At JVA, we have been closely following the federal budget crisis and how it may affect the nonprofit sector.

Last year, JVA Senior Associate Lisa Cirincione wrote a report on the state of the budget crisis and the potential sequester. At that time, Congress had voted to delay automatic budget cuts until March 1, 2013, with the intent of using the additional time to develop a more strategic approach to cut spending.

With the deadline quickly approaching, we hosted a panel discussion at JVA that included experts in the field who could give us guidance on what we can expect and how we can strategically react. The panelists included:

• John Bristol, Director of Grant and Special Projects, Senator Mark Udall
• Becca Montgomery, State Policy Director, Michael Bennet
• Morris Price, District Director, Representative Diana DeGette
• Lisa Cirincione, Senior Associate, JVA Consulting

A key theme that rang throughout the discussion was “uncertainty.” Until March 1 actually arrives, it is difficult to say what exactly nonprofits should expect. The panel was in agreement that it is unlikely that a compromise on the budget will be reached by March 1. If this is in fact the case, then an 8.2 percent cut will be made to all non-defense, discretionary spending. The 8.2  percent will be subtracted from the fiscal year 2012 budget and applied to discretionary funding beginning March 1 for the 2013 budget. Discretionary funding is the part of the federal budget that Congress votes on every year and includes areas like commerce and housing credits, health, education, community and regional development, and natural resources and environment. This does not include Social Security, the Children’s Health Insurance Program (CHIP) or Medicaid.

Many attendees raised concerns about what these cuts might mean for the federal funding they have been promised through grants and are to be awarded in the future. Does this mean their grants will be reduced by 8.2 percent? The panel could not answer this with certainty because agencies are run differently—while one agency might make cuts based on programs, another might make cuts across the board.

The panelists also agreed that federal fund-seekers in Colorado should expect to see a continued decrease in the amount of federal funds reaching Colorado. Along with fewer federal dollars available and an increasingly competitive funding environment, nonprofits should expect an increased need for their services. One panelist gave the example of the recent growth in the number of people contacting Social Security for benefits and the consequent backlog for its small staff.

Despite the uncertainty, there are steps we can take at the community level to help move the budget crisis in the right direction. The panelists continually underscored the importance of contacting your representatives and sharing how these cuts are affecting you and your community, and letting them know you want a solution. The most powerful method to contact them is through a phone call.

Participants were also reminded about what they can be doing at the organizational level to prepare for budget cuts. They were encouraged to explore collaboration and partnership, and to remember lessons learned during the recent recession. For example, shared space arrangements between organizations can help save money on back office expenses. At JVA, we encourage clients to use earned income strategies through Social Enterprise Academy as a way to create effective, sustainable revenue streams that also promote an organization’s mission.

While the outlook may appear dim, the panel agreed that a short-term solution for the 2013 federal budget is likely to be reached in the near future. Morris Price, who works with Representative Diana DeGette, also reminded us that when Colorado’s nonprofit sector has been faced with challenges in the past, it has always responded by doing amazing work.