Reply to Nonprofit Quarterly article

Ruth McCambridge of the journal Nonprofit Quarterly has written an article sent by email today entitled: "Late Payments and Other Tough Stuff." In this brief but excellent article she relates the following comments from an executive director of a nonprofit organization that receives state funds for a local service population:

"One executive director told me that the state contract that comprises most of her budget requires that her organization never turn anyone away or even put them on a wait list. But they have just been informed that the state will not pay for any work done under this contract since mid April until September -- and the amount they will be owed at that time will be between $700,000 and $800,000. The organization has a credit limit far less than that so this makes the near future nerve wracking at best. In short, the state has forcibly taken a loan from this small organization while the agency worries about how to make payroll and tries to convince vendors to wait to be paid. Says the executive, 'We've always had to "slow pay," and all the providers have always found a way to make it through so there's never really been a huge up-in-arms, "this-has-got-to-stop" reaction.'"

Here in Michigan this type of situation is being experienced by hundreds of our nonprofit organizations as our state is in dire financial straits. But the financial crisis in Michigan comes as a result of two independent factors. Let's first take a look at this situation, then at the question involving payments to nonprofit service providers.

First in Michigan, for more than a decade, there is the refusal of the state legislature to deal with corrections and health care, while these two expenditure "lions" eat up the state's revenue in greater shares every year. We have a structural budget deficit that isn't going away, and we don't have the moral and political will to stop this from happening. All the legislators, in both parties, are afraid to deal with these two issues because they may well lose their jobs. ANd they would lose their jobs because the clear solution is that taxes are going to have to be raised, or else our standards and preferences in the fields of correcitons and health care are going to have to be drastically altered. Neither is a popular decision among Michigan's people, who pretty much want everything for themselves and nothing for the society -- we won't allow taxes to be raised, and we want to be comfortable in the niches we've created for ourselves individually given the present healthcare situation, and we really want people we don't like to be locked away with the people who are dangerous to us. So this means that each year the bulk of whatever revenues come to the state are going to continue to be eaten away by these two hungry lions.

Second, there's the worldwide Depression, or Recession -- whatever you call it, it's bad and growing worse, and thanks to the greed and avarice of the excessivly paid executives and managers of insurance companies and the financial and banking institutions of our country. Whatever it is, it's wreaking havoc with our states budget and presumably that of all the other states. And here in Michigan we have the death of the automobile industry to top it all off and make things even worse.

The result, then, is that property taxes and income taxes are not enough to make the state of Michgan's budget balance EVEN IF the above two issues of corrections and health care could be solved instantly overnight. So the consequence is that our state legislators and our governor just keep trying to cut, and shave, and cut, and shave the budget's expense column, and we're making public policy by dint of paring down the budget.

This is the chicken's way out. Legislators are not fulfilling the responsibilities of being elected officials; they're afraid of making the tough policy decisions that deal with issues we've had now for decades but have refused to face squarely. Even to the point that they have used the Federal bailout money to try to balance this year's budget.

Now, given this state of affairs in Michigan, my response to the situation with the nonprofits receiving cuts to their allocations to provide social services is this: If a state agency is going to a)set a condition that no one can be turned away or put on a wait list; and b)cut the amount of funding they pay for nonprofits to provide social services, and c) continue to be late payers to those charities, I see only one response that can really be made to this administrative type of public policy making: the nonprofit should stop serving the people, return any state monies held, and simply go out of business. Period.

There's really no other way to deal with this type of situation. Any move the charity's board or executive might make to try to stay in business and meet the needs of whatever service population we're talking about simply serves to set up a co-dependenr relationship that permits the state to have its cake and eat it too. If the charity keeps trying to stay alive and meet the needs of the service population, then the people are served off somebody else's dollar. They are served because the charity has gone out into the philanthropic marketplace and asked willing contributors to step up to meet the shortfall the state has occasioned. But that "shortfall" is pretty huge, so donated funds are not likely to cover adquately for very long.

State legislators first need to make just and sustainable public policy and then carefully thought out budgets need to be constructed to pay for its enactment of policy, in good economic times or bad; then taxpayers need to pony up to paying to make society better through presumably raised taxes, levied to meet the state's obligation or commitment to the maintain the social safety net. This would alleviate the need for contributors and donors being asked by the charities normally receiving state funds to pay for providing services.

The current situation just means service continues to that service population even though the state is not responsibly meeting its obligation for seeing to it that certain populations are served and their guidelines (no one turned away) are followed.

The state, any state, good economic times or bad, can't have it both ways. A state should not try to put the burden on nonprofits to pick up the slack and somehow find money to continue services when the taxpayers and their elected representatives will not raise taxes to keep the state's commitment to making society better. Public policy shouldn't be made in this co-dependent way. But that's what Ruth McCambridge's executive director is facing. We already have an over-crowded, under-funded philanthropic marketplace, thanks to Reaganomics and the conservatices' policies for the last thirty years. Now the recession brought about by their financial practices makes things even worse.

There is one other issue raised in this article, and it is this: that contributors to charity cannot, in the midst of a Depression or Recession that is international in scope, ever hope to give enough money to fulfill a state's obligations, or the federal government's obligation, to making society better and care for people in need. What we need is a strong commitment by a state or by the federal government to meeting peoples' needs and carrying out their responsibility for a livable and sustainable society as a TOP priority, recession or no, in good times or bad.

If we just stop serving the needy, and the many people who receive state and charitable services, then hopefully there will be enough hue and cry in the streets, enough tragedy and death reported by the media, enough expression of dissatisfaction with the state of things by knowledgeable people, and (god forbid) even mob action in the streets, that the state's legislators or federal elected officials will be forced to raise the taxes necessary to keep their commitment to the quality and sustainability of the social fabric. If nonprofits keep rolling over and refusing to end services and go out of business when states make these draconian cuts, we'll never get any further than we are now in having a public policy that, at both the federal and state levels, provides what people need to live in a society that is peaceful, just and sustainable. The voters won't be moved out of selfishness and complacence, the legislators won't be moved to act courageously, until disaster happens. You'd think we would have learned better by now, but we're apparently going to repeat a scenario that has been seen time and again: no action until disaster strikes.

We shouldn't be trying to keep these nonprofits going in the kind of rock-and-a-hard-place siutation that is described in Ruth McCambridge's article.