April 11, 2011
FY2011 Budget Deal and Nonprofits
Congressional leaders and President Obama reached agreement on a budget late Friday that, if enacted, would fund the federal government through September. Early Saturday morning lawmakers passed a one-week extension of funding to prevent a government shutdown. This gives time to draft the final bill and vote on it this week. The deal calls for spending cuts of around $38 billion for the rest of this budget year (through Sept. 30). Here are details on issues that many nonprofits are following:
As part of the budget deal, the Senate will take separate votes this week on cutting funding for Planned Parenthood and blocking spending to implement the health care reform. Read more details about the reported deal on our website.
- Non-security discretionary spending reduced $20 billion, including a $1.1 billion across-the-board cut spread across discretionary programs with the exception of Pentagon programs.
- Targeted Nonprofits: Does not ban funding for nonprofit Planned Parenthood or National Public Radio and public broadcasting.
- 2010 Health Care Reform: Not “defunded.”
- Policy Changes: No ban or reversal of greenhouse gas regulations by the Environmental Protection Agency or “net neutrality” rules adopted by the Federal Communications Commission.
House Launches FY2012 Phase of Budget Process
Even before leaders reached agreement on funding for the current fiscal year, the House Budget Committee approved a budget plan for 2012 through 2021 designed to cut the federal budget by $5.8 to $6.2 trillion over the period. Key components include:
The Ryan plan next goes to the House floor, where it is expected to pass. It likely will then be ignored by the Democratic-controlled Senate, which will take up its own budget proposal next month. More about FY2012 budget proposals and the federal budget process.
- Non-Security Discretionary Spending: Seeks to reduce discretionary spending at below 2008 levels and then freeze for five years.
- Entitlement Programs: Calls for changes to mandatory spending programs by turning Medicaid into a block grant program to the states, and converting Medicare from a defined benefit program to one that provides premium support so individuals can purchase health insurance.
- Tax Reform: The House budget plan instructs lawmakers to lower the top income tax rate from 35 percent to 25 percent, and to pay for the revenue losses by eliminating $1 trillion in unspecified "tax earmarks."
President to Announce New Deficit-Reduction Plan
President Obama is scheduled on Wednesday to propose a new plan to reduce the deficit that, according to aides, will take a balanced approach to cutting spending and eliminating tax breaks for higher-income taxpayers. The proposal reportedly will include reforms to Medicaid and Medicare, and express a willingness to address Social Security, as well.
Form 1099 Disclosure Requirement Repealed in Senate
The Senate voted last week to repeal the new Form 1099 disclosure requirement enacted in the health care reform law that would have required nonprofits and businesses, starting in 2012, to report aggregate payments to vendors in excess of $600 for goods and other property. The bill previously passed the House, and is now headed to President Obama who has indicated that he will sign it.
House Tax-Writers Question Nonprofit’s Business Practices
Should AARP lose its tax-exempt status due to its business and political practices? That is the question raised both at a congressional hearing and in a detailed report, " Behind the Veil: The AARP America Doesn’t Know,” by two House Ways and Means Health Subcommittee Chairmen. AARP CEO Barry Rand responded to the report in his testimony at the hearing. All nonprofits should watch this investigation as a potential forerunner of political challenges to come.
Taxing Tax-Exempts – A matter of geography
The mood to drain nonprofit resources to fill public coffers is different in separate parts of the country. From Maine, there is good news that a key committee voted unanimously that three bills “ought not to pass” (ONTP, in the Maine political lexicon). The bills would have allowed municipalities to impose service charges on nonprofit property owners with revenues above $150,000 annually ( LD 149); repealed most nonprofit vehicle excise tax exemptions ( LD 238); and narrowed the classifications of nonprofits eligible for property tax exemption ( LD 405).
In New Orleans, however, the Tax Fairness Commission formally recommended asking the Legislature, which convenes later this month, to modify the Louisiana Constitution to allow local governments to collect taxes on as much as half the assessed value of properties of nonprofit organizations. The Commission also recommended that the exemption be narrowed to exclude professional groups, college fraternities, and private membership organizations.
Bill on Hybrid Corporate Forms Considered in California
The California Legislature is considering a bill to permit the creation of Flexible Purpose Corporations that would “give companies in California greater flexibility to combine profitability with broader social or environmental purposes.” The legislation is designed to clarify fiduciary duties of officers and board members, and reportedly promote access to capital markets. In a letter asking legislators to postpone action until an informational hearing and other public vetting can take place, the California Association of Nonprofits laid out the dilemma that legislation on hybrid corporate forms presents:
"[The legislation] has great - but unknown - potential to do harm or good. On the one hand it could expand California's capacity to deal with major problems impacting our people and our environment. On the other hand, it could siphon off much-needed resources from effective existing nonprofits by redirecting donor dollars from charitable contributions to flexible purpose corporation investments."
Government Contracting News
Connecticut Task Force Seeks Administrative, Funding Reforms
The Connecticut Commission on Nonprofit Health and Humans Services issued its Final Report, detailing recommendations for administrative efficiencies and a future funding structure for the nonprofit community-based service system. The public and private sector members of the Commission examined the costs of institutional versus community-based care and administrative efficiencies that could be achieved in the system, among other things. The Connecticut Association of Nonprofits issued a strong statement in support of the Commission's recommendations, many of which are currently being considered by the Legislature.
NC Oversight Streamlining Bill Introduced
Nonprofit human service providers would see significant reductions in administrative costs and duties if government contracting reforms introduced last week in the North Carolina Legislature are enacted. The bills ( S.525/ H.B. 618) would create a public-private task force to identify redundancies in the current reporting process, mandate data sharing among agencies, establish a regulatory body tasked with combining the current multiple reviews into a single-audit review process, and allow for the private development of a “consolidated data warehouse,” or document vault. Similar legislation in Connecticut (see prior article), Illinois [ the final report on H.B.5124], and Texas has set the stage for significant contracting reforms in those states.
Providing Space to Agree
Providers’ Council in Massachusetts promotes its education and advocacy agenda through an ongoing series, "A View from the Hill: A commentary from a legislator on human services," that gives policymakers of all political stripes the opportunity to speak directly to the concerns of the nonprofit audience. The April edition of The Provider features commentary from the Speaker of the Massachusetts House of Representatives, Robert A. DeLeo. Contact Bill Yelenak at Providers’ Council for more information on how use this tool to combine advocacy and communications for the public (policy) good.
Understanding the House Budget for FY2012
Useful resources for understanding the budget:
IN THIS ISSUE
Bipartisan Budget Commentary
Former OMB Director Alice Rivlin (President Clinton’s budget director) and former Senator Pete Domenici (R-NM) agree that there is plenty to praise and oppose in the House Republican budget proposal announced last week. Read this thoughtful commentary.
Federal Lobbyist Quarterly Report
Due April 20 for First Quarter (Jan-Mar)