Filling Budget Gaps, Getting Stimulus Money, and Making the Bottom Line

June 2009

Playtime at Cypress Hills Child Care Center for these Brooklyn preschoolers is one of hundreds of programs provided by Community Development Corporations around the City. A grant to the Local Initiatives Support Corporation is helping these groups restructure their business models to survive major losses in revenue.

Even before the New York State and City budgets started looking like Swiss cheese, funding for public programs was spread thin. Groups such as the Fiscal Policy Institute, the Human Services Council, the Local Initiatives Support Corporation, and the Primary Care Development Corporation, were created to help build strong and fiscally sound nonprofits that serve millions of New Yorkers every year. Today, as we face grim budget shortfalls, the health and even survival of many nonprofits depends, in part, on the work of these groups.

Crunching the Numbers & Untangling the Budget

Nonprofits that help New Yorkers fight eviction, escape abuse, or apply for Medicaid or food stamps often get the bulk of their funding through City and State contracts. But with a tax base that has relied heavily on Wall Street profits and the real estate bubble, the money will now have to come from somewhere else. Unfortunately, the foundations, corporations, and individuals who provide support have also seen their assets decline.

“There is no doubt that some organizations are in danger of having to close their doors in the face of budget cuts—but if we can help find ways to minimize some of these cuts, and give nonprofit leaders a leg up on how budget trends are affecting their groups, the more likely they will be to survive this recession,” says Jo Brill of the Fiscal Policy Institute, an organization devoted to helping nonprofits, funders, legislators, and journalists understand the New York State and City budgets. “We help groups like the Alliance for Quality Education, the Citizens Committee for Children of New York, and the Empire Justice Center understand budget proposals and State finances, and develop ways to fund important programs.”

A $65,000 grant to the Fiscal Policy Institute is enabling it to extend its analysis and expertise to the City budget for the first time. It is also helping funders and nonprofits get a clearer understanding of the impact of the recession on the nonprofit sector and on the New Yorkers who depend on it. It will also hold budget literacy workshops and provide updates on the local implications of the State and City budgets.

Kristin Brown Lilley of the Empire Justice Center advocates in Albany for funding for legal services providers. She says that when legislators ask where the money is going to come from, she can bring up the Institute’s cost-saving and revenue-generating recommendations, such as restructuring the State income tax and pooling the State’s prescription drug purchasing power.

Demystifying the Stimulus Package

Some relief for City social service agencies will come from the federal stimulus package. There is a flurry of hope and desperation surrounding this grand sum of $789 billion, but it won’t be a cure-all for what ails many New York nonprofits.

Some of the money will go directly to organizations, but more than half will be used to fill City and State budget gaps left by billions in lost tax revenue. “There are rules to decipher, myths to dispel, and plenty of questions to be answered. Before groups assume there is money there for their project, they need to learn more about how their work fits into the goals behind the stimulus money,” says Pat Swann, a Trust senior program officer.

A $30,000 grant to the Human Services Council of New York City is helping it explain the stimulus package to the City’s nonprofits and notify them of funding opportunities as they become available. “This grant is allowing us to monitor the stimulus money, and see where it’s going line by line, dollar for dollar. It’s important that we make this process as transparent as possible, and ensure that as much money as possible makes its way to nonprofits,” says Allison Sesso, deputy executive director of the Council. “After all, when it’s out in the field, the money works double for the economy: paying the salary of a social service worker who, in turn, helps others tap into jobs, housing, education, and health opportunities.”

Sesso continues, “Making the most out of this complex package also means recognizing its limits. Budget constraints will last for years and will probably outlast the stimulus package. We need to identify the holes that will be left after the stimulus money dries up and push City and State government to fill them.”

Families can get quality primary care at community health centers, even without insurance. The Primary Care Development Corporation is helping centers in the City apply for $40 million in federal stimulus money.

Helping Community Health Centers Compete

In neighborhoods such as East Harlem, Bedford-Stuyvesant, and Jamaica, community health centers are the cornerstones of primary and preventive health care. They are open late and on the weekends, and accept patients with Medicaid, Medicare, or no insurance at all. Centers in the City are eligible for as much as $40 million in federal stimulus money, which will help them pay for capital expansion and upgrades to serve a rowing number of poor and uninsured families. “By funding the expansion of prenatal and dental programs, renovation and construction of health centers, and the digitizing of medical records, this stimulus money can go a long way toward improving families’ access to primary care,” says Ronda Kotelchuck, executive director of the Primary Care Development Corporation.

With a $125,000 grant, the Corporation is helping these centers compete for funding by helping them with business plans; capital and program expansion budgets; staffing and recruitment strategies; and construction plans and timetables. “Increasing the capacity of community health centers means fewer people going to the emergency room for non-emergencies or problems that could have been easily prevented with basic primary care,” says Len McNally, program director for health at The Trust. “If all goes well, the Corporation will be able to turn our $125,000 into much, much more.”

Bridge Street Development Corporation has helped support the revitalization of once-blighted areas like Lewis Avenue in Bedford-Stuyvesant (above), but, like many such groups it is threatened by the current economic crisis.

Rethinking a Business Model

For years, community development corporations (CDCs) have breathed new life into poor neighborhoods throughout the City, building and managing affordable housing, offering job training and day care, and providing commercial space. Although these enterprises have helped residents and businesses thrive, many are now in serious financial trouble. Their revenue often comes through government contracts, bank loans and grants, and developers’ fees, all of which have dropped drastically as the housing market and banking industry have collapsed. “If you are heavily dependent on only one source of revenue, and you’ve lost that source, then your business model doesn’t work anymore,” says Danielle Pulliam, NYC director of capacity building for the Local Initiatives Support Corporation (LISC), an organization that helps CDCs. “If these groups are to survive, they need guidance that will help improve their business models.”


A grant of $60,000 is funding LISC’s First Responder Initiative to help CDCs find solutions to alarming trends such as empty storefronts, unpaid rents, and buildings that cost more to maintain than they collect in rent. The Corporation is working with dozens of CDCs with sizable real estate holdings, employing expert consultants to give them individualized help. After an extensive review of their cash flows, audits, and operating budgets, LISC will make recommendations to put the CDCs on sound financial footing. “Each group is unique and needs to take different steps to improve fiscal discipline and financial health,” continues Ms. Pulliam. “Some groups may decide that it is more efficient to combine assets with other groups, share back-office work, or make staffing adjustments.” Ms. Pulliam also noted that “it might make sense to focus on preserving existing rental housing instead of building new apartments for purchase. There are still subsidies available for renters, but financing to buy is a lot harder to get in this economic climate.”

To address the problem of unpaid rents, LISC is encouraging CDC property managers to direct eligible families to apply for Earned Income Tax Credits and rent subsidies. The Corporation is also helping to make CDCs more competitive in attracting stimulus money for weatherization and other energy efficiency upgrades. To make sure that the groups develop long-term entrepreneurial thinking, the First Responder Initiative will also help recruit professionals with business savvy to the CDC boards.

“We have been working for years to strengthen the sustainability of CDCs by diversifying their revenue streams and the economic downturn has given many of them a needed push in this direction,” says Ms. Pulliam. “This is also an opportunity for a broader discussion on how to bring more resources to the industry.”