Nonprofits still "taking a loss" despite budget’s pay hike

Michael Appleton/Mayoral Photography Office
Mayor de Blasio delivers his State of the City address at the Apollo Theater in Harlem on Feb. 13.

Nonprofits still "taking a loss" despite budget’s pay hike

February 21, 2017

New York City Mayor Bill de Blasio’s proposed budget for the coming fiscal year contains salary increases for staffers at nonprofits that contract with the city, but several advocates warn that the sector could face insolvency if the mayor’s plan doesn’t address cost-of-living increases and growing overhead costs.

The mayor’s proposed $84.7 billion budget included adjustments to the beleaguered homeless and children’s services efforts – which are partially carried out by some of these nonprofits – and de Blasio promised in last week’s State of the City address to share more details. The spending plan is certain to change during negotiations with the New York City Council before the June budget deadline. However, many organizations were disheartened that the budget could resemble last year’s, when the budget failed to include a $25 million increase.

Fears of federal budget cuts have become more acute with the uncertainty of future funding under President Donald Trump.

There is some relief for these nonprofits in the mayor’s budget proposal. Last year, the mayor announced a phased-in minimum wage increase for city workers and human services contractors to $15, and funds to pay for those hikes were included in the city’s spending plan. The city’s spending plan also contains a 2 percent pay increase for nonprofits, the first of three annual increases, effective July 1. Advocates have been lobbying Albany to fund a similar support program in the rest of the state for the minimum wage increase, as well as more money for Medicaid reimbursements and the Nonprofit Infrastructure Capital Investment Program.

The city still has “a ways to go” to assist nonprofits, but made a “good faith effort” in doing so, according to Emily Miles, director of policy, advocacy and research at Federation of Protestant Welfare Agencies, an anti-poverty and advocacy network.

But, the city hasn’t followed federal guidance issued in late 2013 by the White House Office of Management and Budget that said states and local governments receiving federal funding should reserve 10 percent of a contract to reimburse nonprofits for overhead or administrative costs. “Right now the indirect rates on city contracts are frequently lower than that,” she said.

Miles said that the issue has been discussed at the city-led Nonprofit Resiliency Committee, which is made up of a few dozen nonprofit leaders.

She said FPWA was also seeking more support for senior citizen services, which she said have long been underfunded. According to Susan Stamler, executive director of United Neighborhood Houses, senior services may be further threatened by Gov. Andrew Cuomo’s most recent budget proposal that included cutting $17 million for senior centers, which could put 65 centers in danger of closure.

De Blasio’s proposed budget also reallocates homeless spending as the shelter system has swelled to house more than 60,000 people, a record high. Though spending for the New York City Department of Homeless Services is expected to dip from $1.69 billion this year to $1.43 billion, Frederick Shack, the CEO of Urban Pathways, said that reflects the administration spreading homelessness prevention efforts across various other agencies. Still, that spending may not match the demands of the nonprofit sector.

“Even with that, our concern is that we contract with the city, so while the number of shelters have increased, the number of homeless individuals have increased, the numbers of programs has increased, every time I add a new program I’m taking a loss because I’m not being fully funded,” Shack said.

He spoke following an early February press conference urging Cuomo and the state Legislature to help shore up the sector, particularly by funding the minimum wage increases that organizations are mandated to pay. While nonprofit organizations say they’re happy to help their workers, some argue that without additional state funding, the pay raise equates to an unfunded mandate. 

While Shack said City Hall was more responsive than Albany in funding the minimum wage increases, there were still the issues of flat salaries for the sector’s increased staffing and overhead costs. “This is a very progressive mayor,” Shack said. “Love that, but you’ve got to put dollars in.”

He said the pay issue means that his organization has such a high turnover rate that many social workers with a Master of Social Work degree won’t stay for longer than a year or two.

Mayoral spokeswoman Freddi Goldstein said the de Blasio administration made “tremendous investments” in the sector. The proposed budget includes three annual 2 percent pay raises for workers. She said the administration has also increased salaries for city Department for the Aging case managers by 40 percent, affecting 340 social workers.

“Last year, we put hundreds of millions of additional dollars into the pockets of these employees when we invested in a $15 minimum wage, and this year, we’re providing raises for 90,000 more workers in the nonprofit community,” Goldstein said.

Helen Rosenthal, the chairwoman of the New York City Council’s Committee on Contracts, applauded de Blasio in a statement “for tackling the long-standing question of wages in the human services sector. But we must address the two structural problems that are confronting these essential organizations,” she said, pointing to the lack of funding for increasing costs, while making the organizations pay for the increase in hourly wages. 

“We are calling on the governor to step up and increase state funding to New York City's human services organizations, and are asking the mayor to consider a major increase in (non-personnel) funding to social service providers," Rosenthal said. 

De Blasio’s spending plan includes more resources for ThriveNYC, a program to expand behavioral health services. The city’s spending on the 54 services in the umbrella initiative is expected to grow by 25 percent between 2015 and 2019 to $1.2 billion, according to an estimate by the New York City Independent Budget Office.

The ongoing overhead, staffing and programmatic funding issues were a predominant concern for Good Shepherd Services. According to the organization’s estimates, the city-funded portion of the wage increase would cover roughly half of the $1.1 million needed to pay for the higher minimum wage. That’s because some employees aren’t directly covered by a city contract – such as those who are privately funded – and the city’s increase in funding doesn’t include them.

Michelle Yanche, Good Shepherd Services’ associate executive director for government and external relations, said she was pleased de Blasio’s proposal included about $14.9 million to fund 22,800 free summer camp slots, some of which are run by Good Shepherd. Though less than last summer, which was about $17.6 million for 26,000 slots, it was comforting, Yanche said, to have a baseline to negotiate back toward the 31,000 slots from summer 2015.

It also would provide some much-needed stability to the free summer camp program, after uncertain funding left some camp slots unfilled at Good Shepherd last year because the money was restored too late.

“That’s certainly one of the reasons why we say it really is a relief to at least have this restoration, partial restoration as it may be, so early because we have planning time,” Yanche said. “But, ideally, Good Shepherd would really like slots for all of our participants.”

De Blasio has also been under pressure to reform the city Administration for Children’s Services, whose commissioner, Gladys Carrion, recently resigned after several high-profile child deaths. “On ACS, this is not – from our point of view – a money question, first and foremost; it’s about deepening reforms,” de Blasio told reporters during his budget address in January.

Citizens’ Committee for Children Executive Director Jennifer March credited de Blasio for creating 10 new Beacon community centers, maintaining summer programs and addressing overcrowding. But the city could put more social workers in schools with lots of homeless children and include free school lunch. “The preliminary budget also baselines an increased shelter re-estimate of $123 million, yet there are no new initiatives proposed to prevent homelessness, eliminate the use of hotels to shelter families and/or help families secure permanent housing,” she said in a statement.

This year, the Human Services Council of New York urged the de Blasio administration to fund an unrestricted 12 percent across-the-board increase to contracts to give nonprofits the flexibility to spend where they need. The organization also asked for “cost escalation” clauses to help cover any unexpected cost increases and a systematic plan for giving workers cost-of-living adjustments.

Allison Sesso, the council’s executive director, said an investment to stabilize existing programs would be more fruitful than expanding programs. She said she frequently confronts the misconception that government is subsidizing the work of nonprofits, but because many of the organizations fundraise from donors and other sources, it’s really the other way around. But it seemed to her that wasn’t always understood by the de Blasio administration.

But discussions at the Nonprofit Resiliency Committee have their limitations, “especially when you’re talking about these issues about how the nonprofit, government relationship is structured,” Sesso said.

“Money clearly comes up in those conversations,” she said, “and you kind of get at a stopping point if you don’t know what the city’s willing to invest.”

Dan Rosenblum