Nonprofits squeezed by late government payments

Shrinking income from investments and donations, coupled with late government contracts and payments, dealt New York's nonprofits a double blow during last year's tough economy, a new survey of social service nonprofits out yesterday shows.

The report by the Center on Nonprofits and Philanthropy of the Washington, D.C.-based Urban Institute also found New York State was the ninth worst in the nation in late government payments on contracts to human-services nonprofits. About half of the state's nonprofits reported waiting at least three months for overdue payments.

While payments were delayed, the report found other sources of income dwindled. Nearly two-thirds of New York nonprofits said both investment income and income from state government contracts fell; more than half said income from local government contracts fell.

It's a familiar picture within the nonprofit community on Long Island, said Pearl Kamer, chief economist for the Long Island Association.

"Funding is not as abundant, both on Long Island and elsewhere, as it was prior to the recession," she said. "Any delay in making payments to nonprofits stretches their resources, which are stretched already."

Elliot Pagliaccio, assistant comptroller in the strategic planning division of the state comptroller's office, said 90 percent of state contracts are late, "often for many months."

Payment delays affect nonprofits like Long Island Gay and Lesbian Youth, a Bay Shore group the state contracts for an array of services, including anti-bullying measures at schools and suicide prevention. Chief Executive David Kilmnick, who also runs two related nonprofits with state contracts, said he's been waiting four to six months for $250,000 due from the state Health Department. The delay had forced him to borrow to keep his groups running, he said.

In addition, Kilmnick said, he received a letter from the state this week saying any payments he does receive between now and March will be reduced by 1.1 percent because the state is trimming most payments after it got less federal money for its 2010-11 budget. "We're going to be out that 1.1 percent, plus we're paying interest because the state is slow," Kilmnick said.

The state budget includes the reduction in state payments in order to make up for a decrease in extra Medicaid payments from the federal government, said Erik Kriss, a spokesman for the state budget office.

Kriss acknowledged the late state budget and New York's cash-strapped status had contributed to payment delays.

The survey on nonprofit-government contracting covered human-services nonprofits with expenditures of at least $100,000 a year. It found nearly half of the New York nonprofits surveyed froze or cut salaries or laid off workers last year. About a third ran a deficit. Nonprofit workers make up about 17 percent of the workforce in New York.

At the report's unveiling, Pagliaccio detailed several efforts by the comptroller's office to address contracting issues, including bringing state and nonprofit leaders together and providing training to nonprofits on how to navigate state contracting.

Doug Sauer, chief executive of the New York Council of Nonprofits, said while the report highlights the challenges, he's not expecting any quick fixes.

"Maybe with a new [state] administration there can be some concerted efforts by the executive branch to work with the comptroller and nonprofits and the legislature in getting the system improved," Sauer said. "It will take some time."