Our nation's social programs are undoubtedly feeling the impact of the recent federal spending cuts enacted by the fiscal year 2006 appropriations process, and are bracing for the possibility of bigger cuts in the future. With the myth that government cutbacks can be made up by increased private contributions still prevalent among our elected leaders at all levels, there is growing concern over the effect that these priority shifts over the years will have on sustaining safe communities, good health and equal opportunity for everyone.

A trend in decreased federal spending on social programs is emerging. In a recent report, The Aspen Institute estimates that nonprofits will receive $1 billion less from the federal government in fiscal 2006 than they received in fiscal 2005. Discretionary federal spending on programs of interest to nonprofits, such as education and social welfare programs, including social services, employment training and community development activities, will fall by $4.6 billion, or 2.8 percent, from fiscal 2005 to fiscal 2006, after adjusting for inflation. In addition, it is estimated that Congress will cut money for programs of interest to nonprofits by $40 billion from fiscal 2005 to fiscal 2010.

These kinds of budget decisions obviously have an impact on everyone. A local report claims that federal cuts to discretionary services over the next five years will cut or reduce benefits to Hawai'i's kindergarten through high school education services, including Title I education for disadvantaged kids and special education ($8.5 million cut); vocational and adult education ($0.3 million cut); community development block grant ($3.2 million cut); children and family services, including Head Start services for abused and neglected children ($1.5 million cut); and affordable-housing Section 8 vouchers (960 lost).

The impact is exacerbated by the fact that since the late 1970s, government far outdistanced private philanthropy as a source of nonprofit revenues, which enabled nonprofit organizations to expand their services in a number of crucial areas. As of the early 1980s, most federal support to nonprofit organizations outside of the health field came as grants and contracts, which directly assist the organizations.

These developments lead to two challenges for nonprofits today. First, nonprofits are expected to make up for cutbacks by finding other funding sources. The Aspen Institute found, however, that charitable giving would have to increase by two to three times the growth rate that has been typical over the past 20 years to make up for these cuts. Donations by individuals, foundations and corporations could not, and should not, be expected to offset these reductions.

The second challenge is that government cuts to revenue sources force nonprofits into a no-win situation — they either have to raise more money, in an already-challenging fundraising environment, or cut services. Often, their resources are stretched too thin, affecting their ability to foresee or respond to future crises or to focus on improvements. The bottom line is that it leaves nonprofits with little energy left for reflection, anticipation or innovation.

Kelvin Taketa is president and CEO of the Hawai'i Community Foundation. E-mail him at kelvin@hcf-hawaii.org.