May 27, 2022
In this issue...
Two NC Senate committees approve of new Medicaid expansion legislation
NC Senator files nonprofit contracting reform legislation
State launches new webpage to make it (much) easier to find state grant programs
Legislators introduce hundreds of new bills for consideration during short session
Lawmakers introduce several bills to improve access to child care in North Carolina
Has your nonprofit lost board members because of new conflict-of-interest law?
Last call: Phase 2 of Business Recovery Grants open through June 1
It's not too late to claim Employee Retention Tax Credit for 2020 or 2021
Two NC Senate Committees Approve of New Medicaid Expansion Legislation
Yesterday, the NC Senate Health Committee and Finance Committee approved a new bill (H.B. 149) that would make a variety of healthcare policy changes, including expanding Medicaid coverage to adults with incomes up to 133% of the federal poverty level. The bill includes several major policy provisions aimed at expanding access to healthcare in North Carolina. These include:
  1. Adopting Medicaid expansion through a program called NC Health Works, which would provide health coverage for about 600,000 North Carolinians whose incomes are too much to qualify for Medicaid currently but not enough to receive health care subsidies in the Affordable Care Act health marketplace. The Center strongly supports Medicaid expansion for two reasons. First, it would complement the work of many nonprofits that provide services to North Carolinians who don’t currently have adequate health coverage. Second, it would provide health coverage for some employees of nonprofits that don’t offer group health plans and whose salaries leave them in the health care coverage gap. Notably, Senate President Pro Tempore Phil Berger (R-Rockingham), a longtime opponent of the Medicaid expansion, endorsed NC Health Works in a press conference on Wednesday, saying “we need coverage in North Carolina for the working poor.”
  2. Creating a work requirement for many people to qualify for Medicaid expansion. Although the details of the work requirement aren’t specified in the bill, it would likely include a “community engagement” option. Typically, “community engagement” requirements obligate individuals to “volunteer” for a certain number of hours per week or per month to be eligible to receive governmental benefits. Including this type of “community engagement” component in a Medicaid expansion work mandate would be problematic for many nonprofits. In the past, the Center has opposed similar “community engagement” requirements since this type of "mandatory volunteerism" can put a strain on some nonprofits' capacity to handle volunteers, can create new financial and administrative burdens (and potential liability) for nonprofit organizations, and can create a pool of volunteers who may not be fully committed to nonprofits' missions. It is quite likely the any Medicaid expansion work requirements wouldn’t be enforceable since federal courts have struck down similar requirements in other states.
  3. Making a variety of changes to the Certificate of Need (CON) program that limit the ability of health care providers to be able to offer a variety of health-related services.
  4. Creating new rules for advanced practice registered nurses. The Center is developing an analysis of the advanced practice nursing provisions – and how they might affect nonprofits – which we’ll share next week.
  5. Establishing new notice requirements about out-of-network providers and new rules that could allow more telehealth options to be included in health insurance plans. These changes could reduce out-of-pocket healthcare costs for many nonprofit employees.

The full Senate could vote on the bill as soon as next week. Leadership in the NC House of Representatives have indicated reluctance to take up the bill during the short session but have suggested they could consider it during a special legislative session in the fall. 

Because it would enact Medicaid expansion, which has been a major policy priority for the Center and many other nonprofits for the past decade, the bill appears to be good news for the nonprofit sector. The Center is continuing to analyze the way other parts of the bill could affect nonprofits. We’ll let you know when there is a need to take action.
NC Senator Files Nonprofit Contracting Reform Legislation
Yesterday, Senator Jim Burgin (R-Harnett) filed a bill (S.894) that would address a variety of issues that nonprofits have experienced with their grants and contracts with the NC Department of Health and Human Services (DHHS). The bill would:
  1. Allow nonprofit grantees and contractors to get automatic six-month extensions of their contracts if the renewal process hasn’t been completed within 10 days of the new contract start date. This provision is designed to respond to concerns that many nonprofits have expressed about challenges in offering continuity of services when DHHS is delayed in issuing new contracts.
  2. Require DHHS to pay reimbursement invoices within 30 days of receipt of an invoice from a nonprofit and requiring DHHS to pay interest at the rate of 3% per month when making late payments to nonprofit contractors and grantees.
  3. Establish a de minimis indirect cost rate of 10% of modified total direct costs on nonprofits’ grants and contracts with DHHS where organizations don’t have federally-approved indirect cost rate. Contractors with a federally-approved indirect cost rate would also be allowed to apply this rate to their state grants and contracts with DHHS. This provision is consistent with the rule in the OMB Uniform Guidance for indirect costs on federal funds and was developed in response to many nonprofits’ concerns that their state contracts do not allow funds to be used for indirect costs.
  4. Set a standard 60-day timeframe for contract negotiation, oversight, and monitoring duties and a requirement that key performance indicators and contract deliverables are included in the contract and used as the basis for performance monitoring. This provision comes in response to nonprofits’ concerns about lengthy contract negotiations and unclear performance measures on contracts.
  5. Establish training and continuing education requirements for DHHS staff and limit the required trainings and meetings that nonprofits must attend as part of their grants or contracts to those that are directly related to services provided under the contract or necessary for purposes of contract administration. This provision is designed to respond to some of nonprofits’ concerns about burdensome grant application and reporting requirements.
  6. Prohibit DHHS from making material amendments to contracts with nonprofit service providers after the execution of the contracts unless the amendments are necessary to comply with changes to federal or state laws. This provision responds to nonprofits’ concerns about midstream changes to their state contracts, which can create significant new compliance costs for nonprofits.
  7. Create a legislative advisory committee on nonprofit/DHHS contracting that would look into issues of late contract delivery, late payments, underpayment for indirect costs, mid-stream changes to contracts, overly complex or redundant grant and contract application requirements, overly complex or redundant grant and contract reporting requirements, and unduly burdensome and unnecessary training or meeting requirements for contractors or grantees. This committee would report its findings to the General Assembly at least once a year.

The Center is appreciative of Senator Burgin for introducing this important contracting reform bill. The bill was filed because of your advocacy and the advocacy of other nonprofits around the state. Dozens of nonprofits have provided feedback to the Center about these issues, both in response to our action alert earlier this month and in conversations and communications over the last decade. The Center will work with Senator Burgin and other legislators to try to get the bill to pass during the 2022 short session, either as a stand-alone bill or as part of the state budget. We will let you know when there are opportunities for your nonprofit to take action to help advocate for the bill in the coming weeks.

If your nonprofit has shared feedback on challenges with state grants or contracts through agencies other than DHHS – or if you identified other issues with DHHS – please know that this bill is just a first step in the process of nonprofit contracting reform in North Carolina. The Center hasn’t forgotten your input, and we are working with legislators and other state officials on ways to help address issues nonprofits have with their grants and contracts with other state agencies.
State Launches New Webpage to Make It (Much) Easier to Find State Grant Programs
This week, through a partnership between the NC Office of Strategic Partnerships and the NC Department of Information Technology, the state of North Carolina added a new Grants Page to its website. The Grants Page links to various grant programs across state agencies. The page is searchable by key word and can also be exported into a spreadsheet that you can download. The Grants Page is designed to make it easier for nonprofits seeking state grants to identify possible grants without having to look through dozens of state agency websites. 

The Center is appreciative to Governor Roy Cooper’s office for developing this resource to make grant navigation easier for nonprofits. We encourage you to share the Grants Page with other nonprofits in your network. The state is continuing to update the page to add any grant programs that are missing; let us know if you know of another state grant program, and we’ll pass it along to our friends in state government to add to the Grants Page.
Legislators Introduce Hundreds of New Bills for Consideration During Short Session
The NC General Assembly began work on its 2022 short session this week. During the short session, legislators will consider changes to the state budget for FY 2022-23. Lawmakers may also consider other bills that passed one chamber during the 2021 session, that were recommended by legislative study committees, or that make changes to the state constitution or election laws. 

Yesterday was the deadline for legislators to file new legislation to be considered during the short session. This week, a total of 277 new bills were filed, including 134 in the NC House of Representatives and 143 in the NC Senate. Several of these bills would provide new state appropriations for nonprofits including community health centers (H.B. 1088 and S.898), YMCAs (H.B. 1086), United Ways (S.820), and arts organizations (H.B. 1105). Some of these nonprofit funding bills could be included in the state budget this year. 

Legislative leaders have said that they hope this year’s short session will conclude by the first week of July. Unlike most other states, North Carolina’s state constitution doesn’t limit the number of days the state legislature can be in session each year, so it’s possible the short session could continue later into the summer.
Lawmakers Introduce Several Bills to Improve Access to Child Care in North Carolina
Several of the bills that were filed this week would address child care issues. The recent National Council of Nonprofits report on nonprofit workforce shortages identified issues related to access to child care as the second biggest reason that nonprofits are struggling to hire and retain staff. New child care legislation filed this week include proposals to:
  • Expand the NC Pre-K program and increase child care subsidy rates (H.B. 1074 and S.887);
  • Increase funding for subsidized child care (H.B. 1117);
  • Reduce the cost of co-payments for subsidized child care (S.850); 
  • Extend funding for child care stabilization grants (H.B. 1150); and 
  • Re-enact the state child care tax credit (S.857, H.B. 1074, and S.887)

Last week, NC Child published an excellent blog post explaining three things the NC General Assembly can do during the short session to improve access to child care and early childhood education:
  1. Improve accessibility for working families by funding a new child care subsidy rate structure;
  2. Increase staffing for early childhood education by providing funding to expand the Child Care WAGE$ program statewide; and
  3. Make child care more affordable through increased investments in Smart Start, NC Pre-K, and Child Care Subsidy Assistance.

Many of the new child care bills introduced this week appear to be consistent with these priorities. If your nonprofit wants to stay in the loop in child care and early childhood education issues, sign up for NC Child’s communications.
Has Your Nonprofit Lost Board Members Because of New Conflict-of-Interest Law?
A new state law that took effect on January 1, 2022 requires local government elected officials who serve on nonprofit boards to recuse themselves from discussions or votes on grants, appropriations, or contracts with nonprofits on whose boards they serve. The law doesn’t actually prohibit local elected officials from serving on nonprofit boards. Nonetheless, earlier this year, several nonprofits told the Center that they have had city council members and/or county commissioners resign from their boards as a result of the law. This week, the Center learned that some counties and municipalities are changing their procedures for funding nonprofits to ensure that local elected officials continue serving on nonprofit boards.

If the new law is still causing problems for nonprofits, the Center will need to work with legislators in the next couple of weeks to develop a solution that can be considered during the 2022 short session. To inform our advocacy efforts, it is important for us to understand whether this remains an issue for nonprofits and, if so, what types of organizations are at risk of losing board members because of the new law. 

If your nonprofit has local elected officials on your board – or if county commissioners or city council members have recently resigned from your board – please email to let us know:
  1. Whether your nonprofit has heard from local elected officials who serve on your board with concerns about the new law.
  2. Whether any of these elected officials have resigned from your board or have indicated that they may need to do so.
  3. Which county, city, or town has elected officials who serve or served on your board.

As we hear from nonprofits, we’ll keep you posted about possible changes to the law and ways your nonprofit can engage in advocacy efforts.
Last Call: Phase 2 of Business Recovery Grants Open Through June 1
Earlier this month, the NC Department of Revenue (DOR) opened Phase 2 of the Business Recovery Grant program. Some nonprofits are eligible to apply for financial support through this program. The Business Recovery Grant program provides economic recovery grants to businesses in the entertainment and hospitality industries and to other businesses that have not previously received federal or state relief for economic harm from the COVID-19 pandemic. While the program is designed to provide support for businesses (and not to nonprofits), 501(c)(3) nonprofits that pay state unrelated business income tax (UBIT) are eligible for grants if they meet one of the following criteria:
  1. They are in the arts, entertainment, recreation, accommodations, or food services industries and had declines in revenue of at least 20% during the first year of the pandemic (compared to the previous 12 months); or
  2. They are in any other industry, had declines in revenue of at least 20% during the first year of the pandemic (compared to the previous 12 months), and did not receive funding from other relief programs including Paycheck Protection Program, COVID-19 Job Retention Grant, and EIDL Advance. 

DOR is accepting applications from eligible businesses and nonprofits through June 1. Grants will be awarded for up to 10% of lost revenue for organizations that previously received federal or state COVID-19 support and 20% for organizations that have not received government COVID-19 aid. The maximum grant award is $500,000. Some nonprofits that received less than $500,000 in Phase 1 Business Recovery Grants may be eligible for an additional grant in Phase 2 (although the total amount of their grants can’t exceed $500,000). Additional information and applications are available at the DOR Business Recovery Grant program website.
It's Not Too Late to Claim Employee Retention Tax Credit for 2020 or 2021
Although the Employee Retention Tax Credit (ERTC) expired at the end of September 2021, there is still time for eligible nonprofits to claim this refundable payroll tax credit (translation: it’s essentially a grant for nonprofits) if their operations were shut down because of government closure orders or they suffered revenue losses in 2020 or 2021. Steven Woolf of the National Council of Nonprofits explains the basics of how nonprofits can still claim the ERTC retroactively for 2020 and 2021. The blog post also provides real-life examples of nonprofits that have used the ERTC to maintain employees and hire new staff, and answers common questions nonprofits are asking about the ERTC.
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Nonprofit Policy Update is a weekly newsletter for current members of the North Carolina Center for Nonprofits. We track state and federal policy issues that affect all 501(c)(3) nonprofits. Learn about the Center's public policy priorities. For more information, contact David Heinen, Vice President for Public Policy and Advocacy.