Congress passed, and President Trump has signed, the CARES Act, a massive piece of stimulus legislation aimed at shoring up the American economy and protecting workers and businesses in the wake of the coronavirus epidemic. One of the nation’s largest employment sectors – human services, a field dominated by nonprofits delivering contracted help to children and families – secured some relief as Americans prepare for a recession that is sure to boost the need for the social safety net.
Following is a rundown of key provisions in the $2 trillion CARES Act stimulus bill that will impact youth and family services.
Forgivable Loan Eligibility and Employee Retention
By all accounts, the most significant help to the nonprofit community came in the form of what’s called “forgivable loans,” a $349 billion Small Business Administration program that will be available to nonprofits along with all other businesses with 500 or fewer employees.
The maximum loan in the program will be $10 million, and the amount for any organization is capped at 250 percent of its average monthly payroll. And here’s the big carrot: If a recipient of such a loan uses it to retain the majority of its workforce, the money can essentially function as a grant, and the feds will forgive the entire loan. If put to other uses, it carries a relatively low interest rate at 4 percent.
The original writing on this part of the stimulus would have frozen out any nonprofits that are eligible for Medicaid reimbursement from eligibility, but human services advocates were able to push that out.
There will undoubtedly be great interest in the loans among youth services providers, with operating expenses deeply rooted in personnel and payroll. The opportunity to carry staff on a loan, instead of lose them to layoffs and have to rehire and retrain down the road, is huge. The question is, how many businesses can be helped by $367 billion?
“The trick is getting those spots,” said Sandi Clement McKinley, vice president of the Nonprofit Finance Fund. “It’s a lot of money for sure, but I have no idea if it’s enough” to cover all the businesses that will be interested.
The Independent Sector has posted a guide for nonprofits looking to apply for the loans.
Larger nonprofits with a staff between 500 up to 10,000 workers are eligible for mid-sized business loans that while not forgivable, can cheaply facilitate workforce retention. In exchange for retaining 90 percent of the employees as of February, the loans are locked at 2 percent or below with no principal or interest payments due for the first six months.
Those larger organizations are also eligible for a refundable tax credit of $5,000 for employees kept on the payroll when operations are either partially or completely halted. The credit is available until a fiscal quarter in which the organization’s revenue hits 80 percent or more of the corresponding quarter from 2019.
As Congress began to negotiate stimulus ideas, the human services alliance Leadership 18 called on them to include a $60 billion fund exclusively for nonprofit providers. That didn’t happen, but sector leaders are hopeful this Small Business Administration program can essentially serve as that vehicle.
“I would not go so far as to say they? We? won everything, but we got what we needed from this,” said Ilana Levinson, government affairs director for the Alliance for Strong Families and Communities, which is part of Leadership 18.
Child Welfare Direct Appropriations
The CARES Act provides three relatively modest bumps to relevant programs at the Administration for Children and Families (ACF), the division of Health and Human Services (HHS) that oversees child welfare and most other federal funding to help families:
- $45 million added to the Child Welfare Services, a part of Title IV-B that funds maltreatment prevention, family preservation, permanency and workforce training. This is about a 15 percent bump to the 2020 appropriation for this program.
- $45 million for the Family Violence Prevention and Services program, a 25 percent increase to its 2020 amount, to help shelters and the National Domestic Violence Hotline.
- $25 million for immediate assistance to help programs in the Runaway and Homeless Youth Program. In New York City, the new epicenter of the coronavirus pandemic, drop-in centers and shelters for homeless teens have been really challenged to safely keep their doors open.
Child Care Funding
The federal child care block grant totaled $5.8 billion in 2020 appropriations – the CARES Act adds another $3.5 billion that ACF can use pretty flexibly. The money can be used to assist state programs, help child care providers during the current period of decreased enrollment, or to cover child care costs for workers who are deemed essential. That latter is a boon to the many workers involved in child welfare or juvenile justice that have to continue working amidst federal and state limitations.
The stimulus also added $750 million for Head Start providers, which already got a boost on the policy front early in the fight against coronavirus. HHS made clear that Head Start programs could continue to pay their employees even as the number of participants went to zero during shutdowns and stay-at-home orders.
And in a hopeful move, CARES Act dropped in $500 million for summer programming that ACF can distribute to existing grantees without the standard competitive process.
Tax Break for Charitable Giving
The majority of funding to youth and family providers come by way of fees for service contracts, mostly with state and local governments. But the money they draw from donations is liquid gold, the flexible cash needed to do long-term planning, or make capital improvements.
Charitable giving had flattened out before the pandemic, buoyed only by very large donations by the very rich. And the 2017 tax cuts largely nixed the value of itemizing charitable donations on tax returns by doubling the standard deduction that a person or household could take.
The CARES Act incentivizes donations with a $300 “above-the-line” deduction for giving. This means that if someone donates $300 to a charity, they can reduce their taxable income by $300. It is a short-term provision, expiring in October.
Community Development and Recovery
President Trump continues to zero out the $740 million Community Services Block Grant in his budgets, and Congress continues to maintain it. And it will use the program as a vehicle to help craft local responses to unemployment with an additional $1 billion.
The bill also sends out a collective $400 million for mental health access, substance abuse treatment and suicide prevention from the Department of Health and Human Services. And the Department of Homeland Security will oversee a $200 million pot for emergency shelter and food services.
AmeriCorps was created to offer young people between ages 18 and 24 who are interested in community service an opportunity to embed with organizations on the frontlines, with the added bonus of an education award (about $6,000) to help pay for college. Many nonprofits have come to rely on the pipeline of young, low-cost workers, and those placements can frequently plant the seed for full-time employment with an organization.
The CARES Act accounts for the fact that, in the past two months and several months going forward, many community service ventures will be on hold due to social distancing rules. It permits the Corporation for National and Community Service, the federal agency that oversees AmeriCorps, to extend the timeline of participation and allow participants to “accrue other service hours” to fulfill requirements if their project is suspended or their position is cut off.
The bill also instructs that if the corporation requires participants to exit the program due to issues related to coronavirus, those participants will be eligible to receive a full education award toward higher learning.
Most businesses have to pay taxes into a federal and state unemployment insurance program.
Nonprofits are exempt from federal unemployment taxes, and they can elect to self-insure instead of paying taxes into the state program.
“Some organizations choose not to pay into unemployment, but then the deal is, if they do layoffs, they are on the hook for reimbursing the cost of people being on unemployment,” McKinley said.
In a situation like the one we’re in, where a massive spike in layoffs is possible, nonprofits that self-insure would be looking at a large bill from the state at a most inopportune time. The CARES Act includes a provision where the federal government will take on half the cost for these self-insurers, and McKinley said there was “movement at the state level” to assist nonprofits that decide layoffs are necessary.
John Kelly can be reached at [email protected].