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State budget cuts bring nonprofits to ‘crisis stage’

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Delaware Special Olympians receive their medals. The program is one of the dozens of nonprofits that stand to lose funding due to state budget cuts.

Nonprofits could get $8.9 million less from the state next year. The state meted out $45.9 million in grant-in-aid money to nonprofits for 2017, but Delaware is facing a $382 million budget gap this year and Gov. John Carney’s spending plan allocates only $40.7 million for them in 2018.

Even that amount could be reduced depending on what happens to “pass-through funding” – the funding that legislators keep in the general fund to assure their pet projects don’t get cut.

Now Gov. Carney wants to eliminate “pass-throughs” and put projects that qualify as nonprofits into the grant-in-aid budget like any other nonprofits.

That would nix favoritism, but it would hike the need for grant-in-aid funds by $3.7 million this year because that’s how much pass-through funding was going to nonprofits that weren’t on the grant-in-aid list. As a result, nonprofits that received $49.6 million this year might have to split only $40.7 million next year.

The Delaware Alliance for Nonprofit Advancement is warning nonprofits to have a Plan B.

Although expected cuts didn’t happen in 2015 or 2016, legislators are facing a $382 revenue shortfall this year. The governor’s shared-sacrifice proposal includes across-the-board cuts of 4.5 percent for his own office.

If the state’s financial picture doesn’t improve quickly, the legislature’s Joint Finance Committee could recommend across-the-board cuts for grants-in-aid – or it could drop some nonprofits from the grants-in-aid list or reduce some groups’ grants based on their program outcomes.

“Typically, when we have to do a large cut, it may be across the board, although we might, say, exclude fire companies or senior centers. This year is so radically different that I don’t know,” said Michael L. Morton, controller general for the Delaware General Assembly. “My guess is they’ll maybe do some form of across-the-board cut, but that’s only an educated guess. I’m not sure. These are all decisions that the JFC has yet to make.”

“With the size of the gap that needs to be closed, it’s almost unavoidable not to impact services somehow,” said Sheila M. Bravo, executive director of the Delaware Alliance for Nonprofit Advancement. “For those agencies that receive government funding either through contracts or grants-in-aid, we have urged them to look at their operations and determine how they will be able to continue to serve the people they serve.”

When Bravo spoke to member of the Joint Finance Committee in February, she told them grants-in-aid dropped 8 percent between 2008 and 2016, while the total state budget grew 16 percent and population grew 7 percent.

“We’ve seen all of our government assistance go down over the years,” said Carl Colantuono, director of development at the Salvation Army. “Even the United Way has been going down steadily over the years. It’s getting to a point that I think all the nonprofits are getting to a crisis stage. You can’t tighten your belt past a certain point.”

United Way funding to the Salvation Army has been going down about 7 percent a year. HUD funding slipped from a high of about $70,000 to $20,000. County and grant-in-aid funding have also fallen, according to William Starcher, the army’s business administrator.

“Across-the-board cuts don’t take into account who’s doing the job well. They’re not considering whether a group has a very good record for delivering,” Colantuono said. “When, no matter who applies, everybody gets it, you’re not doing an analysis of who’s doing a better job. You’re not rewarding good return on investment. I’m certain there are people in the budget process who want to do that. They don’t want to cut blindly by percentage.”

Brother Ronald Giannone, executive director of the Ministry of Caring, said cutting all grants-in-aid could mean cutting valuable services to the most vulnerable citizens, so said he hopes legislators will look carefully at what each agency is doing to serve Delawareans. Like the Salvation Army, the ministry is seeing cuts from other sources. It’s United Way funding dropped 24 percent between 2014 and 2016.

“A careful examination must be done and not across-the-board cuts, because it’s easy to slice everybody, but, in reality, the legislators have to be careful that they don’t cut the heart out of any project.” Giannone said. “Just cut the fat out.”

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