Tag Archives: fiscal cliff

Sequestration Still Looms Over the Grant World: Two Months and Counting

I wrote about the potential impacts of the then-looming fiscal cliff a few weeks ago. At the last minute—actually, about a day after the last minute—Congress and President Obama awoke from their torpor and passed legislation, which what’s left of our media immediately hailed as “preventing the nation from going off the fiscal cliff.”

Well, not quite.

Lost in the fiscal cliff hubbub was the fact the fiscal cliff was actually a two-step fall. The first step downward—massive tax increases on almost all Americans—was indeed averted. The second part of the Cliff, sequestration, however, wasn’t addressed.

Rather, it was kicked down the road by about two months. As I pointed out in my earlier post, sequestration will impact the wonderful world of grants much more than tax increases. The former means significant reductions in discretionary grant funding, while the latter means more “money for nothing and chicks for free.”

Over the next few weeks, the battle lines over sequestration will form as the new Fiscal Cliff takes shape. This, too this will be a two-step Fiscal Cliff. Step one is our old pal sequestration, while the second part will be raising the federal debt ceiling. While the two steps are not inherently intertwined, the timing virtually ensures that the debates over both will be.

If you’re with a nonprofit that’s drifted back into somnolence because the Fiscal Cliff has been averted, shake yourself awake because the roller coaster is about to start again. In many ways,* coming to agreement on the largely non-raising of taxes was fairly easy for Congress and President Obama to agree on, compared to the coming battles over sequestration and raising the debt limit.

While understanding the byzantine politics of these two issues is above my pay grade, the eventual outcomes will likely include either decreases in federal spending on discretionary grant programs or, at a minimum, a reduction in the rate of increase. Either course will have significant impacts for grant seekers.


* Free proposal lead-in phrase in here.

Cliff Diving: Sequestration and A New Year’s Resolution for Nonprofits and Local Public Agencies Worried About the Fiscal Cliff and Grants

EDIT: It looks like we’re not going over the supposed cliff. But much of the analysis below will remain relevant in the coming years, as political fights about debt, spending, and taxation continue.

EDIT 2: The analysis below has been augmented with “Sequestration Still Looms Over the Grant World: Two Months and Counting.”

I find it hard to believe, but as I write this post in the waning hours of Sunday in the waning days of 2012, it seems that the President and Congress are actually going to do a Thelma and Louise and send us collectively off the dubiously named “fiscal cliff.”

If this happens, we may see sequestration. As I understand the implications of sequestration on domestic discretionary spending, including funding for block granted and competitive grant programs, this would mean at least an 8.8% haircut across the federal spending board. Since we’re now already three months into the FY ’13 budget year, however, there are only nine months left, meaning that the cutbacks could be as high as 15%.

Now, what “across the board” means is still subject to interpretation, as this has not actually been done before. One assumes current grantees would get an immediate budget reduction notice, while open RFP competitions might be scaled back. There would also significant impacts for federal sub-grantees for such locally administered block granted programs as CDBG, CSBG, OAA, and so on. The mechanics of sequestration are subject to murky federal regulations and a cadre of anonymous GS-12 and GS-13 budget officers spread across the departments, who are going to be in particularly bad moods coming back after their Christmas holidays to this morass.

The short-term impact of sequestration for garden-variety nonprofits and public agencies that have direct or indirect federal contracts, or are vying for discretionary grant funds, is sure to be confusion in the short term and chaos over the medium term. But—and this is big “but” (so to speak)—it’s not the end of the world. To quote REM, “It’s the end of the world as we know it and I feel fine.” While media pundits and trade association/advocacy groups will make a lot of noise, the grant world will return to normalcy once the temporary Federal crisis passes.

Despite sequestration and ongoing budget battles, I think significant cutbacks in federal funding for discretionary grants are unlikely, as least for the next few years. What is more likely is a slowing of the increase in federal spending, or as it is more popularly called in a phrase I’m beginning to intensely dislike, “bending of the cost curve.” Keep in mind that we have not had a federal budget in four years and probably won’t have one anytime soon, as the feds will continue to operate with continuing resolutions and baseline budgeting. Thus, unless there is a sudden come to Jesus moment among Democrats and Republicans, it will be the same as it ever was.

This brings me to my suggested New Year’s resolution for nonprofits and local public agencies–take a hard look at your current programs and new initiatives in the planning stages. While there will still be plenty of RFPs available, the competition for government grants is sure to be more intense as the nation stares down its tax and spending challenges.* Seek foundation grants too; as the economy has staggered out of the Great Recession, foundations have recovered investment losses and are going full steam in grant making.

For those nonprofits that survive mostly on donations, a bigger issue is the potential of limits on the charitable tax deduction, which we wrote about recently in “Nonprofit ‘Whales’ May Face Extinction with Potential Tax Law Changes.” In other words, diversify and your organization will thrive in the exciting new year.


* Free proposal word here. In grant writing, there are never any problems, only challenges.

Nonprofit “Whales” May Face Extinction with Potential Tax Law Changes

I’ve about had it with the endless blathering about the so called fiscal cliff.* There is one nugget in the story, however, that should strike fear and loathing into the hearts of nonprofit executive directors: Whether or not President Obama and Speaker Boehner hold hands as they jump off the cliff, America faces an enormous fiscal challenge that will have to be addressed in the coming years, because we spend more than we take in and have for about the last ten years. As Herb Stein’s Law states, “If something cannot go on forever, it will stop.” The inevitable tax reform that will result is likely to include significant limits on the charitable tax deduction.

While nobody knows what form changes to the charitable tax deduction “loophole” might take, it’s a good bet that the annual total for all deductions, including the charitable tax deduction, will be capped at some number—say $25,000. “So what?” you say. “I’ve got lots of donors and there’ll probably be a minimum gross income, like the currently popular $250,000 per year, that is somehow supposed to equate to ‘millionaires and billionaires.’ And it’s time we stick it to the one percenters.”

But many donation-supported nonprofits have lots of supporters who make small, albeit regular, donations to the cause. As any executive director knows, however, these donors take lots of care and feeding to extract money. As a result, the return on the time investment in getting these donations is fairly small. Instead, for many if not most donor-supported nonprofits, a relatively few large donors actually keep the doors open and the lights on.

Like Las Vegas casinos who depend on high rollers, these donor “whales” are critical to many nonprofits. Just like their casino counterparts, who are charmed by private jets and fancy suites, nonprofit whales also demand perks like a seat on the board, constant phone calls and ego stroking. It’s worth it, though, because the return can be enormous. Thus, executive directors spend a lot of time whale watching, while their underlings curry favor with the everyday donors and volunteers.

Restrictions on the charitable tax deduction will probably make whale herding much more challenging. A typical donor whale might support four or five charities generously. When the tax benefit is capped, as it likely will be, that might drop to two or three. Your nonprofit could be left on the whale watching cruise with nary a fluke in sight.

The good news in all of this is that increased tax revenues from tax reform will mean there will be more government grant dollars up for grabs, or at least fewer extensive cuts.

EDIT: The WSJ ran “Should We End the Tax Deduction for Charitable Donations?“, which engages the same questions as the post above. If the WSJ and other major media outlets are debating this issue, you can bet there’s a real chance of actual changes.


* Or to quote the inimitable Samuel L. Jackson in Snakes on a Plane, “Enough is enough! I have had it with these motherfucking snakes on this motherfucking plane!”.

Turhan Bey Passes, Presidential Debates, Honey Boo Boo, Truffle Pigs, and FY ’13 RFPs (Including YouthBuild, Serving Adult and Youth Offenders, and More)

Almost five years ago, I wrote about the strange phenomenon of grant programs rising from the dead like The Mummy in “Zombie Funding – Six Tana Leaves for Life, Nine for Motion.” Two events reminded of this post.

First, the Huffington Post reported that Turhan Bey has passed to the great beyond. As those of you of a certain age will remember from late night TV, Turhan Bey played the sinister Mehemet Bey in the seminal Universal Pictures monster movie, The Mummy’s Tomb. Like federal Program Officers for programs facing cutbacks, Turhan Bey was responsible for keeping Kharis alive with the mysterious tana leaves.

Second, politics and grants are intersecting—you can see one example in the way President Barack Obama and Governor Mitt Romney got into a fight over Big Bird in their debate, which was really over funding for public broadcasting. Then, Vice President Joe Biden and Congressman Paul Ryan got into a spirited tiff about Ryan writing support letters for Stimulus Bill grant proposals from his District, even though he vocally opposed the Stimulus Bill.* Leaving aside the politics of these exchanges and regardless of who wins the election, it’s clear that grants are going to be a big part of the national discussion as the feds approach the fiscal cliff.

There will be much hand wringing and gnashing of teeth over possible cuts to domestic competitive grant programs, as interest groups flood Washington to save their particular bacon. As Honey Boo Boo puts it, “A dolla makes me holla.”** I’m not a betting man, but I will venture a dollar that funding for Big Bird survives the fiscal cliff, as will funding for most other grant programs. Some may get a severe haircut and others may be living underground on six tana leaves, but almost all will eventually get nine tanna leaves and walk among us again.

For nonprofits, all the hubbub means that it is critical to stay on top of the federal RFP process. Toward this end (this is free proposal transition phrase), it pays to root around like a truffle pig looking for tasty grant morsels on the federal forest floor. It turns out, for example, that our pals at the Department of Labor (DOL) Employment and Training Administration (ETA) just posted a forecast of FY ’13 Upcoming Funding Announcement. Early 2013 will bring a temping $40,000,000 for “The Make It In America Challenge,” followed closely by our old friend YouthBuild, Serving Adult and Youth Ex-Offenders through Strategies Targeted to Characteristics Common to Female Ex-Offenders Generation II and Serving Juvenile Ex-Offenders in High –Poverty, High-Crime Areas Generation III.

It clear that the ETA plans to keep shoving RFPs out of the door, and it behooves nonprofit to position themselves in advance of RFP issuance so they can prepare compelling proposals. Or you can just hire Seliger + Associates to be your personal Grant Truffle Pig.


* We have several clients in Racine, which is in Congressman Ryan’s district, and it is entirely possible that we drafted the support letter for a Stimulus Bill proposal that riled Uncle Joe.

** Jake was sent this Onion article and did not realize that Here Comes Honey Boo Boo is an actual show.