By Lisa Cirincione, JVA Consulting

JVA has been closely following the federal budget debates to discern what the impact of cuts on federal agencies’ discretionary spending will be on nonprofits that pursue federal grants and contracts. While things are still ‘up in the air,’ here are a few things that we are confident will occur.

1. Cuts to discretionary grant programs will happen.  One of the highest priorities of the Obama administration is to reduce the government’s annual deficit. This goal is reflected in the President’s FY2012 budget request, which proposes to place a five-year cap on “non-security” discretionary spending. The cap is an overall spending limit, beneath which funding for various programs can be increased, provided offsetting cuts are made somewhere else. For example, the Administration is proposing significant increases in funding for transportation, while funding for the Low Income Home Energy Assistance Program (LIHEAP) and the Community Development Block Grant (CDBG) program have both been cut substantially.

As you read this, Congress’ Joint Select Committee on Deficit Reduction, often called the Supercommittee, is busy trying to cut $1.2 trillion from the federal budget by its Thanksgiving deadline. This 12-person “supercommittee” is split evenly between Democrats and Republicans in the House and Senate. If the supercommittee fails to reach a consensus, automatic cuts to the Defense Department, Medicare, and other federal agencies and programs will occur. According to Politico, the supercommittee has been lobbied by almost 200 special interest groups and companies seeking to influence the supercommittee.

In a few more weeks, we will know what cuts the supercommittee has recommended, but many senior leaders of federal agencies are preparing contingency plans. One leader – Comptroller General Gene Dodaro, the head of the Government Accountability Office (GAO) – recently announced that he will furlough employees rather than shutter regional offices or lay off employees as a result of budget cutbacks. Other agencies are already offering buy-outs and beginning the downsizing process.

2. Programs that have already been cut are not likely to come back. Programs that have already been eliminated in the FY2011 budget (e.g., Striving Readers Comprehensive Literacy) are not expected to be restored in the FY2012 budget. In addition, some federal agencies are proactively recommending programs for cuts and/or elimination. For example, the Department of Education has already announced a list of programs that are targeted for elimination:

• Arts in Education, $27 million
• Foreign Language Assistance, $27 million
• Teaching American History grants, $47 million
• Excellence in Economic Education, $1.4 million
• Civic Education, $1.2 million

3. Interagency initiatives requiring grant applicants to cite evidence of their program’s effectiveness and are actively pushing grantees to build a research case for social programs. This year, JVA observed a trend among six new federal programs, including the U.S. Department of Education’s Investing in Innovation Fund, or i3, which set aside different pots of money based on the level of research evidence that undergirds a project. In other words, the more evidence that you have to support your program, the larger the grant you can win. These initiatives also actively fund partnerships between grantees and researchers to work together to expand what is known about how to deliver effective social programs.

So what does this mean for nonprofits? Janine Vanderburg shared some of the trends that she was hearing at the Social Enterprise Alliance Conference last week. Everyone was talking about the need to have outcomes/metrics for their programs because their funders are asking for them. A term that was used at the conference was that nonprofits should “double down” and invest heavily in what they are really good at. For some organizations, this may require them to become smaller and more laser focused on the positive change they can make in the world.

In addition, federal agencies are insisting that programs demonstrate innovation so that more can be learned about what works in social programming and what works with specific target populations. Collaboration is also likely to remain the new normal when it comes to pursuing federal grants. Federal agencies seek to leverage their investment across several agencies.

So, given the changes that are happening at a federal level, what is your organization’s value proposition? Leave your comments and questions on JVA’s Facebook page.