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Urge Congress to include block grants, intermediary grants, and emergency bridge loans for nonprofits in economic recovery legislation now in front of them. We must ensure the continuation of services.
The American Recovery and Reinvestment Act of 2009 has been introduced in the House of Representatives. The Senate will have its own companion stimulus package soon. Please write to Senator Dianne Feinstein, who is a member of the Appropriations Committee, and House Speaker Nancy Pelosi to urge them to include block grants, intermediary grants, and revenue neutral short-term bridge loans for nonprofit organizations in the economic recovery legislation being proposed now. Contact information for both is at the end of this email.
Feel free to include any of this language (most of it provided by Independent Sector) in your communications with Senator Feinstein and Rep. Pelosi. The last paragraph is my language and not part of the Independent Sector’s proposal.
I am writing to support a recent proposal from the Independent Sector that will address current financial constraints on nonprofits working to ensure that vital services continue to reach our communities.
In this economic crisis, Americans are turning in record numbers to nonprofit organizations that deliver basic services in partnership with government. Nonprofit organizations that deliver human services rely on $85.3 billion in government funding annually – 66 percent of their total support – and employ 3.4 million workers to deliver critical services to over 98 million Americans.
The services provided by these nonprofits are now threatened by increasing delays in reimbursement payments on service contracts from state and local governments, by major cuts in state and local government contracts, by reduced availability of private credit, and by declining private contributions.
Federal assistance is critical to alleviate the immediate fiscal crisis facing state and local governments. Block grants modeled after the Community Services Block Grant program, based on population, coupled with grants to intermediaries, will help to save jobs and initiate “jump start” programs to increase the efficiency and effectiveness of service delivery.
In addition, a short-term $15 billion bridge loan program administered by the federal government, with loans disbursed through qualified state and local agencies, is crucial to preserving the full-time jobs of over 300,000 Americans. These workers are critical to maintaining services to at least 7.8 million people in need over the next 18 to 24 months. The bridge loan program would be temporary and targeted to organizations and jobs that are at risk, and can be implemented in a timely manner.
Organizations are typically required to provide services before they are reimbursed and must shoulder those costs until government processes the receipts. Because of the severe budget shortfalls facing California and local county governments, our nonprofit service providers are now experiencing long delays in receiving reimbursements for expenses they have already incurred. California is considering issuing IOU’s for services already rendered. It is unclear whether county departments will honor the terms of their nonprofit contracts when those contracts involve state pass-through dollars. Without access to short-term bridge funding, nonprofits that are crucial to meeting the needs of their communities will be forced in the coming months to lay off staff and close essential facilities, and some may shut down altogether.
In normal times, organizations cover the lag between expense and reimbursement through a combination of lines of credit and private donations. Now, however, many nonprofits have reported that either they have utilized the maximum amounts available under their ongoing lines of credit, or the banks have shrunk the size of the credit lines available to them. The private contributions nonprofit organizations frequently count on to weather long delays are shrinking. Private foundations have watched their endowments plummet by 20 to 40 percent, and they now have fewer dollars available for new grant funding. Individuals have continued to give to help their communities, but they must now give much smaller amounts. Some nonprofits even report that individuals who used to be contributors are turning to the nonprofits for help.
Congressional Action Needed to Continue Services For organizations facing immediate cash flow constraints due to delayed government reimbursement payments, Congress should include in its economic recovery package a short-term $15 billion bridge loan program. It would be administered by the federal government with loans disbursed to eligible nonprofits through a network of qualified financial assistance providers. We recommend using the Northern California Regional Association of Grantmakers and other nonprofit providers.
This program would include the following provisions: - It would operate under a central federal administrator who would set clear eligibility and underwriting criteria for state and local agencies to follow in disbursing short-term bridge loans to organizations that have clear, documented contracts or grant commitments from government bodies that will be fulfilled within a specified time period
- Eligibility and underwriting criteria would identify the types of receivables that would be considered valid and distinguish between organizations undergoing short-term fiscal shortfalls due to the economic downturn and increased demand for services from those whose needs stem from pre-existing shortfalls in financial or program management.
- The central federal administrator could be based within an existing federal agency or program, such as the Community Development Financial Institutions Fund (CDFI), or a new, independent body modeled after a program like the New York based September 11th Victim Compensation Fund.
- Loans would be disbursed to eligible nonprofits through existing state and local agencies with experience in reviewing and processing applications for financial assistance and instituting appropriate re-payment procedures. These could include CDFIs, community foundations, community credit unions, Small Business Administration lenders, for-profit financial institutions, or state and local economic development agencies. The interest rates on these loans would be zero or very modest.
It is estimated that the emergency bridge loan fund would require funding of $15 billion to oversee funding needs over a two- to three-year period. By protecting the cash flow of nonprofits providing services on behalf of governments, loans under the program would preserve the full-time jobs of over 300,000 individuals in the next two years, and thereby maintain services to at least 7.8 million people in need. Much of this funding will be repaid to the federal government when state and local governments are able to resume their normal reimbursement procedures and schedules.
Additional Action Required
There are a range of other needs that will not be addressed through the revolving loan fund but are in need of urgent attention. Attending to these issues must be part of the work of the Congress and Administration in 2009. They include:
- Assisting state and local governments experiencing severe budget shortfalls in meeting their joint obligations to serve the American people.
- Investments to enable nonprofit organizations to re-structure their services, embark on new collaborative measures, and expand proven programs to meet the increased needs of Americans suffering from this economic crisis.
- Many large nonprofit organizations serving a variety of missions from education, health, environmental concerns to community development are facing significant declines in their endowments and other reserves and are unable to meet current obligations. Rendering their investments liquid at this time would only further serve to diminish the resources available to them in the long term to fulfill their program commitments. They are in need of access to capital with a low interest rate.
- Additional appropriations for vulnerable individuals, families, and communities.
It is important to know that organizations are moving as quickly as possible to develop new ways of doing business and collaborating with each other to address this crisis. Some are merging operations with other nonprofits, others are developing shared back-office service arrangements or combining service centers. Many are looking to inventive new fundraising approaches. Those measures may serve well in the long-term, but in the short-term, they are time-consuming, disruptive, and expensive to implement.
Unlike the public and private for-profit sectors, most community-based organizations do not have large endowments or a year or two of operating reserves. These organizations that are so vital to the health of our communities need assistance now. In these times of $750 billion no-strings-attached, no-oversight bailouts to banks, it is immoral for our government to allow its nonprofit infrastructure to collapse.
Senator Dianne Feinstein
D.C. Office
United States Senate
331 Hart Senate Office Building
Washington, D.C. 20510
Phone: (202) 224-3841 Fax: (202) 228-3954
E-mail: Email Me
Best contact person: Chris Thompson, Legislative Director
State Office
One Post St., Suite 2450
San Francisco, CA 94104
Phone: (415) 393-0707 Fax: (415) 393-0710
Representative Nancy Pelosi
D.C. Office
235 Cannon HOB
Washington, DC 20515
Phone: (202) 225-4965 Fax: (202)225-8259
E-mail:
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Best contact person: Amy Rosenbaum, Legislative Director |
