For more than nine months, the Commonwealth of Pennsylvania operated without a budget. The budget impasse left many health and human services nonprofit organizations financially vulnerable, with some forced to use extreme measures to continue operating, including drastically reducing crucial services for those in need. While Pennsylvania nonprofits employ more than 13.3% of the Commonwealth's workforce, some nonprofits were forced to lay-off critical staff and reduce staff time during the impasse.
A survey recently conducted by the Pennsylvania Association of Nonprofit Organizations, the United Way of Pennsylvania and the Greater Pittsburgh Nonprofit Partnership illustrated how Pennsylvania nonprofits were financially devastated by the budget impasse.
The survey revealed that 17,100 clients served by 22 organizations in all 67 counties received no services or reduced services as a result of the impasse. Additionally, 135 organizations borrowed more than $171.9 million to continue operations -- using cash reserves, borrowing from banks or "borrowing" from their vendors by delaying payments.
At Public Health Management Corporation, a non-profit government intermediary for hundreds of nonprofits, the budget impasse significantly stretched our 350 nonprofit programs and affiliated subsidiary organizations that serve more than 350,000 people per year in 70 locations in the Southeastern Pennsylvania region, as well as our 2,000 employees. We used our fund balance and a line of credit to pay $59 million in outstanding bills for more than 200 of these agencies.
Had PHMC not been in a position to sustain payment for hundreds of health and human service nonprofits that rely on intermediaries, utilizing our line of credit and other means, thousands of vulnerable kids and adults in the foster care system, child welfare, and after-school programs would not have been kept in safe stable environments.
As we approach the July 1st deadline for the next fiscal year, there seems to be zero legislative or policy changes in place to financially protect nonprofits in the event of another budget impasse. Simply put, this is not sustainable for the people we serve in Pennsylvania in the health and human services sector!
Before our state experiences another budget impasse, three imperative changes to the existing law must be addressed. These elements will ensure that vulnerable clients served by nonprofits continue to receive programs and services that are critical to their health and well-being and to the sustainability of our communities.
One: Expand the current definition of essential provider to include nonprofits and intermediary organizations that offer health, human and social services. This action will ensure that there is no lapse in the delivery of these important services during a future impasse.
Two: Establish a system of expedited payments, so that the delivery of these services is seamless and that no additional interest is accrued on delayed payments, which over time have become standard operations for monies paid to nonprofits by the Commonwealth and City of Philadelphia.
Three: Reimburse interest accrued by nonprofits that have not received payments due to the budget impasse or delayed payments, so that the strength of an organization that sustains high-quality operations is valued, not penalized with a financial burden to bear.
These steps will allow Pennsylvania nonprofits to continue their daily efforts to help millions of individuals, as well as families and communities by protecting, feeding, healing, sheltering, educating and nurturing bodies and spirits. In times of need, these steps ensure those who need it most receive help when it matters most.
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