nonprofits

The Impact of New Overtime Rules on Government

The federal change won’t just hit state and local personnel costs.
BY  | JULY 28, 2016

A new federal rule that more than doubles the number of employees eligible for overtime pay has state and local governments scrambling. Already, governments are facing tight budgets and slow revenue growth. But the new rule, which goes into effect Dec. 1, threatens not only to increase personnel costs, but operating costs as well.

The rule change, which was issued by the Department of Labor in May, affects the earnings of both public- and private-sector workers. Governments are looking now at how much it will impact payrolls. But nonprofits are warning that the rule could also result in substantially higher rates next year for governments that contract services out.

The change is an update to the Fair Labor Standards Act and doubles the minimum salary that full-time white-collar workers must earn to be exempt from getting overtime pay to $913 a week, or $47,476 per year. The salary level was set at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census region, which is currently the South.

Nonprofits' Tax-Exemption Battle Moves to the Courts

Legislative attempts to tax nonprofits have fallen short. But recent legal challenges could present a financial problem for nonprofits and a financial boost for governments.
BY  | JUNE 2, 2016

Faced with tight budgets and in search of new sources of revenue, municipalities increasingly have been eyeing the tax-exempt status of nonprofits. Legislators say that universities' record-high endowments and the corporate-like structure of nonprofit hospitals is making it harder and harder to swallow giving these institutions a tax break.

While many of the legislative attempts to start taxing nonprofits have failed, recent legal challenges have proved more promising. If the trend continues, it could present a financial problem for nonprofits and a financial boost for governments. So far, the focus of both legislation and legal action has been on hospitals and higher education institutions, but some worry they could spill over to smaller nonprofits and charities.

The dollars at stake are significant. According to a 2009 study by the Congressional Research Service, property tax exemption is worth $17 to $32 billion nationwide.

Also driving these challenges is the issue of tax fairness. Many nonprofits fork over an annual PILOT, or Payment In Lieu of Taxes, to help offset the governments' loss of revenue. But residents in the vicinity of hospitals or universities often feel that they still end up paying higher taxes to compensate for the revenue lost to nonprofits' exemptions.

A New Twist on ‘Pay for Success’ Programs

A variation on the existing model would provide a money back guarantee should a project fail.
BY  | MARCH 24, 2016

This year has already seen a flurry of activity when it comes to governments and the private sector partnering on social programs. Fewer than three months into 2016 and three governments have announced so-called pay for success or social impact bond projects, boosting the total number of such programs to 11 across the country.

Now, there may be a new option for governments interested in the model, but wary of its complicated nature. Under a pay for success or social impact bond program, private funders finance a preventive social or health program and only get paid back if the project meets its goals over the course of a predetermined set of years. The new model, announced by Third Sector Capital Partners on Thursday, offers a money back guarantee.

With a “social impact guarantee” or SIG project, governments front the money (instead of a private investor) and get paid back if the project doesn’t meet its goals. Specifics are sparse, but Third Sector co-founder George Overholser says he's currently working with two states on creating the country’s first SIG projects and hopes to announce them by the end of this year.