Counties, school districts and other groups that rely on state funding are preparing themselves for a late commonwealth budget, as Gov. Tom Wolf has all but promised to veto a GOP-crafted spending plan expected to land on his desk Tuesday.
A budget deal between the Republican-controlled Legislature and the Democratic Wolf administration could be elusive. That would not stop commonwealth employees from being paid, due to a 2009 court ruling. The commonwealth would also have authority to pay for critical functions, like state prison meals and human services.
But a months-long deadlock could halt state aid to schools, as well as to counties and nonprofits that provide social services.
“By the second month, which would in our case be August, most agencies will feel the pinch,” said Don Goughler, who spent his career working for Pittsburgh-area nonprofits, and now provides their executives support as the Executive in Residence at The Forbes Funds. “By the third month, it will become very, very serious.”
It’s a cash-flow problem. If state funding dries up, it could hinder the work of groups that provide foster care, residential services for children, drug and alcohol counseling, in-home care for people with disabilities.
“One of the challenges with nonprofit agencies, particularly in the social services area, is approximately 70 percent of our budget is made up of personnel costs,” said Goughler, “because much of what we do is face-to-face, person-to-person types of activities.”
Nonprofits are being urged to find back-up plans in the event of a protracted stalemate – delaying purchases, lining up emergency funding options, inquiring about a line of credit at their bank.
What makes this potential budget standoff unique, Goughler said, is that it comes at a time when most nonprofits don’t have much surplus funding from past years.
“The funding for most social services in Pennsylvania – actually around the country – over the past five years has been flat,” said Goughler. “And in many cases, many programs have had cuts ... so there hasn’t been the capacity to build the surpluses.”