🔒Lamont must retool relationship with nonprofit sector

Gov. Ned Lamont misread his audience when he spoke recently at the annual meeting of the CT Community Nonprofit Alliance in Hartford.

He addressed the assembled nonprofit human-services providers as if they were charities with their hands out. He politely turned away their request for $100 million from the rainy-day fund and suggested they raise more from private donors — especially wealthy “investor types.”

What Lamont misunderstood is that the nonprofits were not asking for a charitable donation — they were asking for a $100-million capital contribution to restore the working capital they’ve been shortchanged over the last 15 years.

The state and nonprofits are in a business relationship not a “donor-to-donee” relationship. They are partners sharing responsibility for the operation of our social safety net; and the money the state pays is working capital to fund the services nonprofits provide under contracts with the state.

Approximately 80 percent of care is provided under these contracts; and functionally 100 percent of nonprofit revenue comes from the state.

If Lamont understood this, he’d also realize that the underpayments are the tip of an iceberg, and that under his predecessors our social-services partnership melted sideways to take the form of a system so circular, redundant, political and complicated as to defy reason.

As one former state commissioner put it to me: “No one understands the system.”

It wasn’t always this way.

Human-service nonprofits trace their lineage to 1809 — when the Village for Families and Children in Hartford was formed, and James Madison became president. On the other hand, it was the spirit of President Johnson’s Great Society movement that caused state government to get involved directly with social/human conditions that traditionally were the primary responsibility of family, churches, and, of course, volunteer community associations (nonprofits). The departments of Children and Families, Developmental Services, and Mental Health and Addiction Services were created between 1969 and 1975.

This era was rich with faith in government’s ability to make society better (if not great), and the nonprofit sector embraced government involvement, but subject to two predicate principles: government would provide reasonable and regular revenue to the nonprofits to fund their work and would exercise its power disinterestedly and fairly.

These principles were followed until the mid-2000s when the financial crisis rolled through the state, and its multiple billions of unfunded health, pension, and other obligations to current and former employees landed with a thud in our collective consciousness and we realized things were going to be harder and leaner for a while.

This was also when the partnership started to fall apart — as union power behind the scenes started pulling strings to protect its own interests (funding the liabilities and preserving state jobs) at the expense of nonprofits. The circular, redundant and complicated system we have is a consequence of the string pulling.

Here’s one example: Nonprofits can be required to maintain as many as 25 separate licenses. Each takes nonprofit and state staff time and money to maintain. This system could be economized by substituting nonprofit accreditation by a recognized national body for most of the licenses, called Deemed Status. Given that taxpayer dollars pay for both the nonprofit (under contracts) and state staff, Deemed Status (used in most states) would terminate the practice of recycling the same dollars back around to pay for things that are unnecessary.

The governor could implement Deemed Status without legislation, but could do much more by reaffirming the partnership’s two founding principles (reasonable revenue and fair exercise of power), and engaging in discussions with the nonprofits to learn where the other skeletons are buried and how to excise them from the system.

There is an urgency to this. As many as 15,000 state employees are expected to retire in 2022 and many will be social-service agency staff members. The state agencies routinely fill openings by hiring away the best nonprofit employees (after they have been trained at nonprofit expense).

If the governor decides to backfill the agencies with new hires, he could unwittingly decimate nonprofit staff while perpetrating the dysfunction. On the other hand, he could reinstate the founding principles, remove and bury the skeletons, and let the nonprofits do whatever additional hiring may be necessary in 2022 so they can continue with the work they have been doing since 1809.

John M. Horak is the director of TANGO Nonprofit Education and Consulting. His opinions are his own.