Well, I think the Southern Baptists (along w/ the Salvation Army) got it right again by refusing federal recompense for their relief work after Katrina.  I agree with them for a few reasons:

1.  Limited civil governement is based on the idea that certain responsibilities belong to each sphere of government.
Whose responsibility is it to plan for and help rebuild after a disaster?  First, the individual.   Second the family.  Third, the local community, including the local church, voluteer organizations, and local government.  Fourthly, the regional – and so on.  The feds should be last in line, and perhaps they should be helping with loans, not handouts.  By refusing the money, the Baptists are saying "this isn’t the governement’s job anyway, it is the Church’s."

2.  If you take money from the government, they have a say in how you spend it.
And rightly so.  Now, for most organizations, this is not a problem.   But if you want to share your faith while you help, better not take government money.  Taxpayers don’t need to support evangelism with their taxes any more than they need so support the arts.

3.  Your usual supporters may decrease giving because you don’t "need" them anymore.
If you want people to continue to give, better be careful about being on the dole from the government.

4.  The government can avoid the appearance of support for religion by not giving money to faith-based organizations.
Now, this may or may not be valid – I mean, I am all for vouchers for faith-based schools as long as their kids pass proficiency tests.  But what kind of test do you give for relief organizations? 

And faith-based religious programs, Christian and even those like the Buddhist Vipassana programs, work better than secular ones at reforming prisoners.

I dunno, maybe I’m being double-minded here.  Maybe it’s all or nothing with faith-based organizations?  Or maybe it’s a gray zone that we should let each organization make its own decision on, and just include certain safeguards so that the government is not funding evangelism.