June 15, 2010; Source: WGAL | In Pennsylvania, the prospect of a prolonged state budget battle isn’t new. Last year, the legislature passed a budget three months after the state’s constitutionally mandated June 30th deadline. Nonprofits are girding themselves for another prolonged state budget battle. There’s no penalty on the state for missing the deadline, but there is a cost to nonprofits if they have to wait indefinitely for state funding contingent on passage of a permanent budget.
Pennsylvania’s budget impasse was headline stuff in 2009, but other states seem ready to compete for blowing budget deadlines this year. California’s budget deadline was June 15, but the legislature is going to miss that deadline again, unable to agree on how to resolve a $19 billion projected deficit. Governor Arnold Schwarzenegger has proposed ending the state’s welfare programs as one way of reducing the budget gap.
In Illinois, the projected cuts to close that state’s $13 billion deficit will whack numerous nonprofit services, including eliminating all non-Medicaid funding for community-based mental health providers. One way Illinois appears to handle its budget is by not paying its vendors: the state is already overdue on $5.5 billion in payments to contractors.
In New York State, the government operates by virtue of temporary budget extender bills, but that doesn’t mean timely payments to nonprofit service providers. Mental health groups in New York State waiting for payments that will not be made in July are facing a “crisis of immense proportion,” according to advocates.]
Experts advise the nonprofit providers to open up lines of credit to hold them until the budget is passed, but they are finding banks unwilling to provide credit. Many nonprofits are accustomed to eleventh hour state budget heroics that save them from financial catastrophe, but will that happen this time around, in a persistent recession in which state revenues aren’t hitting projections?
In Oregon, the director of the Jackson County department of community development said he “hate(d) to say the sky is falling and then discover there is some relief coming," but noted that the stimulus resources that the state used to deal with deficits in the past couple of years won’t be available this year.
Nonprofits might be in bad shape, but they’re hardly as bad off as California, which now reports a zero fund balance in its general fund.