Times are Tough – Get Used to It

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Chicago, Ill.—Former congressional staffer Ron Haskins stood before a gathering here last month of some of the most notable researchers and advocates in the youth field and delivered a harsh message about federal funding for youth programs: “Y’all better watch out.”

Haskins, now a senior fellow at the Brookings Institution who specializes in child and family policy, told a conference convened by the Chapin Hall Center for Children that federal budget deficits will force Congress to virtually wipe out discretionary spending on social services within a few years.

Tapped to respond to Haskins’ dark cloud was Gary Walker, president of Public/Private Ventures (P/PV) – who drew no silver lining. “You’re going to see contraction in the nonprofit world,” he said, meaning that more agencies will merge or go belly-up.

Hold on. In a field that sees itself as chronically and scandalously underfunded, it’s reasonable to wonder whether today’s warnings are anything more than an uptick in wailing. “We’re all guilty of occasionally predicting that the sky is falling,” admits Peter Goldberg, CEO of the Alliance for Children and Families (ACF).

But after several years of discussions and reports about how the recent recession caused drastic drops in foundation and government funding for youth services, the youth field is feeling little, if any, economic recovery. Instead, many of the field’s level-headed veterans say the recent economic struggles, coupled with the results of last month’s elections, reflect a structural shift in how the nation will fund youth programs.

“There is a growing sense that we are in a crisis and nearing greater crisis,” says Irv Katz, president of the National Human Services Assembly, a Washington-based group whose members include most of the nation’s largest youth-serving organizations, such as the National Mentoring Partnership and the Girls Scouts of the USA.

Shrinking Budgets

The change has been brewing since the late 1990s, and this year a series of reports documented the impact on agencies that deliver services.

In January, the John Hopkins Center for Civil Society Studies released a report, “Stressed but Coping,” which said 86 percent of 236 nonprofit organizations surveyed around the nation reported “fiscal stress” over the past year. In May, a report on “safety-net” nonprofits in California found that 40.7 percent reported a decline in income from last year to this year. The average decrease was 22.7 percent, according to “Holes in the Safety-net,” produced by the California Association of Nonprofits and the Human Interaction Research Institute.

Perhaps the most thorough statewide assessment was conducted by the Minnesota Council on Foundations, which released a report in May, “The State of the State’s Youth Development Funding.” The report, which focused on foundation support, said nearly two-thirds of youth-serving nonprofits reported drops in government funding over the previous two years, and almost half reported drops in corporate and foundation support.

Based on surveys of 61 nonprofits and interviews with 17 of the state’s largest youth development nonprofits, the study drew conclusions that would apply to many states. Twenty-five percent of nonprofits said they serve fewer youth because of funding cutbacks; 43 percent say they’ve been forced to lay off staff; and one-third have eliminated at least one youth development program, “with mentorship and after-school programs being particularly hit hard.”

Agencies around the country can identify with the resulting cuts: Big Brothers Big Sisters of the Twin Cities left vacant six of its 50 full-time positions. Those positions could have helped the agency serve an additional 300 youth, says Chief Executive Officer Kathleen Pickering. In Cloquet, Minn., Gayle Edwards, director of R.E.A.C.H. (Recreational Experiences Achieving Community Harmony), cut her hours by 25 percent and other staffers’ by 50 percent.

While such cuts are typical in hard times, what’s not typical is the breadth of feeling among senior agency administrators and advocates that this isn’t just hard times. “It’s not just a year or two issue we’re dealing with,” says Goldberg of ACF, a former foundation and public official. “We’re dealing with fundamental changes.”

Walker of P/PV sees the coming consolidation of the nation’s nonprofit world as a “natural” phenomenon that occurs as an industry matures. Certain approaches and providers become dominant as they prove themselves over time, he said at the Chapin Hall conference.

Less Support

The changes are reflected in several areas of support for youth services:

• Foundation contributions, which began declining as endowments shrank during the recession. According to the Foundation Center, funding for children and youth from 1,005 large foundations fell from $3 billion in 2001 to $2.6 billion in 2002, the most recent year for which such figures are available. (The estimate covers grants of $10,000 or more.) Foundation endowments may never rise to the level they were during the boom years of the early to mid-1990s, which was fueled in part by what proved to be an unsustainable surge in the value of technology investments.

• State budget deficits, which have prompted cuts in spending on human services. Over the past four years, according to the National Conference of State Legislatures, states have faced a cumulative budget gap of more $200 billion. The deficits have trickled down to counties, many of which have also cut human services funding. The Center on Budget and Policy Priorities says the financial picture has leveled out for most states for fiscal 2005, but “the severe fiscal problems of the past several years continue to dominate the budget landscape.”

• The federal budget deficit, which the White House Office of Management and Budget (OMB) says hit $521 billion in fiscal 2004 and is projected (some say optimistically) to be $364 billion in fiscal 2005, which began Oct. 1.

Haskins laid out the “grim” fiscal outlook last month at the Chapin Hall conference, “Adolescence and the Transition into Adulthood,” attended by about 250 practitioners, advocates and researchers. At current rates, he said, in eight years the entire federal budget will be taken up by spending on defense, Social Security, Medicare, Medicaid and the national debt. “There will be no money left for anything else,” he said.

What’s “really under threat,” Haskin says later, is domestic discretionary funding, especially for social programs. “The first things the Republicans are going to think of cutting are welfare and means-tested benefits, possibly even child support enforcement.” Haskins was a senior Republican staffer on subcommittees of the House Ways and Means Committee.

The OMB projects that for 2005, discretionary funding will decline by 1.6 percent for the Department of Health and Human Services and 3.1 percent for the Department of Justice, while increasing 3 percent for the Department of Education and 1.3 percent for the Department of Labor.

The Chicago conference was held a week after Election Day. The Republican victories for the White House and Congress erased the slight hope among some in the youth field who saw Democratic presidential candidate John Kerry as more likely to protect human services funding.

Goldberg shrugs. “The choices were between bleak and bleaker,” he says. “The long-term structural deficits facing federal, state and local government make for a challenging future under any scenario.”

Steve Culbertson, CEO
Youth Service America
Washington, D.C.
(202) 296-2992

Michael Danjczek, Executive Director
Children’s Home of Easton
Easton, Pa.
(610) 258-2831

Paul Gemeinhardt, President
Cornerstones of Care
Kansas City, Mo.
(816) 508-3600

Peter Goldberg, CEO
Alliance for Children and Families
Milwaukee, Wis.
(414) 359-1040

“Supporting Minnesota’s Youth: The State of the State’s Youth Development Funding”
Minnesota Council on Foundations
(612) 338-1989

“Stressed but Coping: National Organizations and the Current Fiscal Crisis”
Listening Post Project, Johns Hopkins Institute for Policy Studies
(410) 516-4363

“Holes in the Safety-net: Study of Funding Cutbacks and Safety-net Nonprofits in California”
California Association of Nonprofits
(213) 347-2070