Global Washington Gives Recommendations to Improve Foreign Aid and Development

Senators Cantwell and Murray requested recommendations last fall from Global Washington, a Seattle association of 120 groups that work in global development, on how to change and improve policy for foreign assistance.  Senators Cantwell and Murray attended a forum at Seattle University to discuss development issues. 

Global Washington recommended that the US develop a national strategy to clarify the goals of foreign aid, make trade policy consistent with those goals, and develop an easier process for small businesses to participate and support international education programs.  They recommended that foreign aid be aligned with United Nations Millennium Development Goals, that USAID have autonomy from the departments of State and Defense, and that aid be based on priorities of local recipients and proportionally targeted to countries that are the poorest and most in need.

Washington is home to about 200 non-profits working on global development issues in 144 countries, including global health, clean water and sanitation, food security, poverty and education.

For the full recommendations from Global Washington, click here

Nonprofit Congressional Briefing Held at PATH

What a great event at PATH!  On Friday, June 25^th, nonprofit and community leaders and congressional representatives met at PATH to discuss issues currently impacting the nonprofit sector.  Representatives from congressional offices had the opportunity to hear about the issues that our sector feels important.  We discussed the Nonprofit Sector and Community Solutions Act, the Estate Tax, and Nonprofit Capacity Building.  This is an annual event that EA alliance of nonprofits holds to stay connected to our representatives in congress and make sure they are informed on our position on key issues.  EA alliance of nonprofits seeks to exert a powerful voice for the nonprofit sector by reaching out to our representatives on important policy issues.

The Nonprofit Sector and Community Solutions Act:  Congresswoman Betty McCollum (D-MN4) introduced House bill 5533, the Nonprofit Sector and Community Solutions Act, on June 15, 2010 to strengthen the nonprofit voice in the federal government and to promote a greater understanding of the critical role charities play in our communities and economy.  The main purpose of the bill is “To enhance the ability of the nonprofit sector to address public challenges and maximize opportunities to improve quality of life in the communities where nonprofit organizations work.”  The legislation would:

• Establish the U.S. Council on Nonprofit Organizations and Community Solutions consisting of 16 leading voices from across the sector. The council would produce a report and convene an annual summit on improving the relationship between government and our sector.
   
• Create an Interagency Working Group on Nonprofit Organizations and the Federal Government composed of cabinet members and other leaders from agencies such as the IRS, National Endowment for the Arts, and the Corporation for National and Community Service. This body will help coordinate efforts between the two sectors.
   
• Require federal agencies to increase collection of data on nonprofits, with $5 million going to the National Science Foundation for research grants to our sector. The bill spells out a number of proposals such as more accurate counts of employees and better tracking of government funding to nonprofits.

The Estate Tax:  Currently, no consensus has been reached on how to handle the federal estate tax.  The tax is slated to return in 2011 as a $1 million exemption and a 55% tax rate (the 2001 level).  President Obama and House Democrats are seeking to restore the tax at the 2009 levels ($3.5 million exemption; 45% tax rate).  However, Senators Blanche Lincoln (D-AR) and Jon Kyl (R-AZ) are leading an effort to weaken the estate tax ($5 million exemption; 35% tax rate).  A strong estate tax greatly benefits the nonprofit sector because the tax offers a sizeable incentive for charitable giving.  We strongly support the efforts of President Obama and the House Democrats in restoring the estate tax at the 2009 levels.

The Nonprofit Capacity Building Program (NCBP) is a provision of the Serve America Act (HR 1388) which would provide a matching grant to intermediary nonprofit agencies. The grants would help fund costs of organizational development assistance to small and midsize nonprofits. The bill was signed into law April 21, 2009.

We enjoyed a great and had a great discussion with sector and community leaders.

Don’t Put All Your Eggs in One Basket When It Comes to Funding: Strategically Pursue Grants and Private Donations

How can you best leverage your funding sources?  What is the best balance of Grants and Private Donations?  What is the best strategy in order to maximize your organization’s unearned revenue? 

The answers to these questions will directly influence how much impact you can achieve in your organization.  There have been many studies performed seeking to understand how grant money influences the level of private donations.  Previous studies predicted either crowing out or that there is no relationship between the two funding sources.  However, a later study performed indicated that these two funding sources could complement each other, and could be used to leverage each other. The study found that it is not advantageous to pursue maximization of both public and private funds simultaneously.  In other words, difersify!  Don’t put all your eggs in one basket!  While this information is nothing new, it is worth repeating.

Government grants can be a really useful too to provide seed money to get the organization started, and increase public support for the organization’s cause that will help increase private donations.  Receiving a government grant has the potential to raise the publicity and credibility of an organization. While traditional theories have suggested that government funding will crowd out private funding, actually, at an optimal level, government funding provides valuable leverage to increase private donations. 

On the other hand, relying too much on government funds can lead one into the subsidy trap, where an organization depends too heavily on this money. As government funding rises above optimal levels, the organization risks being viewed as dependent on government funds, and the perception that their organization doesn’t have broad public support, which diminishes the credibility of the organization.  People don’t ‘donate’ to their government, just as the are less likely to make a private donation to an organization that relies almost entirely on government funding, because it is viewed as not having broad public support.

The trick is to determine how your funding sources affect each other and determine the optimal amount of each type of funding that will maximize your total funding, not only maximize you funding in each separate category.

Often time when an organization gets caught in a subsidy trap, liquidity is the issue.  Also, donors’ reactions to increased government funding might be delayed, which would lead a nonprofit to in the short run overly rely on this money, even though in the long run it will decrease private donations.  A short term sacrifice may have to be made in order to raise private donations in the long run.  A misunderstanding of the subsidy-donation tradeoff could lead to the consumption of a suboptimally high level of subsidies which could lead them into the subsidy trap.  The inability or unwillingness to forego some public money in the short run could have long term negative consequences.

Understanding the subsidy trap phenomenon can help policy makers to better allocate subsidies across the nonprofit sector in order to maximize the effects of this grant money in nonprofits. 

For nonprofit leaders, understanding that the ticket out of the subsidy trap  is not more subsidies is powerful.  Funding must be found from increased private donations or from earned revenues.

We can also use this understanding to urge private donors to donate more, as we can appeal to them to ‘invest’ in the organization in order to decrease government funding, which will allow us to attract more private donations in the long run. 

I-1098 Fact Sheet

What will I-1098 do for Washington?

I-1098 would:

1. Cut taxes by reducing the state property tax by 20%
2. Eliminating the B&O tax for 80% of  small businesses with a tax credit up to $4,400
3. Create an income tax on high incomes (over $400,000 for couples, $200,000 for individuals).
4. Dedicate the net revenue (an estimated $1 billion per year) to education (70%) and health care. (30%)

Proponents of I-1098 say:

I-1077 will address the inequities in our current tax system.

Washington currently has one of the most regressive tax systems, and is one of only seven states that do not have an income tax. Because Washington does not have a sales tax, the poor pay more proportionally in taxes than the wealthy in our state.  See EOI Report for more information about Washington’s regressive tax structure.

It Will Create Additional Revenue for Education and Health Care

On average in other states, individual income taxes contributed 34.4% of General Fund revenues in 2009.  This is a sizable amount of revenue that Washington badly needs. This initiative would create an income tax for individuals earning over $200,000, which would create a revenue source for education and health care.  Washington’s ranking in education spending has been consistently falling over the last 30 years.  $1 billion in new revenue would be generated per year for education and health care.

It Will Address the Structural Budget Problem

This initiative will ensure that Washington has long-term, sustainable funding for its education system, ensuring that its residents are prepared to meet the challenges of today’s economy.  Up until now, Washington has been increasingly underfunding education.

It Will Stimulate Small Business

This initiative would also stimulate business as approximately 80% of businesses would now be exempt from the B&O tax.

Opponents of I-1077 Say:

The Tax Burden Will Be Disproportionately Be Placed On the Wealthy

This tax will tax the wealthy to pay for others to receive benefits

Opens the Door for More Taxation in the Future

This initiative could risk turning in to an income tax for all Washington residents, sort of a “slippery slope.”  Looking at the way the legislature overturned I-960 to be able to pass the budget, it is inclear that they would not try to change the definition of ‘high income’ at some point in order to raise more revenue, despite public opinion.

Washington residents have repeatedly rejected the idea of a Washington income tax, and the Washington State Supreme Court has ruled a graduated income income tax unconstitutional.

I-1098 Will Hurt the Economy

California has a high income tax, and people are leaving California for this reason, which is lowering state revenue.  This initiative could create negative incentives for wealthy individuals and business to reside in Washington, which would hurt Washington’s economic recovery, because we could lose this revenue as well as the jobs created.

Property Tax Numbers Misleading

Property taxes will actually be lowered by 3% of the total, because the 20% is only of the State’s portion.

What do you think about this initiative?  We invite you to be part of  the conversation!

Powerful Words from Dan Palotta at the Washington State Nonprofit Conference

The Washington State Nonprofit Conference was a more than a hit, it was a home run. 

What did you take away from the conference? 

What inspired you and how do you plan to apply what you learned in your organization? 

I took away three key ideas from Dan Palotta’s keynote speech that can transform our sector:

1. Reeducate the Public and the Media So They Know Your Organization’s Impact: We must work to reeducate the public about what it means to be “successful” as a nonprofit.  Measuring a nonprofit’s credibility and worth by what percentage of its donations goes towards overhead does not do it justice!  We need to measure the impact of the work we do, and communicate that overhead is necessary to achieving greater and larger scaled impact.
2. Invest in Our Organizations: We must see our nonprofit organizations as businesses.  Running a successful business requires investment.  Starving your organization of important investments may make you look better on paper but will not produce a greater impact.  We must invest diligently and wisely, but must not be afraid to invest.
3. Innovate: Always measure the impact of what you do, but take risks and try new things.  Trying something new and measuring the failure will teach others and increase your chances of success the next time.  Communicate to your investors and donors your plans and get them excited about your innovation.

These key ideas that Dan touched on challenge our entire paradigm of charity and service. But they will transform our organizations for the better. Dan Palotta also talked about the traditional puritanical values that have undermined our society, because we have separated ‘business’ from ‘charity’ and have made the two mutually exclusive.  Our society holds the value that to work in charity should be self-sacrificial and that one should never profit off of it.  He directly challenged these values and asked the question, why are capitalist ideas off limits when it comes to addressing the most pressing social problems in our society?

Don't Risk Your Tax Exempt Status!

According to the National Center for Charitable Statistics, there are 7,663 organizations in Washington State that are at risk of losing their tax-exempt status. Are you one of them?

Why?

A provision buried in the "Pension Protection Act of 2006" requires that every organization file some sort of report every year. Any organization that doesn't for three years in a row will lose their tax exempt status.

Find Out Now!

If you're on the list you have until May 15, 2010 to comply - and get OFF! Find out if your organization or one you support is at risk; simply click here.

What's Next?

Okay, so if you're on the list don't panic. You have until May 15, 2010, to file with the Internal Revenue Service.

• Organizations with less than $25,000 in annual revenues need to fill out Form 990-N. This is a convenient, easy and electronic form. It asks for eight items of information. The IRS has a comprehensive guide and a link to the form here.
• Organizations with less than $500,000 in annual revenues and less than $1.25 million in assets can use the Form 990-EZ.
• Larger Organizations should use Form 990.
• Private Foundations should use Form 990-PF.

Learn More

Put Barber, editor of the Nonprofit FAQ, has blogged about this very issue on Idealist.org. Check out his article here.

The New York Times reported on the provision, and it's nation-wide impact. Read the article here.

Spread the Word

Tell your friends! Every nonprofit in Washington needs to know about this risk.

Whew!

It’s Monday but we’re all thinking about Thursday. Last Thursday. The 16^th Annual Washington State Nonprofit Conference was bigger, better, and more IMPACTFUL than ever. And we just can’t stop thinking about it! Well, who can blame us?

For those of you who couldn’t make it, here’s what you missed:

More than 700 nonprofit professionals attended the conference to take advantage of learning and networking opportunities. Why is this so important? First of all, we know that 74% of nonprofits collaborate in one way or another. We also know that collaboration is essential to ensuring more successful organizations. This conference was the best place to guarantee that success. Secondly, everybody has experience, expertise, and qualifications. The conference brought all these skills together as all 700 people sought to strengthen our sector. Innovative ideas are born in this creative brainstorm. We learned a lot from our fellow attendees.

The Nonprofit Solutions Marketplace was filled with more than 70 exhibiting companies. Clearly this is a benefit we love. Aside from the amazing door prizes (Remember the $1,000 offered by Banner Bank, the itouch by LeMaster Daniels, or the complementary night at the Westin Hotel?), the exhibitors offered expertise and answers for many challenges nonprofits experience. Everything from accounting and banking to print and marketing solutions were covered by the fantastic exhibitors.

No doubt the most memorable part of this year’s conference were the three (count ‘em: 3) fantastic keynote speakers.

The morning started off with Kirstin McSwain, the Chief of Program Operations for the Corporation for National and Community Service. She brought a much needed federal perspective to Washington nonprofits and helped encourage the value of volunteers.

During lunch we were privileged to hear from Dan Pallotta, author of Uncharitable: How Restraints on Nonprofits Undermine Their Potential. Nothing I write here could quite explain the IMPACT Dan’s thinking will have on the sector. So I’ll let the attendees tell you:

There’s more too. But I think you get the picture.

Then of course, who could forget the IMPACT of having Governor Christine Gregoire close the conference with her passionate keynote. The Governor’s attendance solidifies the support and encouragement of the public sector for the absolutely vital nonprofit industry. It wasn’t only her attendance which signaled her support – she did say this: “You’re picking up where Government leaves off.”

So as we wind down and begin preparing for next year’s conference we hope every attendee learned the value of investment + innovation = IMPACT. Were you at the conference? Leave a comment; let us know how it was.

Go out and continue your IMPACT!

The upcoming nonprofit conference is an event you surely don’t want to miss!  It will change the way you see yourself, what and how you contribute to your organization, and inspire you to think bigger. Dan Pallotta, one of our keynote speakers, has raised many controversial ideas about the nonprofit sector and will be discussing his riveting book on how he believes nonprofits can transform themselves.  He proposes in his book, Uncharitable: How Restraints on Nonprofits Undermine Their Potential, that traditional ideas about nonprofits have held our sector back.  Pallotta believes that society’s strict ethics have denied our sector important tools to achieve more.  In one of Pallotta’s recent blog posts, he talks about how entrepreneurship is an important quality that should not only be embraced in the for-profit sector, but also in the nonprofit sector.  Although traditionally we have associated this quality with the private, for profit sector, a spirit of entrepreneurship Pallotta believes can transform the nonprofit sector.  Pallotta writes, “The fact that someone works in the for-profit sector doesn’t mean he or she is at all entrepreneurial.  Entrepreneurship is a thing unto itself.  “Entrepreneur” is a mind-set.” Someone can decide to be entrepreneurial regardless of if they are in the for-profit sector or the nonprofit sector.  Likewise, someone in the private sector may not necessarily be entrepreneurial.  It is a mind set.  He goes on to point out that just like Honda took market share from Ford by being innovative and entrepreneurial, so too can nonprofit leaders transform society with their innovative ideas and leadership.  The conference on Thursday is all about this theme.  INVESTMENT + INNOVATION = IMPACT!  This conference will transform the way you think about your organization.

To those of you that have registered, you will experience a speaker like none other. To those of you who haven’t registered yet, there is still time. Go to www.npconference.org. And if you can’t spend a whole day at a conference, you can attend just the luncheon.

If you have attended previous conferences, tell us what you experienced.

Click below to read more about the conference

Conference

The recent passage of H.R. 3590: The Patient Protection and Affordable Care Act will directly impact the nonprofit sector in several ways.  Check out the link below to see how nonprofit organizations are affected by the bill.

http://www.councilofnonprofits.org/public-policy/federal-issues/health-care-reform