In Fall 2021, the National Council of Nonprofits surveyed the sector to better understand how workforce shortages were impacting nonprofits and their abilities to carry out their missions. This July, an updated report was released that identifies action taken in 2022, policy challenges, and recommendations to alleviate the crisis going forward. Key takeaways are summarized below, or:
- Expired Charitable Giving Incentives: Congress allowed the universal charitable deduction to expire at the end of 2021, depriving charitable nonprofits of this meaningful source of revenues when it was most needed to address workforce and service needs.
- Retroactive Repeal of the Employee Retention Tax Credit (ERTC): The premature repeal of the law meant that organizations were denied resources to keep people on the job and perhaps pay a little more to retain and attract staff.
- Government Grants and Contract Challenges: Recurring flaws include failing to adjust reimbursement rates to reflect real costs. Another hindrance occurs when governments restrict the hourly rates they will reimburse the nonprofits they hire to provide services to the public on behalf of government.
- Increased Costs – Wages, Inflation, Gasoline: Unlike for-profit businesses that can raise the costs they charge, government policies and economic realities prevent nonprofits from doing the same.
- Increased Volumes of Work: The rising volume of work by people seeking services at understaffed nonprofits often faced waiting lists for services or outright denial of services when organizations could no longer accept new clients or referrals.
- Negative Impacts on the Public: What makes nonprofit workforce shortages a crisis that should be of concern to everyone is the impact on people’s lives. The negative consequences affect all residents.
- All Governments – Prioritize Equity from the Outset: Intentionally seek out solutions identified by marginalized and under-resourced communities that would overcome barriers blocking access to services and support for providing services.
- Congress – Reinstate and Extend Expired Tax Provisions: The expiration of the Employee Retention Tax Credit and the Universal Charitable Deduction deprive charitable nonprofits of the resources they need to overcome the workforce shortages adversely affecting the public. Attention must also be given to additional disaster-relief giving incentives that expired on December 31, 2021 – the provision permitting individuals who itemize to deduct charitable donations up to 100% of their adjusted gross income and the measure allowing corporations to deduct charitable donations up to 25% of taxable income.
- States – Promote Affordable Child Care: Another challenge to employee recruitment and retention is the inability of prospective and current employees to find affordable child care.
- States – Provide Student Debt Relief: Frontline nonprofits called on policymakers and funders to do more the relieve nonprofit employees from crippling burdens of student loan debt so they can remain in the sector promoting public good in their communities.
- State & Local Governments – Cost of Living Adjustments (COLAs): Just as governments increase their own spending to reflect costs of providing services, they must also annually adjust their grants and contracts with nonprofit service providers to cover rising costs of living and actual costs that the nonprofits incur doing work for those governments.
- State & Local Governments – Payment of Indirect Costs: Reimburse charitable nonprofits their actual indirect cost rates, as required under federal regulations, which state and local governments should adopt when using their own funds to provide efficiencies and consistency across governmental agencies