Nonprofit groups need coronavirus relief, too
Nationally, nonprofit organizations provide a bit more than 10% of all private-sector jobs — more than agriculture or manufacturing. In Washington, nonprofit groups make up more than a quarter of all employment, a larger percentage than any state. This comprises nearly half of the city’s private-sector labor force and represents more jobs than all employers in Wards 1, 3, 4, 5, 7, and 8 combined.
Women comprise almost three-quarters of the nonprofit workforce, and, in the human service sector, in particular, many employees are former clients just a few paychecks away from needing to rely on the social safety net themselves. While many of the country’s wealthiest institutions (major universities, hospitals, and foundations) are nonprofit groups, organizations with big endowments or reserves are the exception. Most nonprofit organizations operate on a hand-to-mouth basis, and more than 60% don’t have a line of credit.
While we’re confident our own organizations will weather this storm, we know of others that, without help, probably won’t. With volunteers staying home, donations drying up, and demand for paid services withering, other nonprofit heads have told us they will face an existential crisis in just the next few weeks. And many of the services these organizations provide will be desperately needed in the fallout from COVID-19.
In the short term, with layoffs and a downturn contributing to economic dislocation, Washington has to shore up its own social safety net and the nonprofit groups that provide it. Not everyone is going to return to work immediately, and human service nonprofit organizations need to keep their workforces ready to help. Although federal action seems possible, it’s not clear if it will help nonprofits. And some nonprofits cannot wait.
In the short term, the city government should consider using assets in its rainy-day fund (currently full at $1.43 billion) to back no-interest loans or advances on future grants to help key human service nonprofit groups meet short-term payroll needs. For organizations expecting future federal grants or contract payments, such loans would present almost no risk to taxpayers and might even save money if they keep nonprofit workers off of programs such as unemployment insurance, food stamps, Temporary Assistance for Needy Families, and Medicaid.
Congress needs to act as well. First, tax writers should make sure that emergency business tax credits (such as the one provided in the new federal emergency sick leave benefit law) can apply against payroll taxes as well as income taxes. Since the current credits affect only income taxes, many nonprofit groups face this new mandate at the exact time their other resources are drying up.
Second, as funding delays and a downturn hit the nonprofit sector, a federal law to encourage people to donate more would make sense.
After Hurricane Katrina, Congress raised the ceiling for deductions of contributions from private corporations, and it should consider doing so again. Policymakers can also provide an incentive for everyday people to give generously. After the 2017 tax reform law, the 85% of people who do not itemize on their income tax returns get no benefit for charitable contributions.
To encourage private giving, particularly in a time of increasing need, Congress should consider a modest tax credit for individuals who support nonprofit organizations during the period of national emergency. While this would help all nonprofit groups, it would present the greatest benefits to locally focused organizations that depend on the generosity of middle-class families to stay in business.
Nonprofit groups provide important services in times of crisis, and they represent an important and vibrant sector of the economy. As policymakers in Washington and elsewhere look to help, they cannot forget the importance of nonprofit businesses.
Image credit: joshimerbin