Nonprofit administrators, already pinched by tight budgets, are finding the minimum wage increase is adding to the daily turmoil of operating an organization dependent on dwindling government grants, donations and a pushback from clients as they try to raise fees to cover the higher wage expense.
Most community-based nonprofits are locked into federal, state and local contracts that will not honor the increased employee costs that the wage increase brings, meaning that nonprofits would have to use or raise charitable dollars to subsidize the increase, said Doug Sauer, chief executive of the New York Council of Nonprofits. Most don’t have these funds to allocate so they cut back on staffing and services.
“It should be noted that this wage increase is also alongside increases in workers comp and unemployment rates, and raises at the state level of what constitutes an exempt employee,” Sauer said. “There is a triple if not quadruple whammy on mandated employer costs.”
As of now, the state government does not fully compensate nonprofits that they contract with for additional mandated costs of doing business, and most government contracts with nonprofits also do not pay the full cost of nonprofits’ services, Sauer said. There is a significant effort underway to see that the state does compensate the additional cost.
Because of undercompensation, nonprofits either lose money on state contracts or they have to find other sources to subsidize the services the government is contracting for, Sauer said.
“A vast majority of local nonprofits operate on a shoestring and try to make do with what little they have,” Sauer said. “We may be approaching a time where more and more nonprofits simply refuse to do business with the state because they can’t afford to.”
Some nonprofits may choose to raise fees for their services.
“But not all are fee-based and raising fees means that there will be more people not being able to access their services,” Sauer said. “So, more human needs go unmet, or for arts and cultural organizations, less people benefit from what they offer.”
Ultimately, the increase in minimum wage harms the nonprofit industry, Sauer said.
“From nonprofits being a business that needs to be solvent, it threatens the viability and sustainability of many unless government, philanthropy and donors are willing to invest in the nonprofit workforce,” Sauer said. “Nonprofits already have a problem with recruiting and keeping qualified staff, who easily go to work for government, schools and the private sector to better support themselves and their families.”
Matthew Steecker is Southern Tier regional business reporter for the USA TODAY Network.
Matthew Steecker, @MSteecker Published 6:22 a.m. ET Feb. 16, 2017
http://www.democratandchronicle.com
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