Let Us Know: Does Your Nonprofit Have FLSA Exempt Staff with Annual Salaries Below $60,000?

Earlier this month, the U.S. Department of Labor (DOL) released new proposed regulations on the salary threshold under the Fair Labor Standards Act (FLSA). The proposed regulations would increase the salary threshold for overtime pay by nearly 55% over the current level to $55,068 per year. The salary threshold in the final regulations may be even higher than the level in the proposed regulations – possibly as high as $60,209 per year. Were this proposal to take effect, most employees earning less than the new salary threshold would be entitled to overtime compensation when they work more than 40 hours in a workweek regardless of whether they are classified as executive, administrative, or professional (white-collar) workers. The Center anticipates that this change would affect thousands of North Carolina nonprofits, and we have prepared an analysis of the proposed regulations and their potential impact on nonprofit organizations.

Nonprofits and others have until November 7 to submit public comments on the proposed rule. The Center is preparing comments to explain to DOL: (1) the impact of the proposed rule on North Carolina nonprofits; and (2) possible changes in the final rule that could help minimize operational challenges for nonprofit organizations. To help the Center best advocate for the needs of North Carolina nonprofits in our comments to DOL, it is critical that we give clear examples of the potential impact of a higher salary threshold on the operations of charitable nonprofits with exempt administrative, executive, or professional staff who are currently paid salaries below the proposed threshold. Please let us know if your nonprofit has FLSA exempt employees whose salaries are below $60,000 per year who may be converted to non-exempt employees because of the proposed DOL overtime rule. Feel free to share details in your email or let us know if it would be easier to talk by phone or Zoom. While the Center hopes to include examples of impacted North Carolina nonprofits in our comments, we will not include identifying information for any individual nonprofits (although you are welcome to share that information in your own comments to DOL).

State Budget for FY2023-25 Set to Take Effect Next Week

Last week, both the NC House of Representatives and NC Senate approved the state budget for FY2023-25 (H.B. 259). Governor Roy Cooper announced plans to allow the budget to become law without his signature, which means that it will become law next Monday (10 days after he received the bill from the House clerk). The Center has reviewed the 1,411 pages of budget documents and prepared a comprehensive analysis of the nonprofit appropriations and provisions in the final version of the budget and how they compare to the versions passed by the House and Senate earlier this spring. (Let us know if you see items that are missing from – or incorrect in – the Center’s summary; we have updated it from the version we shared last week and will continue to update this document in the coming weeks.) The next five items in today’s update highlight some key items in the budget that could affect charitable nonprofits.

Let Us Know If Lobbying Fee Changes in State Budget will Affect Your Nonprofit

Two provisions in the state budget could create challenges for some nonprofits that lobby at the state level:

1. One provision increases the annual fee for lobbyist principals (including many nonprofits that lobby) and lobbyists (including many nonprofit staff and contractors) from $250 per year to $500 per year. This fee increase could create financial challenges for small and mid-sized nonprofits that advocate with the state legislature or state agencies and could discourage some nonprofits from lobbying or registering their staff as lobbyists. The Center opposed this provision and is working with other advocates to explore the possibility of legislators reversing the change in future legislation.
2. Another provision allows for legislative “fast passes” for lobbyists, which would cost up to $2,000 for lobbyists, including those who work for nonprofits. The Legislative Services Officer will set the final fee. Over the past few years, the NC General Assembly has added security checks, including metal detectors, for all members of the public who enter the Legislative Building and Legislative Office Building. Legislators and legislative staff receive passes that enable them to use separate entrances and bypass security checkpoints. On busy days, it can be difficult for lobbyists and other nonprofit advocates to get between the two buildings. The steep price of the “fast passes” could be prohibitive for many nonprofits, putting their organizations at a competitive disadvantage with for-profit lobbyists in legislative advocacy. 

In the next few weeks, the Center plans to have conversations with legislators and legislative staff to see whether it would be possible to provide some financial relief for nonprofits that advocate at the state level (e.g., discounted fees for some or all 501(c)(3) nonprofits). Your input will be critical in making the case for legislators and legislative staff to help protect nonprofits from being disadvantaged by these significant increases in lobbying costs. Let us know if your nonprofit would be affected by the increased lobbying fees and/or the potential $2,000 charge for lobbyist “fast passes.” The Center will not share your organization’s name (or your lobbyists’ names) without your permission.

State Budget Provision Would Allow for Burdensome Legislative Investigations into Nonprofits

A provision in the state budget gives the Joint Legislative Oversight Committee on Governmental Operations (GovOps) broad authority to investigate any nonprofit with a state grant, contract, or appropriation. GovOps is run by legislative leaders and hires partisan legislative staff to conduct its operations and investigations. Among other things, the budget provision gives GovOps broad authority to:

1. “Study the efficiency, economy, and effectiveness of any...non-State entity receiving state funds”; and
2. “Investigate possible instances of misfeasance, malfeasance, nonfeasance, mismanagement, waste, abuse, or illegal conduct by...officers and employees of a non-State entity receiving, directly or indirectly, public funds as it relates to the officer’s or employee’s responsibilities regarding the receipt of public funds.”

The provision expressly allows GovOps to require nonprofits with state funds – and many of their employees and board members – to provide legislators with virtually any record or document that they may request and to allow GovOps staff to access the facilities of any nonprofit with state funds. Legislators and GovOps staff can force nonprofits to keep these investigations confidential and also (seemingly contradictorily) could choose to make details of these investigations available to the public. Nonprofits and their staff or board members who do not comply with requests for information or access to their facilities could be subject to criminal penalties.

Practically, this gives GovOps the authority to impose extremely burdensome information requests on nonprofits for almost any reason. The Center is deeply concerned that this provision could lead to costly and unwarranted legislative investigations into some nonprofits’ finances and operations that could be harmful to nonprofit organizations and to the people and communities they serve. The Center is continuing to research the practical implications of this new legislative investigative authority for nonprofits with state grants, contracts, and appropriations.

Medicaid Expansion to Begin in North Carolina on December 1

With the state budget set to take effect next week, Governor Cooper and the NC Department of Health and Human Services (DHHS) announced on Monday that Medicaid expansion will begin in North Carolina on December 1. Medicaid expansion will provide health coverage for about 600,000 North Carolinians in the health coverage gap who have incomes too high to qualify for Medicaid but too low to receive health care subsidies under the Affordable Care Act marketplace. It has been a major policy priority for the Center and hundreds of other nonprofits for more than a decade. 

DHHS estimates that 300,000 North Carolinians (those receiving Medicaid Family Planning benefits) will be automatically enrolled in Medicaid on December 1. Outreach from nonprofits will be critical to ensuring that the other 300,000 North Carolinians eligible for Medicaid expansion actually receive coverage in December or early 2024. The Center will share resources from DHHS, Care4Carolina, and other trusted partners that your nonprofit can use to provide information to your community and the people you serve about enrolling in Medicaid.

State Budget Includes New Funding for More Than 600 Nonprofits

This year’s state budget includes earmarked appropriations or “directed grants” of more than $1.5 billion to 644 nonprofits. The process and timing for when these nonprofits will receive this funding depends on the details of how the General Assembly directed the grant in the budget. For example, many nonprofits will receive directed grants through the NC Office of State Budget and Management, some will receive them through a variety of state agencies, and others will receive them as pass-through grants to counties or cities. 

In past years, many nonprofits were unaware that they had received appropriations in the state budget. To help you identify whether your nonprofit received a directed grant, the Center has prepared a list of nonprofits receiving new funding in the state budget. Let us know if you see mistakes or omissions in our list; we will continue to update it in the coming weeks.

State Budget Includes Little Support for Child Care Programs

While legislators invested significant amounts of state funds in support for individual nonprofits, they largely declined to invest in child care and early education program at the levels that many nonprofit advocates felt were necessary to meet child care and early education needs across the state. Most notably, the budget did not include bipartisan proposals S.292 and H.B. 342 that would have appropriated $300 million to extend child care stabilization grants through 2025. This temporary funding from the American Rescue Pan Act was designed to provide emergency funding to help keep early childhood providers operating during the COVID-19 pandemic.

Federal funding for early childhood stabilization grants is set to end soon, and the lack of additional funding in the state budget could exacerbate the existing workforce shortage among early childhood providers. This is significant for nonprofits since the lack of access to affordable, high-quality child care is a major factor in the ongoing nonprofit workforce shortage crisis.

Biden Administration Proposes Significant Improvements to OMB Uniform Guidance

Last Friday, the White House announced that the Office of Management and Budget (OMB) plans to make significant improvements to its Uniform Guidance, the rules that govern federal grants to nonprofits. The proposed changes include:

1. Increasing the de minimis indirect cost rate on federal grants from 10% to 15% of modified total direct costs. OMB explains: “This change would allow for a more reasonable and realistic recovery of indirect costs, particularly for new or inexperienced organizations that may not have the capacity to undergo a formal rate negotiation, but still deserve to be fully compensated for their overhead costs.”
2. Clarifying that federal agencies cannot force nonprofits receiving grants to use an indirect cost rate lower than the proposed 15% de minimis rate unless a lower rate is required by statute. 
3. Clarifying that nonprofits with federally negotiated rates must receive these indirect cost rates even when federal funds flow through state and/or local governments.
4. Raising the federal single audit threshold from $750,000 to $1 million.
5. Requiring federal agencies to eliminate program reports that are not necessary for the effective monitoring of grants.
6. Revising the Notice of Funding Opportunities to make postings simpler and easier for nonprofits to navigate.
7. Encouraging federal agencies to take a variety of steps to make their grantmaking process more equitable and inclusive.

The National Council of Nonprofits has prepared a helpful initial analysis of the proposed improvements to the OMB Uniform Guidance. These proposed changes to the OMB Uniform Guidance could help address many of the longstanding challenges nonprofits have experienced with their federal grants. The proposed changes to the OMB Uniform Guidance will be open for public comment for 60 days after they are posted on the Federal Register.

Federal Government Shutdown Set to Begin on Sunday

The new federal fiscal year begins on Sunday (October 1), and Congress has been unable to agree on details of either:

1. The 12 appropriations bills to fund the federal government through September 30, 2024; or
2. A stopgap spending bill known as a “continuing resolution” to provide temporary funding for the federal government and give the U.S. Senate, U.S. House of Representatives, and the White House more time to negotiate full details of an appropriation plan.

Barring an unlikely – and procedurally difficult – last-minute agreement, parts of the federal government will shut down next week. The Center for a Responsible Federal Budget has a helpful summary of the impact of a federal government shutdown, including details about the government programs most likely to be affected immediately and the fiscal impact of a shutdown. Government shutdowns can harm nonprofits and the communities they serve by causing delays in nonprofits’ payments from federal agencies and creating disruption in the delivery of federal benefits.

At this point, it is uncertain how long the looming federal government shutdown will last. The Center is not asking nonprofits to take action right now because we don’t know of any type of nonprofit advocacy that can prevent the shutdown (e.g., your phone calls or emails to our U.S. Senators or your U.S. House member today or this weekend are extremely unlikely to change their positions). However, the longer the shutdown persists, the more likely members of Congress and the White House may be swayed to take action by nonprofits’ stories about the impacts of the government shutdown. The Center may ask you to start sharing these stories in the coming weeks.

Have Questions about Nonprofits and the 2023 Election? We Have Answers!

Have you been wondering what types of election-related activities your nonprofit can and cannot do between now and Election Day? Or perhaps you are wondering when Election Day is this year in your city or town (or if you even have an election this year). You are not alone. The Center has been fielding questions about what types of election-related activities are legal and advisable for charitable nonprofits, and we have posted answers to 31 of the most common questions we are hearing. We have included information on several new state election laws that could affect your nonprofit and the people you serve, including the new requirement to show a photo ID when voting. Let us know of other questions you have about your nonprofit’s engagement in the 2023 election.

Legislators Seeking Public Comments on Redistricting Process

Next month, legislators are planning to return to Raleigh for a special session on redistricting. During that session, legislators will draw the districts for North Carolina’s 14 congressional districts, 50 state Senate districts, and 120 state House districts to be used in the 2024, 2026, 2028, and 2030 elections. In preparation for the redistricting process, legislators are accepting public comments on congressional and state legislative redistricting plans. Nonprofit leaders can submit written comments to provide nonpartisan insights on the redistricting process and the ways districts can be drawn to best represent their communities.

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Nonprofit Policy Update is North Carolina Center for Nonprofits' weekly newsletter of state and federal policy issues that affect all 501(c)(3) nonprofits. Learn about the Center's public policy priorities and agenda, or contact David Heinen, Vice President for Public Policy and Advocacy, for more information.