Opinion: The demise of the not-for-profit reaches crisis proportions

Over the past two decades, we have seen a significant proliferation of not-for-profit agency closures. Many of these NFP’s were cornerstones of the NFP world. Hull House, the nation’s very first Settlement House, a fixture in Chicago for decades, sadly closed their doors due to funding challenges. FEGS (Federal Employment and Guidance Services), one of America’s very largest NFP’s, terminated operation several years ago. FEGS was a long standing member of the Federation of Jewish Philanthropies. Despite support from the Federation, as well as having the largest budget of any New York City human service provider, FEGS declared bankruptcy in 2016. Analysis of the FEGS bankruptcy revealed a number of profound systemic problems facing not-for-profits. Included herein were the following factors: 

1. Government reimbursement models failed to meaningfully cover escalating healthcare, liability insurance and real estate costs.
2. Increasing government regulatory standards burdened the NFP with the added expense of hiring quality assurance personnel to meet governmental bureaucratic regulations, as well as, significantly impacting the capacity for NFP’s to focus on quality service provision.
3. As reimbursement rates failed to meet real market expenses, the NFP had to scramble to meet the rising costs of health, real estate/liability. Often, this meant that the NFP had to forgo pension plans and burdened its staff with escalating healthcare costs.

Our ignoring of lessons learned from the Hull House and, FEGS collapses, has led to ever greater turmoil experienced by New York City human services  providers. More recent years have seen an increasing list of bankrupt not-for-profits (e.g. Sheltering Arms) or a growing list of mergers and collaborations (e.g. Edwin Gould Services for Children, Stanley Isaacs, Harlem Dowling [Children’s Villagd], Boys & Girls Harbor [SCAN]. Most alarming, is our failure to, in any manner, address the underlying factors identified regarding the demise of Hull House and, FEGS. Rather than insist that government reimbursement rates meet real costs experienced by NFPs, said rates remain thoroughly inadequate. Further, when NFPs close, insidious references are made regarding inadequate administrative oversight, or potential corrupt practices of NFPs. Rarely does one find articulation pointing to our failure to appreciate and support our human service community. 

The demise of our NFP sector has reached crisis proportions in New York City. In the past year, the City of New York has repeatedly failed to reimburse providers for contracted services in a timely manner, despite recent advancements in accelerating payments to organizations. Yet, these dramatic challenges are ignored. Where is our commitment to the very real human services provided by our NFPs? Have we turned our back on services to the elderly? Services to the disabled? Services to incarcerated folk? Services to victims of domestic violence?

Recent media attention has incrementally revealed the current fiscal crisis afflicting New York City’s NFP community. NFP analysts focus our current fiscal crisis at the doorstep of city governmental agencies’ failure to timely reimburse NFPs, for actual services rendered. The failure of our city government to respond in a timely, and, rectificatory manner to this crisis, reflects far more critical problems confronting NFPs throughout our city and nation.

Here are the facts. New York City NFPs, funded through the Department of Youth and Community Development, are expected to run effective programming (on a fiscal and programmatic level) with 2015 established budgets in 2025. Yes, despite inflationary numbers in the 30% to 50% rate over this ten year period, NFPs must maintain contracted programming, while attempting to navigate these incrementally alarming obstacles. The result? As healthcare costs rise exponentially, and we receive no additional funding to cover said expenses, NFPs must reduce health coverage, and/or charge a portion of costs to staff (who are underpaid) or go broke. As real estate and insurance costs skyrocket, NFPs must again navigate tumultuous waters in rickety row boats. Could any business survive attempting to meet 2025 fiscal expenses with a 2015 revenue base? Of course not. Yet, this very challenge is one NFPs are forced to struggle with, year-in and year-out. DYCD’s current contracted budgets with NFPs were established in 2015. Those 2015 salaries, rental allowances, health care budgets, etc. have remained at 2015 levels, as we attempt to maintain fiscal solvency in 2025. Thus, we have dramatically underpaid staff, incrementally inadequate healthcare for said staff, with staff being asked to pick up some of these ever-increasing costs, the elimination of pensions for staff, etc.

What is most disturbing about the above, is the ultimate impact of said fiscal insanity upon our ability to afford meaningful service to our participants, to our challenged seniors, parents, children and families. We do not exist to merely exist. We exist to afford critical support to those in our community who face ever more difficult life circumstances. We exist to afford our seniors with a “place to be.” The opportunity to reconnect with each other. We exist to support our families with vital healthy food. We exist to help maintain our families in their current apartments. We exist to “be there” when a parent is incarcerated. To support our high school seniors on their path to college and career. To afford support to recently released ex-offenders. Our capacity to do all of the above has been dramatically eviscerated as we try to ‘stay in business!’ Staying in business was never our raison d’etre. Our raison d’etre was to provide quality services to those in need. To mend a broken world (Tikkun Olam). Yet, maintaining current fiscal viability means paying our staff grossly inadequate salaries, eliminating pensions, reducing health care benefits while simultaneously passing a portion of these costs to our staff, reducing costs related to programming, including fewer college tours, less summer trips to Rye Playland, etc. 

So, do we care enough to say enough? Do we care enough to pay meaningful salaries to our staff? Do we care enough to struggle to insure our provision of vital services to our city’s most vulnerable citizens? This crisis is not of President Donald Trump’s making! It is of our making! We can rectify the same! The ball is in our collective court.