Gov. Ned Lamont addresses more than 550 nonprofit social service agency leaders Wednesday at the Connecticut Convention Center.
Gov. Ned Lamont addressed more than 550 nonprofit social service agency leaders Wednesday at the Connecticut Convention Center.

Nonprofit social service agencies have been pleading with Gov. Ned Lamont for months to share $100 million of Connecticut’s record-setting budget reserve with them.

Speaking before hundreds of nonprofit leaders Wednesday at the Connecticut Convention Center, Lamont once again dashed their hopes.

Although he gave the industry lots of praise and promised to urge rich investors to donate — an emerging theme in his young administration — he continued to insist Connecticut can’t spare its reserves.

“I spent the last two weeks talking with a lot of pretty well-heeled investors,” Lamont told nearly 550 nonprofit agency leaders at the CT Community Nonprofit Alliance’s annual convention. “I also mentioned to those investor-types that … I need them to step up more. And I need them to contribute more to what we’re trying to do in the not-for-profit community.”

The Alliance asked Lamont and the legislature to step up last May and transfer $100 million from Connecticut’s rainy day fund to a nonprofit network that is, effectively, the largest unofficial state agency. It continues to run an advertising campaign this fall appealing for these funds, which never materialized.

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.

Gian-Carl Casa, president and CEO of the CT Community Nonprofit Alliance Keith M. Phaneuf

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

Since 2002, state spending for nonprofits has grown by about 10%. After adjusting for inflation, nonprofits say they have lost money.

This stagnation of funds, coupled with rising caseloads, has many nonprofits worried, said Gian-Carl Casa, president and CEO of the alliance. A recent survey of Connecticut nonprofits found 95% have experienced increasing demand for services over the past five years, he said.

State officials project a huge surge in retirements will arrive in three or four years, potentially eliminating 10-to-15 percent of the state workforce.

And Lamont hinted the state may ask more of the nonprofit sector in just a few years.

This surge in state employee retirements “gives us an opportunity in state government to think about what is the best way to deliver services,” he said.

But does that mean Connecticut should invest some reserves in its nonprofits?

Lamont chats with Alyssa Goduti, president and CEO of Adelbrook Behavorial and Development Services of Cromwell. Keith Phaneuf

“No,” Lamont responded when interviewed by the CT Mirror after his address. “Remember, the rainy day fund is to make darn sure that when there’s a rainy day I don’t have to cut funding for services like this at a time of most need.”

The current, $2.5 billion reserve is equal to 13% of annual operating costs. And Lamont’s budget office projects it could reach $2.9 billion by June 30, approaching the statutory limit of 15%.

Still, that fiscal cushion is not a perfect firewall against the next recession.

Nonpartisan state analysts already have warned that the current, two-year budget is not sustainable. 

State finances, unless adjusted, will run about $2.5 billion in the red between 2020 and 2021, according to the Office of Fiscal Analysis. Pension and other debt costs, fringe benefit expenses and Medicaid payments are key drivers of these shortfalls.

Lamont raised the prospect Wednesday of creating new tax credits for philanthropists who contribute to private, nonprofit social service agencies.

“Why don’t we offer credits for folks so that you have an added incentive to give and donate money to each and every one of you?” he asked the crowd.

Lamont added he wants to be a “champion” for the nonprofit social service agencies, saying the growing wealth inequality in Connecticut is placing a greater strain on these services.

“This is an economy, this is a society where the polarity between wealth and folks getting left behind is more severe than it’s ever been before,” he said. “And I do worry sometimes that we’re unraveling a little bit.”

Lamont is not planning, however, to include these new tax credits in his next budget proposal to the legislature on Feb. 5.

“I don’t think February,” he said, adding he has just begun discussions with state tax commissioner Scott Jackson. “I think that’s too soon.”

Casa said that nonprofits will continue to press lawmakers to share a relatively small portion of the rainy day fund, adding that the community-based agencies that serve Connecticut’s most vulnerable already are in fiscal distress.

“We’re already facing rainy day after rainy day at this point,” he said.

Keith has spent most of his 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. He has been the state finances reporter at CT Mirror since it launched in 2010. Prior to joining CT Mirror Keith was State Capitol bureau chief for The Journal Inquirer of Manchester, a reporter for the Day of New London, and a former contributing writer to The New York Times. Keith is a graduate of and a former journalism instructor at the University of Connecticut.

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9 Comments

  1. Gov Lamont is right to tell Nonprofits not to rely on state government handouts for their existence. Nonprofits must rely on fundraising and services to fund their operating costs. It is the way nonprofits are supposed to function. Total dependency on government funding can only make a nonprofit more bloated and less efficient. Sorry, but nonprofit does not mean extended government employees.

    1. Look at the salaries of some of these nonprofits. They have to file an IRS Form 990 which lists the top salaries. The Form 990’s are sometimes are hard to access and I can see why the leaders want them hidden. The leaders salaries are obscene. Funding coming from the state yet salaries that would make a state employee blush.

  2. As we all know, every spare penny the state has must be fed to the state employee unions for free retirement healthcare for retirees and spouses as well as for outsize pensions. Ned feels your pain but has to feed the beast per orders from his union masters.

    The plan is working as advertised. Keep voting for Democrats and get your wallets out for more tax increases for the next 10 years at least.

  3. The state is going to have to increase payments to non-profits. If only to cover the increase in the minimum wage.
    As the article implies, state employment has already been reduced by transferring delivery of services required by law to non-profits. The expected increase in retirements might or might not make possible larger cuts. (I think that many of the jobs to be filled will require direct state employment, and current insufficient numbers will have to be rectified by adding more employees net. We’ll see.)
    So the state has succeeded in creating a whole sector dependent on its funding. And then decided to pretend that private philanthropy will somehow hold down costs. Contributors are effectively paying a voluntary tax rather than improving conditions beyond what the state does.
    I think philanthropists are going to ignore that “opportunity”, and the state is going to have to pay for the services required by law.

    1. The State does not have to increase funding to non-profits; the taxpaying citizenry is not required to fund any third party ngo’s or non-profit organizations.

  4. Trump’s action to cap the SALT (state and local tax) deduction at $10k means that donors would have to have other deductions, including charitable donations, in amounts that together would add up to more than the standard deduction ($24k for joint, $26,600 if over 65). Older people, who may no longer have mortgages or many other deductions, may elect to take the standard, unless they have the ability to give very large donations and exceed that amount. Nonprofits then have to hope they continue to give because they support the mission, and put a laser focus on the very wealthiest donors.

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