July 31, 2020; Gotham City Gazette
New York State is not paying on its contracts to nonprofits again and while its current excuse is the pandemic, the behavior is chronic, interrupted from time to time by resolutions to do better in the future. This problem of starving nonprofits to ensure cash flow for the state was rampant in some states during the Great Recession and has been chronic at other times as well (see here, and here) and we are likely to see much more of it if we cannot stem the behavior. The fact that the US Senate has declared that it is not inclined to release stimulus money to cities and states is likely only to worsen the scene.
This article from the Gotham Gazette focuses on nonprofits that address substance abuse programs. This time, the nonpayment of contracts has extended in some cases over a full six months, leaving some human services programs with enormous receivables from the state that interrupt cash flow to such an extent that staff is now being laid off and furloughed even when there are PPP loans in place.
The amount that is being held back on contracts is reportedly $4 billion to date, but the state also has a freeze on new contracts, which for ongoing programs can also be disastrous and, in fact, fatal. Here is how the Gotham Gazette describes some of the organizational scenarios left in the wake of this problem:
Syracuse-based ACR Health receives nearly 90 percent of its funding from the state Department of Health and has been grappling with months of delayed payments. The nonprofit has had to furlough 70 out of 142 staff members and close three of its five offices. “We’ve really been struggling with the lack of consistent payments from the state,” said Wil Murtaugh, ACR Health executive director, in a phone interview, noting that the state was more than $1 million behind in payments. The first notice they received that funds would be placed on hold was near the end of June, leaving the group scrambling for solutions.
Again, this tactic is not an uncommon go-to for some state governments, and, as far as we can see at this time, there is a great possibility of times of austerity in many state governments. —Ruth McCambridge