Nonprofits try again to make their case: ‘We’re at a breaking point’

Barry Simon is contemplating layoffs and serving as many as 40 fewer clients in the Middletown-based social service organization he runs. Raymond Gorman, who leads a mental health agency based in New Britain, says he’s considering the most drastic cuts he’s faced in more than 35 years. At the Clifford Beers Clinic in New Haven, Executive Director Alice Forrester fears fewer children and families that need treatment for trauma will get help.

Facing another round of budget cuts, the leaders of nonprofits that contract with the state to provide services to people with disabilities, mental health and substance abuse issues have dire warnings for policymakers. They say there’s little left to cut, that they’ll have to lay off staff and serve fewer people, that clients will inevitably feel the pain. They say the private nonprofit system is at a breaking point.

They know this is not a new argument.

“I’ve had legislators say to me, ‘Pat, every year you come to me and you tell me how difficult it is, but you’re still in business,'” said Patrick J. Johnson, president of Oak Hill, which serves people with disabilities. “And I think as long as we continue to provide the services on the backs of our employees, because that’s how we’re doing it, then the world goes on.”

“But there’s a tipping point,” Johnson said. “We’re about to go over the tipping point.”

Leaders of the nonprofits acknowledge that their appeals could have limited impact. The state spends close to $1.5 billion a year contracting with nonprofit human-service providers, and that money is among the few places in the budget that can be easily slashed. Agreements with state employee unions protect most workers from layoffs, and programs like Medicaid that are partially federally funded can’t be cut without also losing revenue.

“The nonprofit sector has already been hammered over the last 10, 15 years, but particularly over the last four or five,” said Joseph J. Sullivan, president of MCCA, a Danbury-based provider of substance-abuse treatment. “The budget has to be balanced on the back of the nonprofit providers, because there’s no place else to go. From a public policy point of view, it really doesn’t make a great deal of sense.”

Sullivan said he’s not placing blame, just acknowledging the difficulty of the situation.

Others are less understanding.

“It’s a race to the bottom in the private sector. That’s what we’re engaged in,” said Sheila Amdur, interim CEO of the Connecticut Community Providers Association. “It’s a belief that this is a sector that will just continue to find other ways to serve people that as a society we’ve decided we’re not going to pay for anymore. And that’s not possible.”

“Walmartizing” human services

Nearly three-quarters of the nonprofit agencies in the state with budgets of at least $1 million were in deficit in 2009, compared with 40 percent nationally, according to a recent report by the governor’s cabinet on nonprofit health and human services.

Nearly three-quarters of the nonprofits are in danger of going out of business if they face any event that causes a financial reversal, the report said.

The agencies are now in their fifth year without a raise in state payment rates. A 1 percent rate increase intended to go toward staff compensation was slated to take effect next month, but that’s likely to be effectively wiped out by cuts. The nonprofits are expecting to lose funding as part of cuts Gov. Dannel P. Malloy’s administration announced last month, and expect more cuts as part of a deficit-cutting plan likely to be reached later this month. A projected deficit next year of more than $1 billion means that the next budget is likely to be just as tough.

While their funding has been flat, the agencies have faced increased costs in other areas. Many run group homes, paying more for food and heating oil; those that drive clients places have had to absorb rising fuel costs. Health insurance costs have grown dramatically, often by double-digit percentages.

Leaders of the nonprofits say they provide savings to state government compared to the public sector, but that it comes at a cost: As state funding erodes compared to the cost of living, more of their workers are relying on government programs like Medicaid and food stamps.

“The dirty little secret is that for private agencies, for the last two decades, we’re doing it on the backs of our employees,” said Johnson, whose agency has dozens of workers on Medicaid.

He said a colleague recently described state policy as appearing to try to “Walmartize” human services — “essentially move to bare minimum wage jobs with little or no benefits.”

Johnson said he recently laid off workers who had fallen asleep on the job. When he asked why they were sleeping, he learned they were working two or three jobs to make ends meet.

Gorman’s agency, Community Mental Health Affiliates, offers health insurance. But it has scaled back benefits to cope with rising costs. Almost a third of the workforce now relies on Medicaid, Gorman said.

“We’ve come up with every model that we could to make it as affordable as possible,” he said. “It’s no longer affordable to our people. Unfortunately, a number of them have gone into the public programs. They have no choice. They have to provide for their families.”

It’s not clear how many people working for state-contracted nonprofits rely on government assistance, like the HUSKY Medicaid program. The governor’s nonprofit cabinet has been trying to find out, but hasn’t been able to because of computer glitches at the state Department of Social Services, said Deborah Chernoff a member of the cabinet and communications director for the New England Health Care Employees Union, District 1199, SEIU.

“Anecdotally, we know just from talking to our members that there are hundreds of people who do this work whose kids are on HUSKY because they can’t afford medical insurance,” she said.

Focusing on cutting the budget line item by line item can obscure the bigger picture, that holding down payments to nonprofits can lead to higher costs for government programs that serve people who don’t earn enough to pay for benefits, Chernoff said.

“Nobody has figured out a way or really wants to count what the bigger picture cost is of having people who work really indirectly for the state…also have to rely on the state,” she said.

Sustainability

Benjamin Barnes, Malloy’s budget director, said last week that the administration is “seeking the least repugnant cuts,” but added that he didn’t think “some very difficult and challenging decisions” could be avoided.

“I hate to take any step that’s going to result in somebody losing a job or getting reduced hours. That’s painful,” Barnes said. “But we may end up having to make some decisions that have that impact before we’re all done here.”

While nonprofits argue that their funding levels aren’t sustainable, Barnes said the state doesn’t have a sustainable budget framework. And he said the difficult decisions being made in addressing the budget woes could affect service levels.

Johnson described the financial woes agencies are facing to Malloy during a meeting of the governor’s cabinet Monday.

“There’s little likelihood that what we’re currently doing is sustainable,” he said.

Malloy told Johnson he wished the economy were stronger and, noting that he’d also trimmed his workforce, said he knows pain. “I’m the victim of it and I inflict it sometimes, I suppose,” he said.

But the governor focused on efficiency, like using data to determine what programs are effective and terminating those that are less effective. “If we spend the remainder of these terrible, difficult times, whether they last for a year or some longer period of time, and we prepare ourselves for doing a substantially better job, because of the lessons we’ve learned in these very difficult times, then dollars will in fact go further,” he said. “We will in fact provide higher level and better services.”

Some agencies, like MCCA, have managed to get through challenging financial times in part by growing, absorbing smaller agencies that couldn’t make it.

But leaders say there are limits to how much they can grow, and how much they can continue to shift burdens to their staff. They say additional cuts will most likely affect services for clients, or serve fewer people or eliminate programs.

While there might be ways agencies could become more efficient, Chernoff said the work they do isn’t like making cars.

“It’s sort of the antithesis of something that can be done more quickly or more efficiently,” she said. “It’s long-term care. It’s behavioral interventions. All of those things take time and patience and relationship-building, and none of that is efficient.”

Still, she noted, as long as the private providers continue to provide services, the state won’t be pressured to changing the way it operates.

“In some ways, they’re their own worst enemy, because every year they say ‘we can’t take any more cuts, we have to have more funding,’ and every year the government says ‘do more with less,’ and every year they try,” Chernoff said.

“I think a number of us in the nonprofit provider community have been telling people for a long time that the system is under enormous pressure and there is no place else for providers like ours to absorb any kind of cuts or cost increases even. And now we’re there,” Gorman said.

He said the cuts he’s contemplating are more drastic than anything he’s proposed in more than 35 years.

“And yet I know that we could be looking at larger cuts down the road,” he said.

Follow Arielle Levin Becker on Twitter.

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