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A Modest Proposal

December 03, 2009

Ben_brains As we noted last fall, fiscal 2009 promised to be -- and ended up being -- a terrible year for state budgets. And that's bad news for nonprofits that rely on state payments and contracts.

According to The Fiscal Survey of the States, an annual overview of fiscal conditions in all fifty states produced by the National Governors Association and the National Association of State Budget Officers, states are

facing one of the worst, if not the worst, fiscal periods since the Great Depression. Fiscal conditions significantly deteriorated for states during fiscal 2009, with the trend expected to continue through fiscal 2010 and even into 2011 and 2012. The severe national recession drastically reduced tax revenues from every revenue source during fiscal 2009 and revenue collections are expected to continue their decline in fiscal 2010. As state revenue collections historically lag behind any national economic recovery, state revenues will remain depressed throughout fiscal 2010 and likely be sluggish into fiscal years 2011 and 2012. The "official" economic recession, which began in December 2007 and may have recently ended, has significantly affected state spending, as more than half the states decreased their general fund expenditures in fiscal 2009, and over two-thirds of states enacted fiscal budgets with general fund spending lower than the previous year....

Back in January, a coalition of nonprofit organizations led by Independent Sector called for immediate financial aid to state and local governments experiencing budget stress as well as a short-term $15 billion bridge loan program for nonprofit human service organizations that, if implemented properly, would help preserve vital services to 7.8 million Americans in need and preserve some 300,000 nonprofit sector jobs over the next two years.

In February, with the national unemployment rate at 8.1 percent, the House and Senate passed, and President Obama signed into law, the American Recovery and Reinvestment Act of 2009, which, among other things, set aside some $55 billion for state fiscal relief. There was no provision in the legislation for an emergency bridge loan program for nonprofit service providers.

Today the unemployment rate stands at 10.2 percent -- and it could be higher tomorrow after the November figure is released. Meanwhile, financial service firms that received federal bailout money under the Treasury's Troubled Asset Relief Program (TARP) are scrambling to pay those funds back so they can "reward" their executives and star traders with the lavish pay packages and bonuses they've grown accustomed to.

With the White House convening a jobs summit and desperately looking, in the words of Tech Ticker, "for any and all ideas to help get Americans back to work," here's a modest proposal. Let's take $15 billion of the $45 billion Bank of America has said it will return to Treasury by year-end and put it toward the nonprofit bridge loan proposal advocated by Independent Sector and others. As Los Angeles arbitrator James Adler, writing on the Huffington Post, notes: "The key to creating jobs quickly is to utilize existing employers, particularly nonprofits who have seen their resources diminish precisely at the time of maximum need for their services...."

This would seem to be that time, no?

-- Mitch Nauffts

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Posted by Bruce Trachtenberg  |   December 03, 2009 at 05:04 PM

Don't be so modest...it's a great idea. Just do it!

Posted by DJ  |   December 04, 2009 at 10:16 AM

Nah....how about we take back all the stimulus money that has been "spent" in non-existent Congressional districts and put that towards the bridge loan instead?

Come to think of it, almost every state has lost jobs since the stimulus passed. Maybe the states should give that money all back and you can have one massive bridge loan fund!

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