Nonprofits say philanthropy isn’t enough to pay the bills

To paraphrase Connecticut’s private, nonprofit social service agencies: Gov. Ned Lamont just doesn’t get it.

Frustration with Lamont, who rebuffed a request from nonprofits for $100 million of the state’s $2.5 billion reserve, recently surged after the governor urged the agencies to ask more from wealthy donors.

Leaders of nonprofits, who provide the bulk of social services in Connecticut and will soon be asked to do more, were disheartened by that suggestion, saying it belies a fundamental misunderstanding of what they do.

“It is extremely difficult to raise money to support services for adults with serious mental illness and serious addiction disorders,” said Heather Gates, president and CEO of Windsorbased Community Health Resources. “They are highly stigmatized conditions. Traditional philanthropy does not want to pay for hardcore professional supports.”

To her point, private fundraising typically accounts for 3 percent or less of most nonprofit budgets, while government sources represent threequarters or more.

In other words, public funding is the meat and potatoes. Philanthropy, while much appreciated, is little more than an afterdinner mint.

Gates’ own organization is testament to this imbalance. With more than a dozen facilities across eastern Connecticut, CHR is one of the state’s larger nonprofit agencies, serving about 24,000 patients per year and operating with a $63 million budget.

About 87 percent of that budget comes from government resources — state contracts, federal grants, and Medicaid and Medicare payments. Another 12 to 13 percent comes from commercial insurance.

Less than 1 percent comes from private donors.

Gates praised her fundraising staff, but said CHR could triple its philanthropy revenue and that still wouldn’t position her agency to add programs and staff.

Former state Rep. Jack Malone of Norwich, who now is president of the Southeastern Council on Alcoholism and Drug Dependence, said fundraising accounts for only $29,000 of his Lebanonbased agency’s $9.5 million annual budget.

Like CHR, the overwhelming bulk of SCADD’s funding comes from government sources. Three different state departments contract with the council to provide addiction treatment services to roughly 3,500 adults each year.

“We have to work hard for our fundraising,” Malone said, adding that while he appreciates the council’s supporters, their resources are limited as well. “They’re not wellheeled, Gold Coast, western Connecticut families.”

Lamont, who addressed more than 550 leaders of nonprofit agencies last week at their annual convention, said the best he could do in his first year on the job was hold their state funding flat.

Presently, more than a half dozen state agencies collectively spend roughly $1.4 billion to hire private, nonprofit agencies to provide social services, health care, job training and other government functions.

These payments represent more than 7 percent of the state budget’s General Fund.

Since 2002, state spending for nonprofits has grown by about 10 percent. After adjusting for inflation, nonprofits say they have lost money over that period.

Further complicating matters, state officials project a huge surge in retirements will occur in three or four years, potentially eliminating as much as 15 percent of the state’s workforce.

Nonprofits already provide 80 percent of statesponsored social services, and Lamont said last week Connecticut will lean more heavily on them in just a few years.

Gates said CHR already has trimmed staffing and program slots in some residential programs and also is struggling with longer waits at its outpatient clinic — which translates into fewer patients served each day.

The Democratic governor inherited a state budget that — without adjustments — was on pace to run more than $3 billion in deficit across this fiscal year and next combined.

But that’s an explanation nonprofits have been hearing for years, particularly since Connecticut emerged from the last recession in 2010 with a sluggish economy and enormous pension debt.

“We have never benefitted from the state doing well and we have always paid the price when the state has struggled,” Gates summarized neatly.

All of this begs the question of how nonprofits can be expected to handle more patients with flat funding three years from now?

The CT Community Nonprofit Alliance, which represents more than 300 agencies, proposed a solution this past spring: invest $100 million — most of which would come from the budget reserve, but some could be borrowed — in nonprofits right now, and then have the administration, legislature and industry work together to develop a multiyear plan to phase in higher rates.

Lamont said last week that preserving the surplus is the best way to provide stability for nonprofits.

“The rainy day fund is to make darn sure that when there’s a rainy day I don’t have to cut funding for services like this at a time of most need,” Lamont said last week.

There is some historical evidence to support the governor’s argument. During the last recession — between 2008 and 2010 — annual tax receipts in the General Fund fell from $12.5 billion to $10.9 billion.

Lamont did offer the nonprofits an alternative at their convention, however

“I spent the last two weeks talking with a lot of pretty wellheeled investors,” he said. “I also mentioned to those investortypes that … I need them to step up more. And I need them to contribute more to what we’re trying to do in the notforprofit community.”

The governor also suggested the state offer tax credits to philanthropic donors to encourage giving, but he downplayed this suggestion immediately after the convention ended and said he wouldn’t be proposing tax credits when he delivers his next budget proposal to the legislature on Feb. 5.

“I don’t think February,” he said, adding he has just begun discussions with state tax commissioner Scott Jackson. “I think that’s too soon.”

GianCarl Casa, president of the nonprofit alliance, said nonprofits appreciated Lamont’s appearance at the convention, “but his suggestion that increasing philanthropic support is the answer to funding shortfalls is, by definition, only a fraction of what needs to be done.

“Charitable giving does not have the reach or the capacity to substitute for state funding of substance abuse and mental health treatment, support and residential services for people with developmental disabilities, homeless shelters, reentry programs and other vital human service programs,” Casa said.