'It makes us very nervous': Nonprofits hurt by prior impasse worry about lack of Pa. budget
With a state budget two weeks overdue, most Pennsylvanians haven’t felt an impact from the commonwealth not having a final spending plan.
But local and statewide nonprofit officials, many of whom remember the lengthy budget state impasse in 2015 and early 2016, say they’re worried. Another long disagreement could keep needed state funds from flowing, and hurt their ability to provide services.
“There's some anxiety that we are headed in the same direction [as in 2015-16],” said Emily Francis, director of the Greater Pittsburgh Nonprofit Partnership, a program of The Forbes Fund.
Both the Democratic-controlled state House and Republican-controlled state Senate have passed a spending plan, and Democratic Gov. Josh Shapiro has said he will sign it. But a disagreement over a $100 million line item for school vouchers has held up final approval.
The main budget bill remains unsigned by the Senate — normally a mundane procedural step, but one that remains unfinished amid the current dispute. Several other budget-related code bills, which must be passed by both chambers and signed by the governor for the budget to be enacted, remain unfinished as well. The Senate and House have adjourned until mid-September, with no agreement in sight.
For some nonprofit leaders, that’s dredging up painful memories of 2015.
Francis said she’s heard concerns from some of her organization’s nonprofit members.
“They are worried that if the state doesn't pass a budget quickly, their organizations will be impacted, yes, but more importantly, the people that they serve will suffer.”
The current situation “makes us very nervous,” agreed Terry Clark, president and CEO of the Pennsylvania Council of Children, Youth & Family Services. “As the days continue on without a budget, we get very nervous because our providers know that they have to begin looking at backup plans to [be] able to continue running their businesses.”
Clark’s organization, which unsuccessfully sued the state to compel it to make payments that year, represents roughly 100 mostly non-profit providers that contract with county child welfare agencies. They provide foster-care services, adoption services, in-home or prevention services, and more for vulnerable children and families. Smaller nonprofits could begin to feel impacts from a lack of a budget as soon as August, Clark said.
Such organizations are often the first to feel the impact of a budget impasse because of how human services are funded: The state makes payments to counties, who often use the money to contract with providers for services.
“Those [funding] allocations are made quarterly,” said Lisa Schaefer, executive director of the County Commissioners’ Association of Pennsylvania. “So, we're going to be looking at a point here very shortly where we're not going to see anticipated payments from the state because that spending authority isn't there.”
Budget impasses have been a recurrent feature of state government in recent times, occurring regularly under Gov. Ed Rendell’s tenure, and multiple times under Gov. Tom Wolf. But the impasse over the 2015 budget, Wolf’s first, stretched over the better part of a year, was especially painful for many nonprofits.
Human service providers were forced to cut services or reduce hours, delay payments, take out loans, and in some dire cases, lay off staff during the months-long standoff between Wolf and the GOP-controlled legislature.
“We incurred significant debt during that time,” said Laura Maines, CEO of Pittsburgh-based Every Child Inc., which provides behavioral health services, foster-care assistance such as recruiting and training foster parents, and in-home prevention service for families at risk of losing their children.
Nonprofits surveyed after that lengthy budget disagreement reported having their credit rating damaged and having to collectively pay back hundreds of thousands of dollars in interest on loans – interest payments that were not reimbursed by the state after a final budget did become law.
Maines said she’s frustrated at the current stalemate in the Capitol, which makes it difficult for organizations like hers to plan or make decisions.
“Those of us in child welfare are going to sit here sort of with bated breath,” Maines said. “We're trying to make decisions at the start of our new fiscal year about where we invest, and how we recruit staff, not knowing whether …after July we're going to get paid.”
School districts, which also receive state support, could be impacted by a lengthy impasse as well. But how long districts can go before feeling the effects will vary from one district to another depending on their finances, said Mackenzie Christiana of the Pennsylvania School Boards Association.
“Districts with low reserves or an extended budget impasse would [be forced to] either borrow money or make cuts to the programs and services being provided, which would impact either their taxpayers or students,” Christiana wrote in an email. “A drawn-out budget impasse also has the potential to present cash-flow issues for school districts. As state subsidies are not flowing in, school districts still need to find money to pay salaries, utilities, and other mandated costs.”
Forest Hills State Sen. Jay Costa, who leads Senate Democrats, said while a budget agreement is still out of reach for now, he doesn’t expect a repeat of 2015.
“I think you'll see our issues resolved in the coming weeks. I don't anticipate it being months,” he told WESA.
“I think all of us do not want to repeat what occurred back then,” he added.