October 2007 Brown Bag Minutes

At this fifth Brown Bag, panelists discussed the Maryland “Budget Crisis” or “Structural Budget Deficit” discussed by policy-makers and in the media relating to the state’s “general fund” budget, which accounts for roughly half of state spending in Maryland – or over $14.5 billion in 2007. The projected shortfall to continue current services and operations within the general fund budget in the next budget year (FY 2009) is approximately $1.42 billion (almost one of every ten dollars being spent today).

Panelists included:
Henry Bogden, Director, Maryland Budget and Tax Policy Institute
Chuck Short, Special Assistant to the County Executive
Pamela Cudahy, President/CEO, St. Luke's House, Inc.

Nonprofit Montgomery! and
Montgomery County Office of Community Partnerships (OCP)
Fifth Brown Bag Lunch
October 16, 2007

Meeting Notes

Panel Topic: “Not a Spectator Sport: The Role of Nonprofits in the Maryland
Budget Solution”

Welcome and Introductions
MaryAnn Holohean welcomed the participants to the October meeting and introduced the panelists.

Participants were asked to complete and return the questionnaire in preparation for the
2008 meetings.

Henry Bogden, Acting Chief of the Budget and Tax Institute

“What You Should Know About Maryland’s Budget Challenge”
· The budget crisis or structural budget deficit refers to the state’s General Fund Budget, which accounts for approximately half of state spending in Maryland.

• The General Fund Budget is money raised through state taxes (80%), the lottery (4%), corporate income (4%) and other fees (12%). It does not include federal dollars, gasoline tax, and tuition at state colleges and universities tuition or motor vehicle fees.
• 83% of the General Fund supports education (47%), health (26%) and public safety (10%). The General Fund also supports aid to local government programs.
  · Structural budget deficit is when “ongoing/recurring costs exceed ongoing/recurring revenues (what is being paid for does not lineup with incoming revenue).
• Maryland’s structural revenue problem stems from:
  o Increased obligations in critical areas such as education, health, and public safety over recent decades
  o Revenues not growing with obligations
  o Tax cuts without regard for growing needs
• Maryland is not a high-spending state; this is a revenue problem.
  Maryland has not grown a revenue base that keeps up with the spending
  o Maryland is still spending the same amount of wealth as 30 years ago.
  o The proportion of Marylanders’ personal income being
  collected to pay for state and local government is lower than in 46 of the 50 states.
  o All state and local government spending in Maryland represents a
  smaller investment of collective income than any other state in the country.
  · The projected shortfall to continue current programs and services in the next budget year (FY09) is $1.62 billion.
  
  · The Governor must present a balanced budget.
• The Department of Legislative Services has prepared a document to present possible cuts – “Doomsday Budgets”
  o These reductions (10% of the General Fund Budget) would be spread over state agencies.
  o Reductions include:
  - A quarter billion in state workforce ‘savings’
  - $500 million in cuts to K-12 education and libraries
  - $32 million from DHMH budget
  - $37.5 million from medical care programs
  - Elimination of property tax relief for low income renters
  - Elimination of General Fund support for DHCD capital program
  o Total number of proposed reductions – 150.
• The Governor has proposed a fairly progressive mix of revenue and spending reductions, which include restructuring of income and sales tax.
  o The plan would balance the General Fund Budget for the next several
  years and close the structural budget gap by fiscal year 2011.
  o The proposal includes two new initiatives with general funds.
  - A new health initiative, which would be partially funded by the increased tobacco tax.
  - Increased funding for higher education funded by proceeds from the increase in corporate income tax.
  o The plan would seek to make the state’s tax system more progressive through income tax rate changes and increasing the refundable earned income tax credit.
  o Also included in the plan, is a phased reduction of the state property tax.
  o Unaddressed in the plan is the revenue to meet the needs of the already under-funded programs that exist.
  - There are disabled individuals and seniors still waiting for services.
  - There are foster care issues.
  o Many problems will be left unaddressed with this new budget plan.
  o The plan will not work without the “special session” that the Governor has requested.
  - More revenue has to be generated in FY08.
  - Generated revenue will be moved to the FY09 budget.
  o If slots are realized, any revenue over $425 million will be used for
  school construction.
  · The problem is political.
• Those opposed to taxes and ‘big” government will exploit the natural resistance to paying more.
• Historically, spending constraints and cuts have not generated any pushback.
• There is no pushback for the advocacy side.
  o Legislators need to hear that people care about these programs.
  o Advocates must influence what the legislators are hearing in their districts.
  o Know who your legislators are and how to contact them.
  o Delegations from three counties hold the bulk of the votes.
  · A solution must be worked on at the grassroots level.
• Develop partnerships and coalitions.
• Engage board members, volunteers, donors, etc.
• Use media, mailings and websites for publicity.
• Engage the community through informational meetings, special events, rallies, etc.
• Contact legislators.

Charles “Chuck” Short – Special Assistant to the County Executive
· First problem - The state budget crisis causes a crisis for the County.
· Timing is everything.

• A balanced budget must be presented by the Governor in January.
• A balanced budget must be presented by the County Executive in March.
• If the special session does not solve the problem, the Governor’s budget will reflect this is January – Doomsday.
• The County’s budget, which is currently under preparation, will have to be reworked.
  · The County is currently looking at a $300 million deficit, which will be resolved by mid-February. If the special session does not resolve the state’s budget crisis, the County will face another $150 million in cuts.
• All of the counties are pretty much in the same situation – facing severe reductions.
  · Second problem – Montgomery County needs to raise taxes.
• The increase will be in property tax – the only tax the County can control. The only question is how much.
  · The greatest disaster is a dramatic increase in taxes with a dramatic decrease in services.
• This happened in 1992, which lead to a countywide referendum that was defeated by 2 percentage points.
  - If the referendum had passed, many jobs, especially those in the nonprofit sector would not exist.
  · With an increase in taxes, county services, at the minimum, must be held at the same level.
  · A political problem for Montgomery County is that the state will increases taxes in January
  (sales tax will increase from 5% to 6%) and the property tax will increase July 1st.
  · 53% of the income tax that will be raised by the state will come from Montgomery County -
  only a small portion of that will come back.
  · Practical thoughts:
• Nonprofits will need to advocate – participate, but don’t “play.”
  - The best way to participate is in an informed and strategic way.
  - Be informed, be careful.
  - The message should not be to protect the nonprofits, but to protect services.
• Understand the difference between posturing and positioning. Where are they trying to go?
  · With higher taxes, private nonprofit agencies will have to figure a way to maintain services.
  · Taxpayers revolt – your services will go first.
  · How can you convince the persons who are paying for your program that it is money well spent?
• Right work, right way, right pay!
  
  Pamela Cudahy, President/CEO, St. Luke’s House, Inc.
  St. Luke's House, Inc., (SLH) was founded in 1971 by concerned citizens from St. Luke's Episcopal Church in Bethesda, MD, to address the needs of patients being released from state psychiatric hospitals who had no place to go. SLH was established independently soon thereafter, and the first group home was opened. (http://stlukeshouse.org/aboutus.html)
  · This is the time to take action, make voices heard. It is not about the nonprofits, but the services – the means to an end.
  · How are we serving the general community? Not everyone has the understanding or the empathy.
• Nonprofits must become more sophisticated in their approach.
  · If programs are not funded, where do these needs go?
• Needs and people do not go away. They are like shifting sand – moving from
  place to place.
• Must be able to show how lives are impacted by the lack of services.
  · Nonprofits must be able to put a human face on problems for the community and legislators to see – take them to Annapolis.
  · Create coalitions and partnerships – numbers count.
• Find partners in other parts of the State.
• Find ways to get together and get the message out.
• Identify the vulnerable.
  
  Questions/Comments
  · When do the nonprofits get the word about cuts?
• Example – Did not find out about a program cut until September, which was retroactive to July 1.
  · Nonprofits with small staffs spend so much time grinding out the service that there is very little time left to find out what is going on with the budget cuts.
  · Coalition-type work is very effective for this situation. Draft letters, lay out a strategy, share the load.
  · When advocating, only two things matter – money and votes.
• If you don’t have money, you can influence votes. Don’t forget to utilize e-mail – eight e-mails about the same subject represent a public outcry.
• No amount of votes is too small.
  · African Immigrant Community has no idea what is going on in terms of taxes being raised. They do not know about the issues in order to vote.
• Communication is key.
• In the African Immigrant Community there are many small nonprofits that are being operated with no or little support from government.
  · There is room for everyone at the table, but the rules of the table change.
  · Nonprofits have to become more and more skilled at what people are buying.
• Must be skilled in knowing what the person is buying – political, financial, and human, etc.
  · How far can a 501(c)(3) go in advocacy?
• A 501(c)(3) organization may choose to elect to participate in lobbying activities under the safe harbor provisions of the tax code by filing form 5768 with the Internal Revenue Service. Once that has been elected, the organization is subject to specific expenditure limits for lobbying activities (election is optional; the organization may prefer to rely on the general rule of “no substantial part” of income . . .” particularly if lobbying activities are minimal.) The expenditure limits under the election rules are graduated, beginning at 20% of the first $500,000 of the organization’s expenditures for charitable “exempt function” purposes.
  · Nonprofits must work together to create coalitions and partnerships – money is not coming top-down, but from all over.
  · Human service side of a private nonprofit – not in it for the money, but for the principle side of it (a moral and just community).
• Justice and fairness – that’s the message.
  · What can be done as agencies to help the County and State government get the message out about who needs the services?
• Look at different coalitions; see what they are doing. Join with them – don’t duplicate the work.
• Community statements – just don’t stand alone.
• “Gee whiz” statements.
  · Challenge – to have someone on the board to monitor legislation.
  · County Council should put out a request for persons to be on the review committees during the grant process.
  · Four levels to work through – individual, executive (County), Council members, State.
  · Advocacy fair – how to write a letter to my legislator; have experts in the room; target small, emerging nonprofits.
• League of Women Voters has a program on how to lobby your legislator.
• Maryland Nonprofits also has a program geared toward this subject.
  · Maryland Nonprofits – Coalition for the State
  
  
  October 17, 2007- Nonprofit EXPO and the Montgomery County Charity Campaign Kickoff in the Executive Office Building, Cafeteria, 11:00 a.m. - 4:00 p.m.