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What Would a Government Shutdown Mean For Nonprofits?

Posted by Andrew Littlefield on Sep 30, 2015 10:00:00 AM

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"So Congress and the Budget walk into a bar..."

Stop me if you’ve heard this one.

Today marks the deadline for Congress to pass a bill funding the federal government. At the time of this writing, the Senate has advanced a temporary spending measure that would fund the government through December, although it still must be approved by the House and Senate before 11:59PM.

No approval, no more funding.

What would that mean for nonprofits?

No More Government Checks

The most direct effect of a government shutdown for nonprofits would be the cut-off of federal funding. Some 1.4 million nonprofits rely on government funding, though how much of their budget is made up by government grants varies. But the impact would certainly be felt throughout the sector.

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Indeed, many nonprofits would have their very existence threatened by a cut-off of grants. Without regular checks coming through, many organizations would have to redirect funding from other sources, putting programs and operating costs at risk (and increasing the burden on fundraisers to increase revenue).

One nonprofit at the center of this debate is at risk of their federal funding being cut-off completely. Planned Parenthood, who receives over $500 million dollars a year in federal funding, is the target of lawmakers who wish to defund the organization.

Nonprofits with diversified funding streams will be best suited to ride out any turmoil, but losing federal money is no small crisis. Those organizations who have developed healthy relationships with major donors, regular donors, corporate gifts, online fundraising, and more should be able to weather a temporary storm either through redirecting money, tightening budgets, or tapping into emergency funds.

How Many Government Grants Are Awarded a Year

The good news is, nonprofits have the public on their side. Following the last government shutdown in 2013, a full 80% of Americans said they disapproved of the shutdown (I challenge you to find 8 out of 10 people that agree on anything). This time around, a majority of Americans disagree with the defunding of Planned Parenthood, signaling more public opposition to any shutdown. In the event that vital programs are at risk of closing, it’s likely that a nonprofit’s supporters will be understanding and want to help.

Secondary Effects

Even nonprofits that don’t rely on federal money will feel the effects of a shutdown due to a decrease in supply of the the services they offer. Take this example cited by Nonprofit Quarterly back in 2013:

“…when “funding gets cut for food stamps, people still need to eat, so they’re running to the food banks, they’re running to any nonprofit that distributes food or resources. At the same time, the nonprofits have not increased their supply—they can’t turn it around that quickly.”

Many nonprofits serve as a secondary resource to government programs, but the need doesn’t go away when the federal spending does. This puts a heavier burden on nonprofits, even if they don’t receive a single penny from the federal government.

What Can Nonprofits Do?

Of course, the best time to plan for an emergency is before you have one. With Congressional gridlock apparently now a permanent part of our government landscape, the time to start building a contingency plan is yesterday. Set aside an emergency fund, make plans for what must be cut during a shutdown to keep the organization intact, and be prepared for worst case scenarios.

Average Size of Government Grant

In the meantime, nonprofits can mobilize their supporters to prevent the worst from happening. Remember, a vast majority of the public opposes these shutdowns, so email your supporters and ask them to contact their representatives expressing their opposition. Tools like OpenCongress (a nonprofit organization themselves) make it easy for people to look up their representatives and their contact information. Better yet, segment your email list by zipcode and do the work for your supporters. Give them a script or email template to use and hand them the contact information for their lawmakers.

You could even set up a petition to send to lawmakers explaining the need for funding and the people lawmakers put in harm’s way by cutting off grant funding. Petitions are also a great way to bring in new supporters.

It would also be a good time to visit your major gift prospects and discuss the impending situation with them. Even if the temporary measure passes, it will only kick the can down the road until December when the problem will rear its ugly head again. Make sure your major supporters know the stakes early so you’re not forced into a situation where you’re asking for emergency funding at the last minute, without taking the time to properly steward these donors.

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Image credit: Wikipedia Commons | Kathrin Tausch, CC BY 3.0

Topics: nonprofit news

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