President's Budget Seeks to Cut Many Programs That Subsidize Charities

Many charities would receive far less money from the federal government if Congress approves the $2.6-trillion federal budget for 2006 that President Bush released today. Some organizations would also face tougher regulations on their operations.

As part of his pledge to cut the $400-billion deficit in half in the next four years, the president proposed cutting by more than 1 percent every category except those related to defense and homeland security, as well as overseas projects. He also singled out 150 programs for elimination, a move that he says would save the government $20-billion.

Not all charities would see reduced support under the president's plan. Mr. Bush sought increases in spending on some health-care programs. And he also proposed a $3.1-billion package of tax incentives designed to spur charitable giving, including permitting tax-free withdrawals from individual retirement accounts for gifts to charity.

Among the federal programs that would be eliminated or reduced under the president's plan are those for adult and vocational education and low-cost housing.

Housing and human-services advocates said the proposed cuts would hurt those who need assistance most and would mean that charities would not be able to help all those who need aid. The budget would slash spending on services for children, the elderly, the disabled, and low-wage families, according to the Coalition on Human Needs, an alliance of more than 170 organizations, including civil-rights, religious, labor, women's, children's, and disability-rights organizations. "These are the wrong choices, and Congress should not pass this budget," said Deborah Weinstein, the group's executive director.

Responding to charges that his budget cuts fall disproportionately on the poor and disadvantaged, Mr. Bush told reporters this morning that programs were selected for cuts because they failed to meet specific performance goals set by the administration. Mr. Bush said money for such programs was redirected toward more effective programs.

All of Mr. Bush's proposals to encourage Americans to give more to charities were contained in the president's plan last year, but one key measure from 2004 -- to allow people who do not itemize on their taxes to deduct gifts to charity -- is absent from this year's budget. A committee that Mr. Bush appointed to to consider an overhaul of the tax code is expected to consider whether to promote that idea, senior Treasury officials said. They also said the president remains committed to pressing for passage of a bill with charitable-giving incentives this year.

The president's budget also calls for tightening the rules for some types of charitable deductions that administration officials say have been abused. The most extensive proposal in the president's plan would impose taxes on people or companies that improperly benefit from charity-owned life insurance policies. Charities in many states buy life insurance policies on their donors and sell the interest in those policies to companies, which make money when the donors die. In many cases, the companies get far more money than the charity does, according to the President's budget plan. The proposed change would tax those companies that hold charity-owned policies, helping the government raise more than $300-million.

Another proposal would impose penalties on charities that fail to enforce conservation easements. Treasury officials said they are concerned that some charities fail to monitor and enforce the conservation restrictions for which donors claimed charitable deductions.

It is unclear how much of Mr. Bush's budget plan Congress will approve. The president proposes cutting many programs that are popular with lawmakers, charity lobbyists say. Last year, for example, Mr. Bush proposed cutting 65 programs, but Congress only cut five.

Among the other items in the budget of particular interest to charities:

• The Community Development Block Grants program, through which local governments give money to charities and other groups for housing and economic development, would be eliminated. Grants for that program totaled $4.7-billion in 2005.

• AIDS-related programs would receive $3.2-billion, up from $2.8-billion in 2005.

• Community health centers would receive $2-billion in 2006, $304-million more than in fiscal 2005.

• All money for vocational education, which totaled $1.2-billion in 2005, would be eliminated.

• The Compassion Capital Fund -- which provides grants to local charities, including programs run by religious groups -- would get $100-million, nearly double the 2005 figure.

The President's request covers spending in the 2006 fiscal year, which begins October 1, 2005.

The Chronicle will provide more detailed coverage of President Bush's spending plan in its February 17 issue, which will be available online February 14.