Everyone understands the consequences of not paying bills on time. In 2017, one in three New Yorkers had their utilities shut off, couldn’t afford health care, ran out of food, or had to stay somewhere else other than their home.
Somehow, the City of New York has been paying its bills late and has avoided any repercussions for it.
Many don’t realize that New York outsources most of its social services. Over 1,000 non-profits have a contract to operate homeless shelters, early childcare programs, mental health clinics, emergency food pantries and other vital institutions to the tune of roughly $6 billion per year. Yet the city pays these organizations late and inadequately for their work.
When I became CEO of Robin Hood, an organization that grants $120-$140 million annually to 250 of the city’s top poverty-fighting non-profits, I spent hundreds of hours meeting with the leaders of the human-services sector.
Sister Paulette LoMonaco, of Good Shepherd Services, told me how she had to take out a $2 million line of credit to cover the city’s late payments.
Many organizations have it even worse. Non-profits are spending millions of dollars on interest for these credit lines.
Successive reports by the city’s controller found that the city was on average 221 days late in registering its contracts with non-profits, which cannot be paid until that registration is final. Even without payment, they won’t close their doors to the city’s most vulnerable, so they burn down their meager cash reserves.
Non-profits are floating the city hundreds of millions of dollars to care for New Yorkers. One analysis by SeaChange Capital Partners, a non-profit merchant bank, found that in the past fiscal year, these delays created a cash flow burden of nearly $750 million on the nonprofits contracting with the city.
In the City Charter, New York City’s constitution, only the controller is required to review contracts within 30 days of receipt from a city agency. No other agency is mandated to adhere to a timeline for contract registration. As a result, human-services contracts languish in the city’s bureaucracies.
Whether through the Charter Revision Commission or City Council action, this glaring hole in the administrative code must be closed. The pace of procurement cannot be left to the whims and priorities of whoever sits in City Hall.
Non-profits are not only paid chronically late, but are paid 80 cents on the dollar for what the services they deliver actually cost. Right now, many of our partners are telling us of their challenges to manage payroll and provide cost of living adjustments that were promised in past city budgets but have only begun to materialize.
Recent budget negotiations have centered around addressing the significant pay equity gap between private, non-profit early childhood providers and the Department of Education. Fixing this gap isn’t limited to this slice of the social-services workforce — which is more than 80% women and over half people of color. A divide-and-conquer strategy is unacceptable. The entire sector needs greater support now.
While the de Blasio administration has made approximately $600 million in investments in the human-services sector over the past years to try to remedy the shortfalls in cost of living adjustments and reimbursement rates, it has not gone far enough. Late payments have eroded these investments.
Despite the City Council’s urging, Mayor de Blasio has yet to include a modest $106 million allocation in the 2020 budget to increase the funds available to close the gap in the city’s reimbursement rates and the full cost of delivering social services, a mere 0.12% increase on a more than $90 billion budget. In failing to do so, he is undercutting his front-line workforce in the battle to make the city more equitable.
This $106 million is the bare minimum the mayor must put on the table over the next year. The city should begin to pay non-profits the remaining 15 to 20 cents on the dollar for the cost of running their programs.
We should not continue to see the financial burden of caring for the most vulnerable New Yorkers shifted to cash-strapped non-profits. But while we do, the least the mayor could do is pay them fairly and on time.