One of the key themes in my book Out of Reach and this blog’s discussion of the recession, is the pro-cyclical nature of public expenditures for programs that help low-income populations. Funding for many human or social service programs that assist low-income workers increases during periods of growth, but contracts during economic downturns right at the moment when need is greatest. The current recession has hurt almost every source of government revenue and almost every source of funding for social service organizations that help low-income populations.
As governors and state legislatures begin to grasp the program cuts necessary to balance budgets in the next few years, the fragility of the safety net for low-income populations becomes more and more apparent. The safety net has come to rely more heavily upon state and local government for human service funding in the past twenty years. Yet, government programs are under budgetary pressures unprecedented in recent years.
Many regional and local newspapers track proposed social program cuts within their states, but National Public Radio and the New York Times both have recent pieces that use the budget crisis in Arizona to frame some of the broader issues at hand. According to the NPR story:
Arizona, which faced a $1.6 billion budget gap this year, has been among the hardest hit. Funding was trimmed for food banks, community health centers and home health care for the elderly. Monthly payments for foster care parents were reduced, and more than 1,100 children with chronic or disabling conditions were dropped from the state Children’s Rehabilitative Services program.
The New York Times continues:
Arizona’s crunch came on fast and hard. In January, the newly seated Republican governor, Jan Brewer, had to address a $1.6 billion budget gap by cutting $580 million in general-fund spending, taking more than $500 million from agencies financed with fees or other sources, and using $500 million in federal stimulus money — squeezing all the reductions into the final five months of the fiscal year ending June 30. Arizona expects a $3 billion shortfall in the next fiscal year. In a speech to legislators in March, Ms. Brewer proposed to fill the chasm with $1 billion in spending cuts, $1 billion in federal stimulus money and — in a risky idea she floated after emphasizing her conservative credentials — $1 billion raised through “a temporary tax increase.”
States are in a tricky spot right now – they are faced with falling revenues amidst rising program costs, even if social programs are not expanded or made more generous. For instance, inflation makes it more expensive to operate programs. Population growth and trends in demographics matter as well. Growth in population and the aging of the population both translate into greater numbers of individuals that may benefit from programs.
Few social programs or clients groups are buffered from program cuts. Looking at surveys with almost 2,000 government and nonprofit social service organizations that I completed in years following the 2001 recession, I find that about half of all organizations reported recently losing funding. The results are likely to be more dramatic if one was collecting data today. It is surprising when I look at the data that there is no particular pattern to it. Government agencies and nonprofits were equally likely to lose funds. Reliance on different revenue streams made little difference – those receiving public funds were as vulnerable as those reliant on private giving or charitable organizations. No service mission or client focus was immune – employment services, emergency assistance, housing, mental health and addiction services all seemed equally likely to face cuts.
What we should be worried about, is what happens to agencies after funding cuts. We hope organizations can make up the lost revenue or get by until the economy improves. But my survey data collected a few years ago suggest this is not the case. First, about 70 percent of service providers that lose funds report cutting staff, clients, and services as a result. Second, and perhaps more alarming, I found that about 30-40 percent of programs listed in community directories in the years following the 2001 recession were no longer offering programs or were nonoperational. Both are a sobering indication of what tough budget times mean for organizations that serve the poor.