budget Trends Study Commission is established for the purpose of completing a study of the implications of state demographic trends for future state budget conditions, including both expected revenue collections and spending for state government services and local services supported by state revenues.

On January 12, they released a report that outlined some of the challenges facing the “long-term stability of the state budget.” Their findings included, but were not limited to (emphasis mine):

• Despite continuing to rank high among many key social and economic indicators, Minnesota’s economy has underperformed recently relative to the nation.
• Demographic and economic factors will lead to lower growth of state revenues over the next 25 years.
• Minnesota has a long-term structural budget problem, with long term expenditure growth likely to outpace revenue growth.
• Minnesota’s general fund tax base has grown more volatile in the past decade.

Coverage on the report:

• Report: Minn. budget problems need long-term fix from the AP (via the Star Tribune)
• Minnesota budget trends study says changing demographics require revised state financial system from MinnPost’s Joe Kimball
• Report from Minnesota Budget Trends Study Commission from Jerry Zhao of the Humphrey Institute
• A commission with some common sense ideas from Minnesota Budget Bites

How do we Fix the Problem?

The first step to any solution is acknowledging that there is a problem.

There has been (and will continue to be) a lot of discussion about how to address our state’s $4.8 billion budget gap for the upcoming biennium (2010-2011).

Our goal is to share thoughtful analysis on the budget, the proposed cuts, and what it means for everyday Minnesotans on this blog and over twitter (a great big thank you to @tomsheck, MPR’s Political Reporter for live tweeting the press conference).  We will try to bring you the highlights, with an eye on how these changes will impact Minnesota’s nonprofit organizations and those they serve.

Recommended Reading

• State of Minnesota press release
• Star Tribune
  • Pawlenty would balance budget with cuts, federal stimulus
  • Your Voices (especially Budget doesn’t solve deficit, just prolongs it)
  • Losses loom for adults without children
• Minnesota Budget Bites
• Pie charts and numbers of Minnesota’s proposed budget fix don’t tell the whole story from MinnPost
• MPR
  • Pawlenty’s budget: 2.2 percent spending cut
  • Human services cuts inevitable under Pawlenty plan
  • The governor’s budget from Bob Collins’ News Cut
  • Legislature to begin dissecting Pawlenty’s budget proposal

Governor Pawlenty’s Proposal

Yesterday the Governor released his 2010-2011 budget proposal. All of the information is available at the Minnesota State Budget website. State budgets are incredibly complex, and we are still trying to make sense of it.

However, there are some overarching principles, goals, and recommendations that we can unpack.

Budget Principles

•

• Balance the budget (this is mandated by our state Constitution)
• Fund priorities in order of importance
• Strategically position Minnesota for success in a changing world
• Enhance and expand pay for performance
• Don’t increase burdens by raising taxes

Financial Goals

• $250 million in budget reserves to address additional economic risk
• $350 million in cash flow account
• Understate potential level of federal fiscal assistance until finalized
• Improve structural budget - reduce 2012-13 budget gap by nearly half

As the slide illustrates, in order to achieve his goals, he proposes a series of cuts and cost saving measures. (Please note that these are screen shots and the presentation can be downloaded here.)

Budget Assumptions

All budgets have a set of assumptions. Minnesota Budget Bites unpacks some of the Governor’s underlying assumptions:

• He assumes Minnesota will get $920 million in federal stimulus relief (this is just a placeholder amount for now).
• He reduces the FY 2010-11 deficit by $1.3 billion by shifting K-12 education payments into the future.
• He raises close to $1 billion upfront by selling bonds secured with our tobacco lawsuit revenues.

Budget Priorities

• Enhance Minnesota’s job climate
• Improve K-12 education
• Protect state public safety programs
• Maintain military and veterans programs
• Increase government reform and accountability

Budget Cuts

The budget calls for $2,368 million in permanent spending cuts (a 2.2% spending cut). These cuts include:

• Changing eligibility standards for MinnesotaCare, which means that “84,000 people will lose health care eligibility over the next two years.” These changes include:
  • Only those at 100% of the federal poverty level qualify for Medical Assistance (a family of four living on $21,200)
  • Adults without children are no longer eligible for MinnesotaCare
  • Cuts in state reimbursement to hospital and long-term care providers
• $151 million to the University of Minnesota (you can read their response here)
• $245 million in Local Government Aid
• $125 million in County Program Aid
• 5% cut in state agencies

All of these cuts will impact nonprofits.  The changes in health care eligibility, a decrease in reimbursements, and cuts to local and county governments will affect health and human service organizations precisely at a time when need is growing and donations and foundation support is lagging.

These budget cuts, while not surprising, will force nonprofits to make hard choices.

Other Recommendations

• Borrowing $153 million from the Health Care Access Fund.  It often runs a surplus and the state has used these funds to balance the budget in the past.
• Merge the Health Care Access Fund with the General Fund. 
• Sell half of bonds from the state’s tobacco settlement
• Freeze wages
• K-12 payment shifts, totaling $1,294 million.
  • This means deferring state reimbursements to school districts to the following year, known as the “holdback.” The current holdback is 10%, under Pawlenty’s budget it would be 20%.
    

These additional recommendations are primarily one-time solutions that will balance the budget for the moment, but not address the underlying structural problem - Minnesota has a flawed business model.

Innovation

This week has been a mix of optimism and pessimism. When I saw a blog post titled Innovation in a Recession, I had to read more. It directed me to this post, which summarizes the opportunities Tim Draper, a venture capitalist, sees in the current economic climate.  Although I don’t agree with all of his ideas, I appreciate his willingness to reframe this moment:

Don’t panic and don’t cling to the past as it will be a new game. We need to all stick together to solve our current problems. We face not only a crisis but many opportunities for new innovation.

I think that this framework segues nicely with Blue Avocado’s suggestion to declare an emergency:

An emergency doesn’t mean people should panic . . . an emergency means considering the bold and wacky ideas that are either brand new or used to be off the table.

Transformation

For some thoughtful analysis on what the future could hold for the nonprofit community, I suggest reading Paul Light’s recent article in Nonprofit Quarterly, Four Futures.  The entire piece is worth reading, but for the moment I want to focus on the forth possible future:

Transformation. This fourth scenario is hopeful but different, and it is likely only if nonprofits make it so. As has been noted in several of this issue’s articles, nonprofits could use the faltering economy and its impact on the sector as an opportunity to reinvent themselves. But this approach requires examining all possible options quickly and creatively. In state budgets, should certain services be saved over others? Are there ways to redesign organizations to achieve greater synergy between community players? Are there ways to involve communities in rethinking and reenergizing our work? A transformation-oriented approach requires deliberate and collective action by the sector’s stakeholders: communities, philanthropists, governments, intermediaries, constituents, nonprofit associations, and boards.

He goes on to list some strategies for moving towards this more hopeful future.

This Week’s Harvest

Considering the Inauguration

• America’s Greatest ‘Public Works’ by Clara Miller in Chronicle of Philanthropy

• Foundations Should Step Up as Obama Steps In by Mark Kramer and Amber Johnson for Chronicle of Philanthropy

On the Proposed Stimulus Package

• Economic-Stimulus Package to Help Nonprofit Groups Meet Social Needs from Chronicle of Philanthropy

• State fiscal aid key part of federal economic recovery package from Minnesota Budget Bites

• Economic Recovery Bill Would Add Little to Long-Run Fiscal Problem from CBPP

On the State Budget

• Minnesota Budget Bites

• MPR’s coverage of Minnesota’s budget shortfall

• Pawlenty’s deficit plan: Freeze, cut from the Star Tribune

Additional Articles and Resources

• When Good Data Goes Bad from Minnesota Budget Bites

• When the Ax-Man Cometh: What to cut out of your budget from Katya’s Marketing Blog

• A giving recession? from The Economist

• Great Depression Giving- Data sources part two in Philanthropy 2173

State Budget Update

• Pawlenty plans to cut funds for local governments

• Minnesota Budget Bites has the rundown on the unallotments: Ready, set,cut!!

• More from Budget Bites, House asking for your ideas on how to close the budget deficit

Here’s what the Minnesota Budget Project will be saying this session: State policymakers must take a balanced approach to the state’s budget deficit and avoid policy choices, like excessive spending cuts, that make the economic downturn more painful. The deficit is simply too large to take raising revenues off the table.

• Update: Pawlenty announces short-term budget cuts

• MinnPost asks Deficit spending: Why shouldn’t Minnesota do as the feds do?

But some are asking, what good is a balanced budget if it means widespread slashing and burning to eliminate jobs and services, especially in tough economic times?

• CBPP’s article on the long-term impact: Restoring Fiscal Sustainability Will Require Major Changes to Programs, Revenues, and the Nation’s Health Care System

While the long-term problem should not deter policymakers from dealing with the short-term crisis, policymakers will need to demonstrate to the public and the lenders who finance our short- and longer-term borrowing needs that they are prepared to move the budget toward a sustainable long-run path when the economy improves.

We encourage you to share your ideas with the Minnesota House.  You can chime in about the federal budget and spending priorities on change.org and change.gov.

MCN’s Forum on the Economy

On Tuesday, MCN hosted a forum on the Nonprofit Fundraising and Economic Outlook in 2009.

It included updates from the 2008 MCN Salary and Benefit Survey, the 2008 Minnesota Nonprofit Economy Report, a new 4th Quarter survey of nonprofit fundraising, and the state’s November Economic Forecast.

More on the Forum

• Economic briefing for nonprofits offers some optimism, plus reality checks and strategies, for 2009 from Scott Russell at MinnPost

• Notes from MCN’s Economic Briefing from Philanthropy Potluck

•  Nonprofit Survival: A Special Broadcast on MPR’s Midmorning with Jon Pratt from MCN, Jim Farstad of Intermedia Arts and Melissa Brown, director of research at the Center on Philanthropy at Indiana University.

Read the Reports

• Nonprofit Current Conditions Report

• Nonprofit Economy Report

• The Economy and Charitable Giving: Special Briefing November 2008

Other Resources

• Blue Avocado brings you Twelve Blue Avocado Days of Christmas, our favorites:
  • Seven pairs of bad shoes
  • Two unbalanced budgets

• 20 Emergency Funding Sources for Nonprofits from Fieldstone Alliance

• Kristin Giantris of NFF offers advice in the New York Nonprofit Press Dec. 2008 issue.

• Join the Discussion: Service Response

Paul Schmitz, a member of the Transition’s Innovation and Civil Society Team, kicked off the Change.gov discussion on service by asking to find out more about the social causes and volunteer efforts making a difference in your communities.