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Legislators Need to Get the Message That Government Shutdowns Hurt Nonprofits

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Now that the shutdown of the federal government has been lifted it's time to assess the damage it has done to nonprofits. We've read a lot about the pain the shutdown has inflicted on federal workers and contractors, but many nonprofits across the state of Illinois and the country have also been severely and negatively impacted by the shutdown.

In an insightful post to the Philantopic blog early on in the shutdown, Tim Delaney, President and
CEO of the National Council of Nonprofits, a leading national network of nonprofits, wrote about the impact the shutdown would likely have on charities:

Community and human needs do not stop just because the federal government has stopped functioning. Indeed, the shutdown has actually increased the needs of millions of Americans. That's why when politicians shut the doors of government, charitable nonprofits struggle even more than usual to meet the needs of their constituents.

It's worth noting a lot of the federal funding for nonprofits is funneled through the states. The state of Illinois already has the poorest record in the country of paying nonprofits on time for contracted work, so charities here are particularly vulnerable to a cutoff of federal dollars.

Earlier this week we took a snap online poll of Donors Forum's nonprofit members about how they're being affected by the shutdown. Although not scientific, we found that nearly 40 percent of our members are being negatively impacted by the shutdown. More than ten percent had furloughed or laid off staff, and an equal number had closed programs. Nearly 17 percent had scaled back programs while at the same time 13 percent were seeing an increased need for their services. All of this in a poll in which just over half of the respondents told us they receive federal funding.

Respondents also told us that their lines of credit -- used to get them through inconsistent government funding cycles -- were closed by their banks during the economic downturn and cash flow went from already tight to nonexistent. Others expressed their funding had already been cut by the sequester and the shutdown had added pressure to continue current levels of service. Even conferences that featured public sector leaders were canceled because government travel was suspended.

"We could potentially lose matching funds if the shutdown continues," one respondent said, highlighting the fact that many government funding programs require a match, potentially doubling the losses to charities that participate in those programs.

The Illinois-based agency Rainbow House, a nonprofit that serves victims of domestic violence, told many of its employees October 15 would be their last paycheck. Even with the vote this week to reopen the government, its Executive Director, Kathleen Higgins, indicated she has not been made aware of when funding for her agency might be restored.

"There are so many catch-22s for us because of the way the funding programs are structured," Higgins said. "We are not fee-for-service and our federal funding agreements require we provide the services that we committed to provide so we can't furlough," she added. "Our only choice is for some of our staff to work for free."

Higgins did say some private funders had stepped in to fill gaps and others had indicated a willingness to meet commitments for next year early, but those potential grants still must to go through the funding approval process. [Read a brief Q&A with Rainbow House's Kathleen Higgins on the impact of the shutdown on her organization here.]

The struggles nonprofits faced the past two weeks and will continue to face as a result of the federal shutdown amplify both the complexities charities face when obtaining funds to provide the essential services that the government is asking them to provide, and the fact that legislators aren't nearly enough aware of how their decisions impact nonprofits and the communities, families and individual they serve.

We need to use the story of Rainbow House and other nonprofits that hold together the strands of society to make sure elected officials at all levels know that their votes can often erode the programs of charities that are the only place many in our communities can go to for critical needs.

Asked what she would tell legislators who allowed the government to shutdown Higgins said, "I would tell them that the $30 billion or so that was lost during these past two weeks would have been enough for every person in the country impacted by domestic violence to receive comprehensive care for years."