Nonprofit funding a sticking point in $15 minimum wage debate

With Albany Democrats poised to push for an all-sector wage hike to $15 an hour in the upcoming legislative session, a key issue raised by skeptics and advocates alike is how the proposal would impact the state’s nonprofit sector. 

E.J. McMahon, president of the right-leaning Empire Center for Public Policy, said at Wednesday’s City & State minimum wage forum at New York Law School that the proposed wage hike could result in nonprofits losing workers to other sectors.

“Nonprofits are freaking out about this,” McMahon said. “The more compelling a case they make to the Legislature and governor for how this will disrupt their model, the more likely the governor and Legislature will say: Don’t worry, we’ll take care of you with a carve-out or a slowdown. That won’t help much because if the rest of the labor market has got its pay rising, they’re going to be threatened by the loss of some of their workers to the other businesses.”

McMahon contended that the wage hike’s adverse impact on nonprofits would largely be a function of organizations’ reliance on government sources of funding.

“It’s going to be very, very disruptive, especially for the nonprofits, many of whom depend on federal aid streams, which have no cognizance of a $15 minimum wage,” McMahon said. “Is the state going to reimburse the hundreds of millions of dollars this is likely to cost them? I would say likely it is not.”

Other panelists agreed that the impact to the sector would be sizable, but suggested that solutions for the sector could be built in to the wage hike proposal.

Paul Sonn, general counsel of the left-leaning National Employment Law Project, cited potential savings to the state budget as workers at human services agencies earn more and rely less on state-funded Medicaid as a possible solution. As wages increase, Sonn argued, workers would transition to health care exchanges established under the Affordable Care Act, which are overwhelmingly funded by the federal government. According to Sonn, this shift could represent “hundreds of millions of dollars” in savings in the state budget, which could then be used to support nonprofits.

“No doubt about it: there’s going to be a big impact to nonprofits,” Sonn said. “That’s why the state Legislature as part of this should use the savings to the state budget to increase support for the nonprofits that have been underinvested in for years.”

Sonn also suggested that the proposal has wide support within the human services nonprofit community, mentioning a coalition of organizations spearheaded by Jennifer Jones Austin, chief executive officer of the Federation of Protestant Welfare Agencies, and the Fiscal Policy Institute “to advocate and push the Legislature to use the savings in the budget to provide needed and long overdue support.”

But this approach was met with skepticism by some of the panel’s more conservative members, including Republican state Sen. Jack Martins, who argued that nonprofits would be unable to absorb the cost of the proposed wage increase without unfair government intervention.

“You’re suggesting that we should take money out of the state budget so that we – so that taxpayers – can subsidize increased wages for not-for-profits and keep them operating,” Martins said. “I don’t know that that model works either, that taxpayers of the state should be asked to absorb the impact to our not-for-profit community from an increased wage.” 

In contrast, Hector Figueroa, president of 32BJ Service Employees International Union and a vocal advocate for the wage hike, stressed that state government must prioritize support for the nonprofit sector, as it has played an ever-expanding role in the lives of low-income New Yorkers.

“We need to look at ways for entities like nonprofits that are feeling a vacuum as the government has not met its obligations, as the economy has become more unequal and people who are insecure – retirement income has disappeared and they need to rely on nonprofits and charities,” Figueroa said. “We have to figure out with the nonprofits, with the charities, what other things can be done so that they can function, whether it is in the form of subsidies or whether it is in the form of providing space.”

Ultimately, Figueroa argued, policymakers must confront this issue now in order to avoid larger stresses on both individual workers and the overall economy.

“We have to be prepared to understand that if we don’t address this question of the minimum wage now, we’re going to be facing a much bigger problem in the near future," Figueroa said.