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Lawmakers take aim at nonprofits

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RALEIGH, N.C. – Early in the legislative session, North Carolina lawmakers have made clear their intention to reduce the flow of state funds to nonprofits.

The leadership in the General Assembly in late February instructed appropriations sub-committees to “eliminate/reduce funds for nonprofits.”

The instructions were included in a document intended to help subcommittee members reach funding targets laid out by House and Senate leaders.

And while a bill that would have created administrative-cost caps and private-funding requirements for nonprofits that receive state funds has been pulled, then intent behind the bill still stands, says its primary sponsor, Rep. Larry Brown, a Republican from Forsyth County.

“There has been some abuse in nonprofits, such as very high salaries, with only a little of the state money going to programs that help the citizens,” he said in an article in the Winston-Salem Journal March 3. “That was what we were trying to address.”

House Bill 100, sponsored in total by nine Republicans, would have required nonprofits receiving state grants to maintain administrative expenses at or below 15 percent of their total budget, and to receive at least 35 percent of their funding from private sources.

Nonprofits that do not meet these eligibility criteria for the year a grant is made would not have received funds, and could have been forced to repay funds already disbursed.

After conversations with nonprofits, Brown said, he realized the bill was not as clear as it needed to be and that “a number of things could have been done better.”

The news likely will be welcomed by the state’s nonprofits, about 200 of which had joined a coalition, organized by the N.C. Center for Nonprofits, that opposed the legislation for several reasons.

The coalition argued that compliance with existing laws places an administrative burden on nonprofits that make it “virtually impossible” for nonprofits to meet the 15 percent ceiling on administrative expenses.

That ceiling on expenses does not take into account that a general consensus is lacking on appropriate levels of administrative expenses, and that administrative costs can vary greatly within the nonprofit sector depending on an organization’s focus or geographical location.

And the bill, which was referred to the House Appropriations Committee on Feb. 16, does not define “administrative expenses” or “private funding,” creating ambiguity the Center for Nonprofits says would make enforcement “impossible.”

In order to combat the rising anti-nonprofit sentiment among lawmakers, the Center for Nonprofits encouraged nonprofits to visit their elected officials on March 1.

By communicating the impact nonprofits have on individual legislators’ constituents, the center hoped to improve legislators’ understanding of the importance of the nonprofit sector.

“We’re really trying to have a more grassroots effort to show the impact of nonprofits,” says David Heinen, director of public policy and advocacy for the center. “It’s good for legislators, many of whom are connected to nonprofits other than their churches, to know how nonprofits connect to their constituents.”

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