On June 30, 2015, just one day before the start of Pennsylvania’s 2015 – 2016 fiscal year, the state House and state Senate passed a $30.2 billion budget. That budget was later vetoed by newly elected Governor Tom Wolf. In late September, the House and Senate released a stop-gap bill that would have released four months of funding through October 31. This bill was also vetoed by Governor Wolf. The budget impasse is much more than politics. Many not-for-profits, particularly those in the public education and human service sectors, are beginning to feel the lack of state funding.
So how are NFPs dealing with the impasse? Healthy organizations have built up reserves for times like these, which they have begun utilizing. On the contrary, many organizations have resorted to borrowing. Overall, all organizations have been closely monitoring their expenses and looking for opportunities to cut costs, which in some cases, are personnel or even specific cash-heavy programs. Purchases and maintenance projects are being deferred into the future with the short-term uncertainty.
The United Way of Pennsylvania recently conducted its second statewide survey of the budget impasse and the impact that it is causing. The survey included 282 organizations and reported that of those organizations, 1,200 employees have been either laid off, seen a reduction in hours, experienced a loss of some benefits or are working without pay. The survey also reported that 30% of the respondents (approximately 85 organizations) have been forced to either curtail services or implement “waiting lists” for new clients or individuals in need.
As each day passes without a budget, these not-for-profit organizations are faced with a harsh reality. How do they continue to provide their services to those individuals who count on their organization for education, shelter and food, among other services?
We encourage all organizations to engage your Board of Directors and communicate clearly and often as to the impact to your organization. Solicit input and assistance as you navigate through this impasse. Know your ‘what if’ scenarios. What if the budget isn’t approved until ___________? Know your cash position and your projected cash position according to the ‘what if’ scenarios. Be open. Be transparent. Engage all of your constituents, and actively engage your board.
You’ve heard our thoughts… We’d like to hear yours
The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].
Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.