Posted on June 8, 2010

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New York State Cuts Off Funding to Tens of Thousands of Nonprofits

Facing budget gridlock, New York state has cut off funding to thousands of nonprofits and legislators on both sides of the aisle are unsure if and when the funding spigot will be turned back on, the Wall Street Journal reports.

Since April, the state has been unable to pay the roughly thirty thousand social service agencies it contracts with to provide safety-net services such as senior care and mental health counseling. Even so, nonprofits say state agencies are still quietly asking them to keep operations going without knowing whether the government will actually pay them later. Social services agencies, which typically depend on government funding for 50 percent to 90 percent of their revenue, say this is the first time the state budget has been late that the governor has not included funding to nonprofits in emergency appropriations known as extender bills.

"I have contracts that go through August or December, and these agencies want me to continue providing services," said Christine Molnar, president of Safe Space NYC, which works to prevent foster-care placement for at-risk children. "My reserve will only carry me for a month. No business can operate this way."

The uncertainty comes as most nonprofits are planning their budgets for the next fiscal year. In addition to the short-term cash crunch, many nonprofits in the state are bracing for larger budget cuts that have been proposed to address the state's $9 billion deficit. New York is hardly alone; at least forty-five states have imposed cuts in major service areas, including health care, services for the elderly, and education, according to the Center on Budget and Policy Priorities. At the same time, nonprofits are laying off staff and cutting or reducing programs that provide support for homeless and runaway youth, the elderly, and the mentally ill.

New York governor David Paterson's administration says it intends to pay service providers but until a budget or extender bill is passed its hands are tied. "We are withholding payments because we literally can't afford to pay right now," said Eric Kriss, a spokesman for the state budget office, noting that the state is continuing payments for Medicaid expenses. "We'll open the spigot when we can."