In many of the media reports about sequestration – the government's mandatory budget cuts that total $85 billion – not enough attention has been given to its consequences for charities. As local nonprofit organizations, particularly those serving people living with HIV/AIDS, prepare for less federal funding, leaders should keep in mind that if these budget cuts result in furloughs or layoffs of federal workers in the coming months, any charitable giving they participated in likely will be lost or sharply curtailed.
The San Francisco Bay Area is not like Washington, D.C, which has hundreds of thousands of government employees. But as a major metropolitan region, the Bay Area does have a sizable federal workforce, including researchers, attorneys, and bureaucrats. Just about every federal agency has an office in the region. Any furloughs or layoffs will hit the local economy on many levels. Those in the service industry might see fewer customers because they will be forced to limit their spending. Restaurants could experience a decrease in patrons. Contractors that provide services to the federal government will also be affected. The local economy was just beginning to show signs of improvement, which now could be jeopardized as federal agencies must cut their budgets.
But with some AIDS nonprofits ramping up expansion efforts or preparing for a reduction in federal Ryan White funds, it will be necessary to continue searching for private dollars, which could prove more elusive if there is no solution from Congress over the budget.
In terms of AIDS services, one of the hardest hit would be the AIDS Drug Assistance Program, which nationally faces a cut of 7,400 people living with HIV.
The federal Centers for Disease Control and Prevention estimates that 424,000 fewer HIV tests will be provided nationwide, and 49,300 fewer in California, which would negatively affect prevention efforts and the goal of increased testing. Slots in substance abuse treatment will be cut, because the state will lose $12.4 million from a federal grant.
In short, the country is about to enter a new age of austerity, which Americans are not used to. Congressional Republicans shoulder much of the blame, in our opinion, because tea party members in the House refused to compromise. But it doesn't seem like that situation will change anytime soon.
Now is a good time for nonprofits to review their finances, and any reductions should start with mid- and upper-management positions rather than services or line staff, who work directly with clients. Development directors need to get creative at soliciting private funds and recruiting new donors. In the worst case scenario, organizations that provide similar services should consider merging in order to save on common expenditures like overhead costs. We were a proponent of mergers a few years ago when the recession was at its height and we know agencies don't like to think about it. In this new economy of the sequester, however, executive directors need to put their clients – not their salaries or deputies – first.
The political gamesmanship in Washington is indeed poor policy, as the San Francisco AIDS Foundation noted in a news release it sent out this week. And it is the poor who will suffer the consequences of service reductions and reduced funds for programs like housing subsidies and food stamps. But to minimize the impact of these federal cuts, it looks like another round of belt-tightening is in order.
The sequester was passed a year and a half ago and, at the time, it was believed to be so drastic that neither political party would let it occur. But last Friday, as President Barack Obama signed the order implementing the cuts, as he was required to do, it became clear that our federal government is in disarray. Austerity is the new normal, like it has been in Europe recently, and nonprofits, like everyone else, will need to adapt. Those changes, however, should not leave clients out in the cold.