As the country enters the government shutdown’s second week, nonprofits that rely on federal grants are considering the measures they will need to take to keep their organizations operating — including applying for loans, reducing staff, and seeking emergency aid from funders — should the impasse between congressional lawmakers over a federal spending bill drag on. And already strained nonprofits in certain causes, including food aid, could see an increased demand for services.
Congressional lawmakers seem no closer to making a deal on a federal spending bill than they were when the shutdown started last Wednesday. Hunger-relief groups are among the many nonprofits concerned that a lengthy shutdown will compound the impact of recent federal funding cuts, said Joel Berg, CEO of Hunger Free America. Hunger Free America is a national advocacy group headquartered in New York City that also manages AmeriCorps VISTA members, who spend a year volunteering at nonprofit organizations or public agencies and get stipends for living expenses supported by the federal government.
Berg is among the nonprofit leaders calling for lawmakers to bring a swift end to the shutdown before it causes more harm to nonprofits that are already strained financially.
“The effects on the nonprofit sector were already ghastly before this, and depending on how long this shutdown goes on,” the situation will only get worse, he said.
The Trump administration has slashed billions in federal grant dollars since January, including about a $1 billion in federal funding for schools and food banks. In July, Congress passed bills that allowed the administration to claw back roughly $9 billion in previously approved funds for foreign aid and other programs and slash $186 billion in future funding for the Supplemental Nutrition Assistance Program, or SNAP, which helps provide food for more than 41 million people.
Meanwhile, federal funding for a food aid program for low-income mothers and children known as WIC will expire within two weeks if the federal government isn’t reopened, potentially causing more strain on the charitable organizations that support those populations. An estimated 6 million people rely on WIC.
“If this goes on a few weeks, you’re going to start to see real pain in the WIC program,” Berg said.
Beyond food assistance, many nonprofits must consider how they will get through a prolonged shutdown, experts said. With most federal agencies unable to make payments, renew contracts, respond to emails, or offer any other form of support, nonprofits reliant on federal funds are unlikely to be able to meet their expenses, said Sarah Saadian, the National Council of Nonprofit’s senior vice president of public policy and campaigns.
“While this might not have an immediate impact on nonprofits, if it continues for some time, it can put nonprofits at financial risk,” Saadian said Monday during an online forum about federal grant funding.
Nonprofits could soon find themselves unable to cover payroll and other expenses, she said. The National Council of Nonprofits has advised nonprofits to consider options such as applying for bridge loans, tapping into cash reserves, or reaching out to funders for emergency relief to cover immediate financial needs if the shutdown goes on for an extended time.
“It’s really hard to guess how long it could last, but it’s important that nonprofits are prepared just in case,” Saadian said.
The last shutdown lasted 35 days, starting in late December 2018 and ending in January 2019.
A Cascading Crisis
The shutdown is capping what was already a tough year for the nonprofit sector. Organizations delivering disaster relief, emergency shelter, job training, and mental-health services are among those that have had to suspend programs and lay off staff in response to federal policy changes and the downsizing of federal grants and staff since January, according to a new report published by the Urban Institute this week. The report is based on survey responses from 2,737 nonprofits nationwide and was compiled by researchers at American University, George Mason University, and the Urban Institute.
About 27 percent of nonprofits reported a delay, pause, or freeze to their government funding in the first four to six months of the year, and 21 percent said they had lost at least some of their federal funding during that period. Another 6 percent said they had received a stop work order requiring them to immediately stop spending allocated federal funds. At the same time, two-thirds of respondents said they expected demand for their services to increase in the next 12 months amid shrinking funding for social safety nets.
The National Council of Nonprofits is already hearing from food banks and other groups that are seeing increased demand as a result of the shutdown “when there was already a great need in communities and not enough resources,” Saadian said.
Looking for Relief
As the shutdown goes on, unemployed federal workers may well be added to the groups of people turning to nonprofits for services. The Trump administration has not backed down from a threat to start firing federal workers should Capitol Hill negotiations stall. Thousands of federal employees have already been furloughed without pay. This Friday will mark the first missed paycheck for most of those furloughed, and October15 will be the first missed pay day for active-duty military personnel, Saadian noted.
Like many federal workers, the AmeriCorps VISTA volunteers that Hunger Free America manages will not be paid during the shutdown, Berg said. AmeriCorp VISTA members typically receive a biweekly allowance to help cover their living expenses. The allowance rates vary by location but are typically above $900. Hunger Free America is planning to loan money to its AmeriCorps members for at least a few weeks, he said. However, if the shutdown lasts longer than that, things will start “to get dicey,” according to Berg, who noted his organization is still owed nearly $1 million from state and local contracts from past years.
“That’s a real challenge for our cash flow,” he said.
Others in the sector are also pressing state and local governments to throw a lifeline to struggling nonprofits dealing with the loss of federal money. By issuing payments to nonprofits on time and paying some portion of funding upfront rather than strictly relying on reimbursements, state and local governments could provide some relief to cash-strapped nonprofits during the shutdown, according to the lending and consulting firm Nonprofit Finance Fund. The organization recently published its data on the “colliding crises” putting financial pressure on nonprofits.
“As people lean on nonprofits, state and local governments have an opportunity to be better partners,” Aisha Benson, CEO of Nonprofit Finance Fund, wrote in a blog post.
“While we can’t expect them to fully replace lost federal dollars, there is plenty of room to act.”
