Marnie Taylor is all for balancing budgets in Washington.
She just doesn't want it to come at the expense of nonprofits. She and others in the local nonprofit community are worried that charitable deductions may be reduced or eliminated as part of the ongoing effort to reduce the federal deficit.
“Go back to (the economic collapse of) 2008,” said Taylor, president and chief executive of the Oklahoma Center for Nonprofits. “Oklahoma didn't take as deep a decline as other states or the country did, but people had less money to give. Some people who used to be givers had to become takers of some charitable help.
“That's exactly what we're looking at now. Funding cuts that are undefined in Washington could end up in great cuts around a lot of social service programs, creating a greater need and at the same time cutting off the incentive for people to give more. It's a big, horrible circle.”
Earlier this month, in the aftermath of the fiscal cliff negotiations, the Oklahoma Alliance of Nonprofits sent out an email highlighting three areas of concern.
While the charitable giving deductions were “largely untouched” by the fiscal cliff legislation, the Clinton-era limit on itemized deductions was restored. This reduces “itemized deduction, including charitable deductions, by three percent of adjusted gross income” for individuals earning $250,000 or more and couples earning $300,000 or more.
Income tax rates won't go up for most Oklahomans, but the temporary payroll tax break expired, so everyone is seeing two percent less money in their paychecks. Singles earning $400,000 or more and couples earning $450,000 or more have had their tax rate increase from 35 percent to 39.6 percent.
Perhaps most significantly, charitable deductions could go on the chopping block multiple times early this year. The current debt ceiling negotiations provide one such opportunity; two others — the postponed sequestration and the expiration of the stopgap Continuing Resolution federal spending bill — will arrive in March.
The biggest worry is that charitable deductions could be eliminated entirely. Even if they aren't, further reductions in the amount donors can write off could cause contributions to drop precipitously.
“In our state, there is a big push to reduce taxes,” said Ray Bitsche Jr., executive director of Sunbeam Family Services. “At the federal level, there is a big push to get our financial house in order, to live within our means, to reduce our deficit. At the same time, if you reduce or eliminate the charitable deduction, you're just reducing the dollars that fund some really valuable and successful programs.
“I will speak for myself. I make an ongoing pledge to my church. That's where most of my giving goes. I make a contribution to the United Way, and then I make charitable contributions to several other nonprofits in town whose work I value. I will always put my pledge to my church first, and I suspect others will do the same. So (if write-offs are reduced or eliminated) it really hurts the nonprofit agencies.”
But deductions are only half the problem. The other is possible cuts in federal funding of nonprofits.
Some agencies realized quickly that funding cuts could come as a result of the 2008 economic downturn and began cutting costs and seeking alternative cash streams.
“We anticipated revenue reductions some time ago and began … (in) November 2011 when we reduced our operating expenses $197,093 by eliminating some positions and not filling others,” Bitsche said in an email. “We also rebid and reduced costs of banking services, janitorial, document imaging, office supplies and cellphones. In addition, we also canceled memberships in professional organizations.”
Sunbeam made “deliberate efforts to increase funding from private sources — individuals, businesses and corporations,” he wrote.
Those efforts have been successful. In fiscal year 2009, Sunbeam generated nearly $111,000 from those sources. The totals have grown in each successive year; fiscal year 2012 brought in nearly $318,000. The nonprofit's strategic plan calls for an expansion of marketing and development activities and a 22 percent annual increase in private funding though 2015.
“The bottom line is this,” Bitsche wrote. “A nonprofit that doesn't think like a ‘for profit' probably isn't going to make it.”
Taylor's group, which provides training and resources to other nonprofits, has been advising its members to remind legislators of the important services nonprofits provide — services that are often more cost effective than the alternatives.
Sunbeam, for example, has a program to help keep seniors in their homes. The program pays active seniors a small stipend to visit low-income seniors, providing friendship, helping out and giving caregivers time to run errands and enjoy short breaks. The annual cost per client is about $1,400, a pittance compared to the $40,000 a year it would cost Medicaid if those clients were put in nursing homes.
Taylor hopes nonprofits will fight to keep such programs alive.
“Be proactive during this time of quiet,” she said. “Send a letter. Make a phone call, whatever your means of communication might be. But let them (legislators) know we aren't willing to take any more trims or cuts.”