SACRAMENTO – A new report from the state's leading oversight agency offers revealing data about the significant challenges nonprofits face in accessing and managing state funds and underscores the need to enact two pending bills.
Assembly Bill 880 by Assemblymember Steve Bennett (D-Ventura) and Assembly Bill 1039 by Assemblymember Gregg Hart (D-Santa Barbara), now pending in the Senate Government Organization committee, directly address three of the key challenges nonprofits face identified through The Little Hoover Commission's survey. In January, working in conjunction with the California Association of Nonprofits, the Commission sent out a survey to thousands of nonprofit organizations. About 400, representing a broad array of nonprofits, responded.
According to the Commission's findings, 40 percent of survey respondents said they had never received upfront payment, despite recent legislation authorizing advance payment of state awards. Remarked Commission Chair Pedro Nava, "Nonprofits are on the front lines every day, working hard to try and address problems. That's why the Legislature authorized upfront payments. We're going to be looking into this in more detail, but our survey results indicate that this change isn't yet being implemented across state government."
AB 1039 addresses this issue head-on by requiring all state agencies to provide upfront payments to nonprofits receiving new grants and contracts. The bill also requires state agencies to include information about whether advance pay is available and at what rate in any notices about grants and contracts, including on the state's grants portal.
"Despite the passage of my bill, AB 590, to expand access to advance pay, this new report shows that many nonprofits still struggle to receive funding. Every nonprofit should be able to partner with the State without unnecessary financial barriers that delay or disrupt critical services. AB 1039 is crucial to support the work of our state's nonprofits and ensure these organizations have the necessary resources to continue serving our local communities," said Assemblymember Hart.
"CalNonprofits is grateful for the Commission's new insights demonstrating the clear need to address barriers in state contracting practices for nonprofits," said Jeannette Brown, Policy Director at CalNonprofits. "Nonprofits deserve to be paid up front, on time, and fairly for the high quality services they provide to Californians in partnership with the state. We hope this new evidence and the Commission's work inspires Governor Newsom to engage with Assemblymembers Hart and Bennett to advance the success of nonprofits as effective partners of the state."
In addition, nearly 60 percent of respondents reported that they do not receive sufficient funding for indirect costs, which includes expenses such as rent or utilities. And nearly one-quarter waited over three months to be paid by the state; among nonprofits receiving late payments, around 72 percent were moderately to severely impacted by delays. To cover shortfalls, nonprofits rely most frequently on reserve funds (64 percent). According to Commissioner Dion Aroner, "When the state takes too long to pay nonprofits for the services they provide, it creates a barrier for partnering with the state and places a burden on who chooses to do so."
AB 880 would remove a long-standing exemption in the state's Prompt Payment Act and require timely payments for services rendered by nonprofits and improve coverage of nonprofits' indirect costs, consistent with the federal government's approach. AB 880 is a repeat effort by the Legislature, following vetoes of the same legislation last year by Gov. Newsom.
"In this climate of funding volatility, this study by LHC validates the testimonies of our nonprofit partners. It highlights the critical need of AB 880 and similar bills supporting our community-based organizations," said Assemblymember Steve Bennett.
Steve Bennett represents the 38th Assembly District, which includes Camarillo, Fillmore, Ojai, Oxnard, Port Hueneme, Santa Paula, and Ventura. He is chair of the Budget Subcommittee No. 4 on Climate Change, Natural Resources, Energy and Transportation.
Gregg Hart represents the California Assembly's 37th Assembly District, which includes Santa Barbara, Goleta, Carpinteria, Montecito, Summerland, Buellton, Solvang, Lompoc, Guadalupe, Santa Maria, Orcutt, and Nipomo. He currently serves as the Chair of the Budget Subcommittee No. 7 on Accountability and Oversight.
MEDIA CONTACTS:
Michelle Sevilla, Director of Communications (Bennett) | O: (805) 487-4745 ext. 13438, C: (805) 394-8842, Michelle.Sevilla@asm.ca.gov
Terra Grantham, Chief of Staff (Hart) | O: (805) 564-1649, Terra.Grantham@asm.ca.gov