On Top of Economic Woes, Nonprofits Face Threats From Government

While the stock market and corporate profits have recovered handsomely since the Great Recession, most charities continue to face an uncertain funding environment compounded by the possibility of further budget cuts at the federal, state, and local government level, the reports.

Although charitable giving has rebounded modestly over the last few years, the estimates that it will take , adjusting for inflation, for giving to reach its 2007 high of $344.5 billion. Given stubbornly elevated unemployment rates and declines in real wages for many Americans, the need for essential services such as meals, housing, and clothing remains acute. Indeed, many nonprofits report they are unable to meet the demand for their services. "The question of capitalization is still the overarching concern," president and CEO Diana Aviv told the Times.

To make matters worse, the charitable tax deduction and federal, state, and local budgets have been the subject of considerable scrutiny on the part of policy makers. After earned income, government contracts are the largest revenue source for nonprofits, accounting for roughly three times the revenue from private giving and forty times the revenue from corporate giving, the Times reports. The trillion dollars of long-term cuts in projected federal government spending slated to take place under sequestration have held back financing for slashed many budgets categories affecting for programs in the sciences, environment, health, and arts, and as well as services to the poor, which in turn affecting has affected charities. At the same time, state and local budgets continue to be pressured by soft tax revenues, exacerbating the problems that nonprofits typically have in obtaining from government full and timely payment for their services.

To make matters worse, the charitable tax deduction and federal, state, and local budgets have been the subject of considerable scrutiny on the part of policy makers. Government contracts are the largest revenue source for nonprofits, after earned income, accounting for roughly three times the revenue from private giving and forty times the revenue from corporate giving, the Times reports. The trillion dollars of long-term cuts in projected federal government spending slated to take place under sequestration have slashed budgets for programs in the sciences, environment, health, and arts, as well as services to the poor, which in turn has affected charities. At the same time, state and local budgets continue to be pressured by soft tax revenues, exacerbating the problems that nonprofits typically have in obtaining from government full and timely payment for their services.

Meanwhile, attempts to cap or even eliminate federal and state charitable tax deductions — which have met with some success in Michigan and New York — have charities worried that charitable contributions will fall significantly. Nonprofit experts told the Times that if such legislation is enacted, lower revenues and higher demand for services will be the reality for most nonprofits for years to come. "It's not about hurting the sector," said Aviv. "It's hurting the causes and people we're serving."

"." New York Times 11/07/2013.