Monthly Archives: October 2011

Jobs bill killed in Senate, employment initiatives to be considered piecemeal

Several weeks ago we reported on how President Obama’s jobs bill could help some nonprofits by giving them payroll tax credits for hiring veterans and people who have been unemployed for a long time. As predicted, Senate Republicans filibustered the President’s bill this week, defeating the plan to quickly create at least 1.3 million jobs and raise economic growth by 1.25 to two percent.

With 14 million people unemployed, sinking wages, and “another” recession on the way, the failure of the Senate to try and work out an effective compromise is being called a major blow to the country’s economic revival. The bill was expected to create 200,000 to 300,000 jobs per month, adding revenues to the tax base, lowering the deficit, and increasing funding for important domestic spending.

The proposed bill was criticized by some in the nonprofit world for overlooking the important role and particular needs of nonprofits in the economic recovery, although most representatives of the sector backed the overall plan and approach. Under the plan, nonprofits wouldn’t get the same benefits as for-profits and the plan would be funded by limiting writeoffs for charitable deductions.

Like ARRA, the last sweeping recovery initiative, additional funding aimed at stimulating the economy would largely come from changes in tax law. More than half of ARRA’s 787 billion dollars were generated through taxes.  The tax incentives in the new jobs bill include halving the business share of the payroll tax on the first $5 million of payroll, deductions for businesses that add workers or raise wages, credits to encourage hiring veterans and long-term unemployed workers, and an extension of 100-percent expensing on capital equipment purchases.

It remains to be seen what will become of the jobs legislation, although the process is expected to be long and painstaking. Both parties are now reconvening to break the bill up into individual pieces in the hopes of moving them toward bipartisan passage.

One component of the bill that has generated controversy and is likely to hold up compromise is President Obama’s Bridge To Work program, which would let employers train unemployed workers without pay, allowing the trainees to remain on unemployment insurance for up to eight weeks.

Many employers and labor advocates say that training workers without pay creates inequity in the workplace and holds neither employers nor employees accountable. Under the program, employers would not be obligated to hire the trainees.

Bridge to Work would only be open to jobless workers receiving Federal unemployment benefits that kick in after six months of state benefits have run out. The  bill would reauthorize the Federal benefits, which are set to expire in January. Some opponents have said that states should be encouraged to implement Bridge to Work without reauthorization of the Federal benefits.

The program is based on existing models such as the state of Georgia’s Georgia Work$ initiative. Despite Obama’s enthusiasm for Georgia Work$, the state’s Labor Commissioner said the program is only marginally successful. Only 92 people have signed up for it in the eight months since it began.

Just as with ARRA, it’s unclear whether any of the proposed programs will actually put Americans back in jobs. As Rick Cohen has pointed out, much of the corporate sector has bounced back from the crash but companies are too risk-averse to invest in hiring. According to Cohen, many big corporations have turned healthy profits the past few years and are now “sitting on” them rather than expanding their operations and workforce. “The jury is out,” he writes, “as to whether these proposed tax cuts will actually stimulate demand and lower the cost of business expansion enough to get corporations to put their money into creating jobs.”

Rural nonprofits get fewer dollars from government and foundations

Rural communities account for 18 percent of the U.S. population and 22 percent of the country’s poor. Yet they receive only eight percent of total nonprofit funding.

A new Bridgespan study says rural nonprofits confront a particular set of barriers to serving their clients and raising funds. According to the study, based on an analysis of Form-990 tax returns, the rural nonprofit sector is one-third the size of its urban counterpart on a per capita basis.

For every dollar per capita spent by a rural nonprofit, urban nonprofits spend six dollars on arts and culture; five dollars on food and agriculture, social action and advocacy, and education; four dollars on youth development and crime; three dollars on health, recreation, and housing; and two dollars on human services, environment, and public safety.

The overall ratio of government and private funding for nonprofits is about the same in rural areas as in urban ones. Despite evidence that rural states have strong Federal legislative influence and access to special Federal funding streams, rural nonprofits receive fewer government dollars per capita than urban ones.

Private philanthropy in rural areas is notoriously limited. Grants to rural America account for less than seven percent of overall foundation giving and slightly more than one percent of corporate giving by large companies.

Several leading nonprofit analysts have pointed to the weak infrastructure for rural community foundations. The Council on Foundations is promoting a Rural Philanthropy Growth Act through which the Department of Agriculture would incentivize and support rural philanthropic capacity building.

By some measures, rural organizations actually exhibit better financial health than urban nonprofits. They’re less likely to run an operating deficit and more likely to have more than three months of cash reserves.

Rural nonprofits struggle with a lack of qualified job applicants due to lower educational attainment in rural areas. Further, many are not able to offer competitive salaries compared to urban nonprofits.

They also struggle to deliver crosscutting services. Many rural nonprofits must provide a broad array of services, which the study’s authors say challenges their ability to develop expertise and capacity in any one service area.

The study highlighted three fundraising strategies that have proved successful for rural nonprofits: seeking long-term rather than short-term funding, aggressively pursuing government funding, and developing relationships and increasing visibility outside of their communities, “because that’s where the money is.”

Read more in the Bridgespan Report, “Small But Tough: Nonprofits in Rural America.”

For an excellent article on the future of rural funding, see Rick Cohen’s “Where is Rural Philanthropy Heading and Where in the World Are Its Partners on the Journey?” in the Nonprofit Quarterly.