CITYWIDE — Like many who rely on federal dollars, Mark Loranger, CEO of Santa Monica nonprofit Chrysalis, is watching national politics with trepidation.

When the economy collapsed under the weight of the 2008 subprime mortgage debacle, sending the stock markets into a tailspin and millions of homes into foreclosure, the impacts were felt at the doors of Chrysalis, which saw a 60 percent increase in the number of people seeking its job placement services.

The load grew to such a degree that Chrysalis is expanding its offices in downtown Los Angeles to fit the huge influx of new clients.

“It’s served our needs pretty well over the years, but since we had this new spike, it’s been crazy,” Loranger said. “There aren’t enough phones, classroom space, et cetera for our clients to use.”

The economy is slowly on the mend, but, while Loranger and other leaders of nonprofits struggle to cope with the current client load, the fight over federal spending seems poised to yank the rug out from under them.

The current wrangling over the federal budget, primarily the $2.4 trillion in spending reductions that lawmakers are proposing over the next 10 years, has him worried that the United States could be heading for collapse 2.0, and this time with even less money to take on more need.

The long, hard battle to raise the ceiling on the United States’ federal debt and prevent a catastrophic default ended Aug. 2 with the promise of $1.1 trillion in cuts and the creation of a bipartisan committee charged with producing another $1.2 trillion to $1.5 trillion in savings over the next 10 years.

If the committee fails to agree on reductions, it will pull the “trigger” on $1.2 trillion in across-the-board cuts to be shared between defense spending and discretionary spending, which equates to federal programs.

Chrysalis, like many non-profits, receives a great deal of its funding through that discretionary category.

“I’m sure that there will be consequences,” Loranger said. “You don’t just cut a trillion overnight and not have an impact.”

Adine Forman, the government affairs and special projects director with Jewish Vocational Services (JVS), a nonprofit that provides job placement and training to youth out of Virginia Avenue Park, put a number on the problem: Somewhere between 8 percent and 33 percent of her organization’s budget.

“It is crazy, and we have a massive amount of clients to help get jobs,” Forman said. “We’re clearly understaffed for the need, and those that have accessed our workforce center.”

The cuts will be deeper with JVS because approximately 70 percent of the budget — which topped $16 million in 2010 — is comprised of competitive government contracts.

At the same time, California’s state budget is inching ever closer to the brink of automatic cuts. According to the Office of the State Controller, the $4 billion in additional tax revenue that legislators were banking on to shore up K-12 education funding and other expenses will more than likely not go through.

From a government funding standpoint, the only bright spot on the horizon seems to be in Santa Monica. Both Chrysalis and JVS receive funding from City Hall, which is continuing flat funding for most non-profits this year.

City Hall continued to fund the programs even when times were good because it was seen as an investment, one that Santa Monica is currently reaping the dividends, said Julie Rusk, human resources manager with City Hall.

“We’ve always done more here in Santa Monica on a local level than other areas, and now’s the time that really pays off,” she said. “We do have that locally, we’re not looking at closing down and cutting.

“Having said that,” Rusk continued, “it doesn’t mean times aren’t getting harder for non-profits.”

Some of the tension lies in the unknown — it’s too early to tell exactly how hard budgets will be hit by the “supercommittee’s” decision.

Though the severity of the coming cuts is uncertain, non-profits are right to be afraid, said Mark Tajima, an analyst with Los Angeles County.

Nearly all federal dollars used in Santa Monica first get filtered through the county.

“They should well be scared,” Tajima said. “When we get less money, there’s less to award them to carry out services. Depending on the program, some are more vulnerable than others. One of the more vulnerable is the Workforce Investment Act program.”

That’s the umbrella program under which organizations like JVS and Chrysalis compete for funding.

That funding finds itself under attack because unlike popular programs like Section 8 Housing, which provides assistance to low-income individuals and families, or Pell grants, which help adults continue their education, workforce programs don’t have sympathetic clientele or special interests that benefit from the federal dollars being spent.

In the case of Section 8, it’s landlords who are getting 70 percent of their rent charges from the government. With the Pell grants, it could be the for-profit colleges that tout job-training programs.

“The ‘ideal’ program is where you have a sympathetic population and then a provider that can make money off of them,” Tajima said.

With those programs taking an ever larger piece of the pie — Pell grant funding has expanded from $12.4 billion in 2005 to $41.7 billion in 2010 — others, inevitably, get less.

That’s problematic for services like JVS, which are on the front lines of the current recession and trying to prepare for the possibility of a worsening economy and job market.

“There’s no easy solution to this situation,” Forman said. “The recession has continually gotten worse, and unemployment will continually get worse, and continues to climb.”

Perversely, the politics of the situation mean that it will be better for Los Angeles County, and the nonprofits it helps fund, if the “supercommittee” in Washington D.C. cannot find a solution to the budget cuts, and has to pull the trigger and cut across the board.

If that happens, half of the $1.2 trillion will automatically come from defense spending. The rest will come from so-called discretionary funds.

A handful of programs — including Medicaid, food stamps, assistance for foster children and others — would remain untouched under the law.

That could be good news for the county, because those programs pay out the lion’s share of the federal money that flows into the area, but it’s unlikely that Congress would allow defense spending to be hit so hard, Tajima said.

In any case, the full brunt of the most immediate cuts won’t be felt until 2013, well after the 2012 presidential race is decided.

“The main thing this is built to do is to put off the tough cuts until later,” Tajima said.

ashley@www.smdp.com

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