A slowing economy may spell trouble for nonprofits who rely on public funding as states cope with budget shortfalls by slashing spending, the Chronicle of Philanthropy reported Feb. 21.

The National Governors Association says that 17 state budgets for 2009 are a total of $31 billion in the red, and that, "If the current downturn follows the path of previous recessions, 35 to 40 states could face budget cuts in 2009." Since many states are required by law to have balanced budgets, that could mean funding cuts for agencies and the community-based organizations they fund.

California, for example, has proposed a 10-percent across-the-board budget cut for state agencies to close a massive budget gap. "These across-the-board 10-percent cuts might sound equal, but they are not equitable," said Nancy Berlin, director of the California Partnership, a coalition of antipoverty groups. "They impact low-income people more because they affect the same families over and over again."

Aggravating the situation are proposed funding cuts by the Bush administration to a series of state block-grant programs for social services, child development, and other priorities. Some experts project that federal aid to the states will decline $19.8 billion in 2009.

Meanwhile, nonprofits say that demand for their services is rising, in part because of layoffs of public- and private-sector workers in the sluggish economy.