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Legislative horizon

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By Ret Boney

As the 2005 session of the North Carolina General Assembly gets underway, nonprofits in the state can expect some changes, policy watchers say.

“The most pressing state issue facing the nonprofit sector is the projected budget shortfall,” says Anthony Petty, policy and research analyst with the N.C. Center for Nonprofits. “That’s the issue, more than any other, that nonprofits are most concerned about.”

The General Assembly estimates that shortfall will total about $1.3 billion this year and have a ripple effect on funding for nonprofits, though it is not yet known how deeply those effects will be felt.

Nonprofits can expect three waves of cuts resulting from the state and federal budget shortfalls, says Ran Coble, executive director of the N.C. Center for Public Policy Research.

“Between May 1 and July 1 is when they do the cutting they’re going to do,” he says of state legislators. “And those can include direct appropriations to nonprofits.”

The second wave will come once the budget cuts are final, Coble says, when state agencies may absorb some of those reductions by eliminating contracts with nonprofits.

“The bigger impact, probably, is the ripple effect from the federal cuts,” he says of the third wave. “Those are likely to be deep. Everything is going to the war in Iraq and homeland security.”

Nonprofits can also expect changes in reporting requirements resulting from Senate Bill 1008, passed in the 2004 session, which charged the Office of State Budget and Management with developing new reporting guidelines for non-governmental groups receiving state funds.

The original legislation came about in part because of a scandal involving Frank Balance that led the former state senator to plead guilty to funneling state dollars to the Hyman Foundation, a group he led, some of it for his personal use.

The budget office is in the process of drafting the new rules, with input from groups like the Center for Nonprofits, says Petty.

Anticipated changes include requiring groups that receive state funds to provide reports to the State Auditor’s office in addition to the agency providing the money, says Petty, and a possible change in the threshold at which those groups must furnish an audit.

“We don’t expect big changes, but clearly, the General Assembly wants to ensure that state dollars are used for the purposes for which they were intended,” he says. “And nonprofits want to make sure they are complying with appropriate regulations. If nonprofits are told upfront, clearly, what the expectations are, they can and will do it.”

A draft of the legislation is expected by early March and the new rules are schedule to take effect July 1.

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