After years of lean budgets, nonprofits want $100 M from surplus

With Connecticut’s coffers flush with cash for the first time in a decade, long-suffering nonprofit social services want a share of the wealth.

The CT Community Nonprofit Alliance recently wrote to Gov. Ned Lamont, asking that he and lawmakers set aside $100 million to assist those who provide the bulk of state-sponsored social services.

But despite the rosy outlook for the rainy day fund, Connecticut still has tens of billions of dollars in pension and bonded debt that dwarf its budget reserve. And Lamont and the legislature still face more than $3 billion in projected deficits in the next two-year budget cycle.

“Simply put: community nonprofits have taken the hit when budget times were bad,” wrote Gian-Carl Casa, president and CEO of the alliance, which provides services to more than a half-million people. “It is important that the people they serve benefit as the budget improves. “

Since exhausting its reserves during the last recession — which ended in January 2010 — state government has struggled with deficit forecasts for much of the past decade.

But surging income tax receipts over the past 18 months helped Gov. Dannel P. Malloy and the last legislature amass a $1.2 billion emergency reserve.

And continued growth in tax receipts has Lamont and the current General Assembly anticipating more than 2.6 billion in the rainy day fund by the end of September.

“It is important to understand that this surplus comes after more than ten years of budget cuts that have fallen disproportionally on the state’s safety net and impacted quality-of-life,” Casa added. “Community nonprofits house the homeless, work with individuals with intellectual and developmental disabilities, treat people with substance abuse and other behavioral needs, manage food pantries, provide therapeutic arts and cultural opportunities and much more, even as demand has increased.”

But while $100 million out of a potential $2.6 billion reserve might seem relatively modest, it’s not that simple.

Nonprofit agencies would not want to lose the funding after next fiscal year ends. And the governor and legislature cannot count on a surplus every year.

In other words, if lawmakers fund a $100 million rate increase using one-time dollars now, they would be expected to continue to pay for it in future years. That would mean either raising new revenues, cutting other programs, or both.

“We appreciate the Alliance and want to remain a partner in helping them achieve their important goals of helping vulnerable communities when they need it most,” said Maribel La Luz, Lamont’s communications director. “However, the surplus is not a long-term funding source for any statewide operating expense. It’s not feasible or sustainable to use surplus or rainy day funds to support non-profits.”

La Luz added that “we will continue to support the nonprofit service providers through the existing operating and capital expenditures and other creative ways.”

Presently, more than a half dozen state departments collectively spend roughly $1.4 billion to hire private, nonprofit agencies to provide social services, health care, job training and other government functions.

Though these resources are scattered among more than 1,200 contracts, involving hundreds of nonprofits, together these payments represent more than 7 percent of the General Fund.

In terms of dollars, that’s larger than the departments of Transportation, Correction and Motor Vehicles combined.

Nonprofits employ close to 190,000 people in Connecticut, about two-thirds of whom work in the human services field.

But from 2002 through 2017, state spending for nonprofits grew just 9 percent in total. 

Legislators gave nonprofits that serve the developmentally disabled a 5% rate hike last year, while others received a 1% bump. But both came with restrictions.

Most nonprofits were mandated to allocate all of those extra dollars to wages. In other words, any cost increases tied to maintenance, technology, debt service, or energy costs had to be borne by the agencies.

Barry Simon, CEO at Hartford-based Oak Hill School, one of the largest agencies serving clients with physical and intellectual disabilities, said the funding would help him attract nurses, physical therapists and other professional staff.

Other nonprofits, he said, likely would use the funds to make long-deferred investments in computer systems, building maintenance and equipment.

“We see this as an opportunity to catch up,” he said.

The alliance projected a $100 million payment to nonprofits would be the equivalent of a 5 percent rate increase — with no strings attached.

This is also important, Casa noted, because many of the nonprofits’ clients also qualify for Medicaid assistance, which means the state would be eligible for almost $37 million in matching federal aid under this plan.