Don’t discount the value or distress of nonprofits

by John M. Bridgeland and Bruce Reed

The economic downturn has prompted congressional action to shore up the financial sector and get credit flowing. What’s been missing is a concerted effort to respond to a quiet crisis in America – the plight of the nonprofit sector that cares for those hurting most from the economic recession.

A report commissioned by the W.K. Kellogg Foundation shows that in the wake of the economic downturn, hospitals, nursing homes, nursery schools, senior centers, soup kitchens and other nonprofits have been hit by a triple whammy. The evaporation of wealth has decimated charitable contributions; state and local budget shortfalls are costing nonprofits their best paying clients; and the human need for nonprofit help is skyrocketing as nonprofit resources shrink.

The troubles are real. Churches, the core of social service delivery to the poor and needy, were expected to raise $3-5 billion less than expected in the last quarter of 2008. United Way saw a 68% increase during the past year in calls for basic needs such as food, shelter and warm clothing. Over the last year, more than 70% of Michigan nonprofits have seen increasing demand for their services, while 50% say their financial support has dropped.

Even though the nonprofit sector constitutes 11% of the U.S. workforce — greater than the auto and financial industries combined — the debate in Washington over how to get the country moving again has almost completely overlooked nonprofits.

This is a mistake, because no sector offers more bang for the buck. Here’s what could be done to help the economy and strengthen charity right at a time when we need it most.

Congress should pass the Hatch-Kennedy Serve America Act that would put 250,000 Americans a year to work in national and community service and create a volunteer generation fund and other means to engage literally tens of millions of Americans in service to their communities and nation. With unemployment among youth at 21% and among older Americans at levels not seen since the early 1980s, government could put these two vulnerable populations to work at low cost and with no new bureaucracy. Imagine these generations working through Habitat for Humanity, Meals on Wheels and Teach for America.

Congress also could spur more charitable giving and volunteering with modest changes to the tax code. It could extend the IRA rollover so Americans over 70 can make charitable contributions through tax-free withdrawals from their retirement accounts; make the mileage deduction for volunteer travel, currently at only 14 cents per mile, the same 58.5 cents per mile as for business travel; and allow the 65% of all taxpayers who do not itemize their tax deductions to claim a deduction for charitable contributions.

The nation also faces massive home mortgage and foreclosure problems and nonprofits can help. The government should make full use of community development financial institutions and nonprofit housing organizations that oversee billions of dollars in mortgages and loans to low-income communities and individuals, without the greed, excessive risk, and mismanagement that plagued so many subprime lenders and helped create the current financial crisis.

Times of trial have always summoned the greatness of our people. As the administration, Congress, statehouses and communities look for innovative ways to respond to the economic downturn, they must include the nonprofit sector in their response. By doing so, we can help save our economy and engage more Americans in serving their nation.

John M. Bridgeland and Bruce Reed are coauthors of “The Quiet Crisis: The Impact of the Economic Downturn on the Nonprofit Sector,” commissioned by the W.K. Kellogg Foundation.