State of Pennsylvania Once Again Takes Out Forced Loans from Nonprofits

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July 30, 2015; Fox 43

The three-week-old budget impasse in Pennsylvania is forcing nonprofits all over the state to take out loans to cover the cost of services under state contracts while legislators figure out a resolution. State funding payments to service providers are to be delayed starting today, and the next budget vote is scheduled for the end of August. Meanwhile, as we have described previously, the nonprofit sector—and, specifically, safety net programs—are bracing for a big hit. And those that could get loans have prepared themselves to spend on debt.

The Community Progress Council in York spends $300,000 per month on an array of programs in early childhood education, housing, and employment training. President of the Community Progress Council (CPC) Robin Rohrbaugh says they got prepared at the urging of their state association, but the delay will cost them. “Interest is not reimbursable with state and federal grants. So the money that we receive to provide services for clients, we cannot use government resources to pay back the loan,” said Rohrbaugh. “Fundraising for interest payments is not something that is value added to the community or the taxpayers. If we take some of our other revenue from other sources that we would normally direct towards client services, to pay back the interest on the loan, basically, it results in fewer people receiving help.”

The local YWCA has also taken out a line of credit. “The organization’s CEO, Jean M. Treuthart, says, “YWCA York receives around 35 percent of our budget revenue from the state to fund learning centers, provide rape crisis services and operate our two domestic violence shelters in York and Hanover. Our mandated programs and services will continue no matter what. The YWCA is the primary provider of domestic violence services in York County, so our shelters and hotline will be staffed regardless of the impact of the budget impasse.”

Governor Tom Wolf acknowledged last Friday that nonprofit social services providers would likely have to borrow to provide for service continuation. In the last such impasse, in  2009, a resolution was not reached until October, causing many social service agencies to lay off employees, borrow money, and, in some cases, shut down.—Ruth McCambridge

  • DC

    Here it comes, next will be the offer of philanthropists to ‘invest’ in the projects of these nonprofits all providing a ‘public service or program’. They should be paid for from the public coffers if municipalities had the money, but they’ve been ‘starved’ by those who shall remain unnamed.

    This is the door that opens up public programs to ‘privatization’ of our public services. Professor Mildred Warner has critiqued Public Private Partnerships, as well as the newly developing ‘social investment bonds.’ The first two experimental SIBs (Peterborough in the UK and ABLE Project at Rikers in the US) have failed in their goals, but are still being touted as good financial models. This is what the ‘philanthropists’ looking to privatize gain at the expense of the public purse have been waiting for. This is not good for our democracy and its public services institutions.