Pennsylvania is now more than one month into its fiscal year without a budget, and Mayor Nutter announced late last month that until the state government approves a spending plan and releases funds to city governments, the City of Philadelphia will cease payment to all its vendors, cutting off a major cash flow to most of the city’s HIV/AIDS service organizations.
Gov. Rendell did sign a budget Wednesday that the legislature passed the day before, but he vetoed all stipulations in it besides government-operations funding — which will allow the 77,000 state employees to again receive paychecks, which they haven’t seen in weeks — further preventing the release of money to social-service agencies.
One such organization, Calcutta House — which provides housing and other services for people with HIV/AIDS — announced that it will follow the city’s example and cease payment to a number of its own vendors until the state finalizes the budget.
Matt Teter, executive director of Calcutta House, said that in addition to delaying payment on its water, electric and supply bills, it will also withhold payroll taxes owed to the state. Teter said the taxes amount to about $1,300 per two-week payroll cycle.
“I don’t understand how the state can expect us to pay money to them when they owe us so much money,” Teter said. “It doesn’t make sense. For them to expect us to pay when they’re not paying us is just not possible.”
Calcutta House receives approximately 75 percent of its funds from government sources, such as the federal Housing and Urban Development program. Teter noted that most of its HUD money is dispersed by the city but, with the current halt on funds, Calcutta House is unable to access that money. Additionally, the organization receives state funding, as well as a small amount of city money, that also is being withheld until the budget impasse is resolved.
Teter said the organization is currently awaiting payments that amount to about $200,000.
“We have virtually lost all of our government funding overnight,” Teter said. “We’ve been told we’re on an emergency list, but I don’t know what that means or when we’re going to get that money.”
The organization is in the process of sending out notices to vendors detailing the situation and calculating how much the group owes each agency, pledging to fulfill that obligation when the funding halt is lifted.
Calcutta is the first local organization to announce that it is taking such a step, but Kevin Burns, executive director of ActionAIDS, said his organization is also considering delaying payment to vendors in order to stay afloat.
ActionAIDS receives federal, state and city funding, all of which is filtered through the city; Burns said government funding comprises up to 80 percent of its cash flow.
He said the organization should be able to depend on its line of credit through mid-August.
“If it goes beyond that, we’ll have to talk with our bank about the possibility of increasing our line of credit so we can keep our operations going,” Burns said. “If this goes into September, I’m just really not sure what we’ll do.”
Gloria Casarez, the city’s director of LGBT affairs, said it’s not unusual for state contracts to be up in the air this time, but added the overall financial climate is deepening tensions.
“The difference this year is the overall larger picture of the financial crisis,” Casarez said. “These organizations are hurting in other ways, seeing reductions in individual donors, and they may have felt some federal cuts, lost investment money and have additional costs. With the backdrop of the city’s crisis and the federal crisis, this is all being illuminated.”
Casarez said there’s a strong possibility that when the budget does eventually pass, it will contain deep cuts that could further affect these agencies.
“We’re looking at some really challenging cuts to education and social services, so it may not play out well,” she said.
She said HIV/AIDS organizations should communicate with one another and be frank with donors in order to generate new ideas and new funding sources.
“I think it’s important for people to be vocal,” Casarez said. “They need to be talking with one another to strategize and figure out what each other is doing, and each has to make decisions on what they can and cannot do based on what kinds of financial reserves they have. It’s not just one organization that’s being affected, so it’s really important that these groups aren’t isolated in their financial struggles.”
The AIDS Activities Coordinating Office issued a memo to its nearly 80 providers this week explaining the city has instituted an emergency plan that will allow service providers to seek additional funding during the impasse. AACO will submit weekly requests to the health commissioner’s office on behalf of each provider that is “experiencing a true fiscal emergency,” and requests that are approved by the commissioner’s office will need final approval by a review committee in the Finance Department.
Jeff Moran, a spokesperson for the city Department of Health, said AACO is committed to seeing its providers through the crisis.
“AACO intends to work very closely with providers to address the emergency situation,” he said.
Teter said Calcutta House is going to have access to emergency money through another city agency for this week, but that if the impasse is not solved by the time the next payroll period ends, it may file for the funding under AACO.
Nurit Shein, executive director of LGBT health clinic Mazzoni Center, said any potential AACO assistance, combined with the agency’s line of credit, should be able to cover necessities in the immediate future, such as payroll and supplies. But she’s eager for the state to take swift movement on the budget.
“Even though we may be able to weather this for a little bit, it will cost us money to front the resources from our line of credit. And that line of credit of course is not unlimited,” Shein said.
Jane Shull, executive director of Philadelphia FIGHT, said that at this point the organization probably won’t need to accept the emergency money, as it has other funding sources that should sustain it.
“We are in a position to survive for a considerable period of time because we do have a line of credit and have cash, and we don’t receive only city funding,” she said. “People with the most difficulty are the people who are totally dependent on city funding and, right now, we’re not.”
BEBASHI, which provides outreach to people of color with HIV/AIDS, receives the majority of its funding through the city’s health department, and executive director Gary Bell said that while the funding freeze has led to a “tense” and “tenuous” situation for his organization and many others, he doesn’t fault the city.
“As a nonprofit, we’re always trying to plan close to the vest and trying to raise money to supplement the contracts and the funding we get from government agencies. We never really have enough to begin with, and then when we have even less coming in, it’s tough,” he said. “But I understand the city’s point of view and I give credit to the city and AACO because they have tried to work with us through this.”
Ronda Goldfein, executive director of the AIDS Law Project of Pennsylvania, echoed Bell’s sentiments.
“I’m in complete understanding of the problem originating from there being no budget in Harrisburg,” she said. “We and all the other city’s vendors are struggling to get by while we’re waiting for the budget to be passed, but the facts are that the city is in a crisis and taking what they feel to be responsible efforts.”
Jen Colletta can be reached at [email protected].