Non-profits nationwide and in New York State are facing a difficult fiscal road ahead as much needed federal stimulus funding remains stalled due to partisan squabbling in Congress. A recent survey suggests that without some fiscal assistance, approximately 30% of non-profits in the Hudson Valley may not survive in the near term.
In response to the devastating economic impacts of the pandemic, New York State has delayed or cut state payments to non-profits that provide a host of services, including housing assistance, economic development, education and childcare, arts and culture and human services.
Back in July, when non-profits began experiencing delayed payments from New York State and Gov. Cuomo issued Executive Order 202.4 that suspended prompt payment laws during the COVID crisis, the New York Council of Nonprofits sent a letter to the governor calling the fiscal situation facing nonprofits in light of the Executive Order as “untenable.”
Nonprofits represent the largest private sector employer in the state, employing (pre-COVID) 1.3 million people (18% of the state’s workforce) and generating $260.26 billion in annual revenue.
In its letter penned by NYCON CEO Doug Sauer, the council noted that the vast majority of non-profits are community-based with a workforce that is comprised of low-income workers who are predominately people of color.
“The people we serve are also those most impacted by COVID-19; the virus has hit low-income communities of color at a staggering rate with Black and Latino New Yorkers dying of COVID at twice the rate of white residents. Nonprofit jobs and services will be key to the recovery in these communities, and at a time they are needed more than ever, budget cuts and payment delays results in service reductions and layoffs. These unfortunate choices by the state disproportionately effects communities that have been hardest hit by the pandemic due to structural racism, ableism, and income inequality,” he said.
A survey released and prepared by NYCON in September entitled “Hudson Valley Nonprofits Amidst COVID-19: An Assessment of Capacity Building Needs” chronicled the in some cases grim outlook for this sector.
The survey was sponsored by the Hudson Valley Funders Collaborative, which includes the Berkshire Taconic Community Foundation, the Community Foundation of Orange and Sullivan, the Community Foundations of the Hudson Valley, the Dyson Foundation, the Foundation for Community Health and the Westchester Community Foundation.
Respondents included nonprofits serving communities in Columbia, Dutchess, Greene, Orange, Putnam, Rockland, Sullivan, Ulster and Westchester counties. In response to the survey’s dire findings, the network of philanthropic foundations is exploring ways to provide targeted financial and technical assistance to nonprofits, particularly those providing essential human services.
“The adverse impact of the pandemic on nonprofits in the Hudson Valley region is dramatic. Services that people are relying on to meet their needs are quickly eroding as nonprofits are reducing their work force, shutting down programs, and even permanently going out of business; all making it even more challenging for the region to economically recover,” stated NYCON’s Doug Sauer.
Many of the survey’s key findings of the 291 respondents were outright alarming.
Perhaps the grimmest was 30% or 75 nonprofits consider insolvency or dissolution to be very likely, likely, or somewhat likely. Those with higher expectations for insolvency tended not to have endowments, reserve funds, or government funding. Additionally, non-profits in Education and Childcare have greater expectation for insolvency than other nonprofits.
The survey, conducted from June 29-July 14 also found that the adverse financial impact of the COVID crisis on nonprofits in the region has been significant, with 79% of respondents projecting a revenue reduction in 2020. The survey stated, “Financial risk is shown to be inversely related to budget size, with nonprofits in the lowest budget size categories experiencing the greatest financial risk on average. High levels of financial risk were found for nonprofits in all service sector groupings with higher levels in nonprofits that do not receive government funding.”
A total of 60% of survey respondents received government funding. Of those, 73% expect cuts this calendar year, 42% expect cuts of more than 20%, including 7% expecting a cut of more than 50%.
To address the nonprofit fiscal crisis, NYCON in its July letter to the governor urged the state: to fully implement the recommendations made by the State Comptroller in the 2019 report on state contracting and payments with not-for-profit organizations, rescind Executive Order 202.48 which suspends prompt payment laws and prioritize and pay out invoices on existing contracts promptly and remove additional barriers, like DOB review, that have significantly and seemingly intentionally delayed payment; register all pending contracts and do not impose retroactive cuts; end the policy and practice of financially penalizing nonprofits that have successfully secured bank loans from the Payroll Protection Program; streamline executive branch approval process for licensed program transfers, mergers, acquisitions and dissolutions and commit to process applications within 90 days and create a “Nonprofit COVID-19 Recovery Advisory Committee” and re-install a nonprofit representative agency as Co-chair.
At present, relief for the nonprofit sector does not appear imminent. Tim Delaney, president and CEO of the National Council of Nonprofits, released the following statement after President Trump announced the suspension of negotiations on a new coronavirus relief package.
"Giving up on America is unacceptable. The President, the Senate, and House cannot cavalierly give up on negotiations over a COVID relief package our country desperately needs so they can hit the campaign trail. Charitable nonprofits throughout America are working to help everyone afflicted by COVID and its economic devastation. Elected officials cannot assume nonprofits will be able to handle the added load we’ve been carrying for too long, all while enduring increased demands with shrunken resources and reduced staff.”
Noting that the funding from CARES Act has run out, Delaney noted, “The human pain is growing. Without a deal, thousands of nonprofit employees will go from helping others to needing help themselves. Nonprofits that people rely on will have to shutter, just as need for their services peaks. The resulting increased economic damage of delaying action will be massive. The House, Senate, and White House owe the American people the same commitment to COVID relief that nonprofits are showing every day. Get back to the negotiating table and don’t stop until a deal is done.”
Nationwide, nonprofits employ 12.3 million people, with payrolls exceeding those of most other U.S. industries, including construction, transportation, and finance. A substantial portion of the nearly $2 trillion nonprofits spend annually is the more than $826 billion they spend on salaries, benefits, and payroll taxes every year, according to the National Council of Nonprofits.
Resources to Help Nonprofits
• New York Forward Loan Fund (NYFLF) is a new economic recovery loan program aimed at supporting New York State small businesses, nonprofits and small landlords as they reopen after the COVID-19 outbreak and NYS on PAUSE. NYFLF targets the state’s small businesses with 20 or fewer full-time equivalent (FTE) employees (90% of all businesses), nonprofits and small residential landlords that have seen a loss of rental income. https://esd.ny.gov/nyforwardloans-info
• The SBA’s Economic Injury Disaster Loan (EIDL): Low interest loan available to small businesses and not-for-profits. Provides low interest loans up to $2MM that can help overcome temporary loss revenue during COVID-19. https://disasterloan.sba.gov/ela/Information/ApplyOnline
