Federal budget uncertainty puts social services funding at risk

With the Federal fiscal year beginning in just weeks, Congress will be working on a stopgap continuing resolution to stave off a government shutdown in October. When legislators return to session, a number of key budgetary conflicts are expected to emerge, despite the recent debt ceiling deal that reportedly reconciles Democratic and Republican spending priorities.

Last month, the debt ceiling deal created a “Super Committee” charged with releasing a massive $1.2 trillion deficit reduction package by Thanksgiving.  The deal has brought anxiety to cash-strapped nonprofits due to uncertainty around how mandatory cuts to discretionary funding will play out.  The bill didn’t spell out where savings should come from, although it’s pretty clear various social services funding streams will wind up on the chopping block. Elements of President Obama’s new jobs bill may be incorporated into the package, requiring even further cuts.

Setting a recent record, the House passed six of 12 appropriations bills before its summer recess.  House appropriators are said to be waiting for an omnibus bill from the Senate that would combine the other six bills. The Senate, which passed one bill before the recess and three since, is expected to start work on these six in the coming weeks.

The House budget slashed $30 billion, and conservatives are calling for the Senate to do the same, although the debt ceiling deal sets an overall spending cap for FY 2012 at a level only slightly less than that of the current fiscal year. House leadership is publicly supporting the budget levels set out in the debt ceiling deal.

Cuts to non-defense spending are much smaller in the Senate than in the House because the House significantly increased defense spending, forcing drastic cuts in other areas. Defense spending levels are expected to be a major point of contention and cause of delay in the coming months. Short-term extensions of both the surface transportation bill and the reauthorization of the Federal Aviation Administration (FAA) were also in dispute until last weekend, when Congressional leaders agreed to set both issues aside until 2012.

Because of recent natural disasters, disaster relief is also a pressing issue. The Federal Emergency Management Agency (FEMA) is running out of funding and the White House is seeking more than $5 billion in disaster aid for the next two fiscal years. Republicans in the House are insisting that new funds for disaster relief be offset by other cuts.  House Appropriations Committee Chair Hal Rogers (R-KY) announced Monday that disaster relief will be part of the continuing resolution.

Adding to many nonprofits’ concerns is the requirement that across-the-board cuts be made if the Super Committee doesn’t pass the called-for cuts by Thanksgiving. These automatic cuts, totaling $1.2 trillion, would begin in 2013. Many believe this long-term scenario is likely given the fact that the 12-member Super Committee is bipartisan, and likely to disagree on where to cut spending.

According to recent articles in Stateline and the Nonprofit Quarterly, the news for nonprofits isn’t entirely grim, at least for the short term. The projected decrease in discretionary funding is adjusted for inflation, and according to Stateline, discretionary levels would actually rise slightly over the ten-year period. Immediate spending cuts wouldn’t affect mandatory programs such as Medicaid, Medicare, and Social Security. The Children’s Health Insurance Program (CHIP), Temporary Assistance for Needy Families (TANF), and food stamps are also exempt from the automatic cuts. Nonprofits dependent on health-related Federal programs are more likely to see stable funding for the near future, while the outlook for education, Head Start, affordable housing assistance, child care, and other human services funding looks considerably more dire.

We’ll keep you posted on Congressional developments that may affect local nonprofit funding. Please let us know if you have questions about particular programs and funding streams.

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