The Third Sector Report By Jeffrey Wilcox

The Federal Government Shutdown And The Third Sector
Jeffrey Wilcox - The Third Sector Report

October 8th, 2013 – There’s a reason why it’s called “the third sector.” Our nation’s system of nonprofit organizations is a uniquely American invention that affords governments, businesses and citizens a way to advance the quality of life for their local communities, using shared resources.

While every community may have its own ideas about what constitutes quality of life, most agree that healthy people, quality education, protection from harm, a clean environment, food and shelter, and positive options for youngsters would be among its many desired attributes.

When one of the sectors can’t hold up its end of the bargain to the others, however, things can quickly deteriorate. What was once a community’s attribute can, over time, erode into a community’s emergency.

When the federal government shuts down, the nonprofit sector becomes a community billboard for what can happen when policy-making gone awry converges with the domino effect and the trickle-down theory.

According to the Urban Institute, 54 percent of human service nonprofits rely on government contracts to work their magic on the streets, often in partnership with other local agencies and community organizations. In California, the percentage is estimated at closer to two-thirds.

Even when the federal government is fully functional, the system isn’t without its challenges. Most of what the government brings to the table doesn’t cover the full cost of providing services, a shortfall that can be further compounded when their checks arrive late. A federal shutdown guarantees late or no payment to organizations that share an unfortunate reality with many federal employees: Most don’t have sufficient reserves of their own to weather the storm for very long.

If any taxpayer or politician wants a first-hand look at the dramatic effects a federal shutdown can have on a local community, the nonprofit sector will be among the first to portray the travesty. Organizations that provide services related to The Federal Special Supplemental Nutrition Program for Women, Infants and Children, or WIC, and Meals on Wheels would be two prime examples among many.

The WIC Program helps provide low-income pregnant women, new mothers and children up to the age of five with healthy food in an effort to curb adverse health effects, learning disabilities and other complications stemming from premature births or childhood malnourishment. This is one federal program that has proven that it saves taxpayer money as it has shown that $1 spent in this program saves $4.21 in medical costs. The United States Department of Agriculture has made it clear, the longer the shutdown, the more certain it will be unable to sustain its operations.

Meals on Wheels is the federal system that partners with local nonprofits to assure that vulnerable senior citizens, who either can’t afford to feed themselves, are isolated, or are unable to prepare their own food, receive a hot meal. Nonprofits coordinate elaborate volunteer and staff efforts to make this happen and are dependent on federal reimbursements.

When combining the numbers of people affected by these two vital programs with the scores of children and families who benefit from the comprehensive services of Head Start through schools and community agencies every day, it doesn’t take a lot of math skills to begin to appreciate the widespread needless casualties that can result from political warfare fought on our own soil.

A government shutdown leaves nonprofits with the same painful management choices now facing the federal government itself, as well as hundreds of businesses whose government contracts could mean late or no payments to their cash flow forecasts.

According to the Urban Institute, 60 percent of nonprofits in California report the first phase in these situations is to freeze or reduce employee salaries, which could lead to staff reductions and reduced benefits. The second phase is drawing upon reserves, provided the nonprofit has such means, or looking to lines of credit. The third phase is the entire elimination of programs and services to vulnerable populations which, if such moves don’t create stabilization, could lead to business failure.

The nonprofit sector is a model envied by the rest of the world. It’s too bad the federal government didn’t feel the same levels of urgency and responsibility that it expects from all the other sectors in safeguarding its sanctity.

(Jeffrey R. Wilcox, CFRE, is president and chief executive officer of The Third Sector Company, Inc. Join in on the conversation about this article on Facebook or drop us a line at jwilcox@thirdsectorcompany.com)