Gov. Kathy Hochul highlights her Fiscal Year 2024 Executive Budget in Syracuse in January. (Photo Credit: Darren McGee | Office of Gov. Kathy Hochul)

Gov. Kathy Hochul vetoed a bill on Friday that nonprofit operators say could have helped hundreds of nonprofits operate smoothly within their tight margins. 

The bill, which would reform contracting law to allow nonprofits to receive advances on their contracts and for the state to cover administrative costs and pay interest for tardy contract payments, was called up by the governor for review last week. 

Hochul had 10 days to review the bill and decided to veto the legislation, passed by the New York State Legislature last year, writing in a memo that the tenet of the law that would advance payments to nonprofits would “run afoul of the state constitution.” 

The governor argued that instituting an advancements requirement could result in payments to nonprofits who have not been fully vetted and deemed responsible vendors. Making interest payments to nonprofits, the governor wrote, would also impose a “significant cost to the state.”

“This bill raises serious legal and fiscal concerns and increases the risk of fraud and abuse of state funds,” Hochul wrote.

Nonprofit operators who have lobbied for reforms say the veto is disappointing at a time when organizations are facing severe financial burdens.

“The governor chose not to fix a well-known and well-documented problem within state government, at a time when nonprofit groups are facing severe financial burdens and unprecedented threats from the federal government,” advocates with the New York Legal Services Coalition wrote in a statement.

Advocates have said that a veto would be devastating at a time when service providers in the public and nonprofit sectors all across the country are seeing deep federal cuts to social safety net programs, ushering in an uncertain financial outlook heading into 2026. 

Legal Services Coalition members were worried a veto was on the table given that the governor had vetoed a similar bill last December.

“The federal situation is and will likely continue to be an added pressure on NY’s nonprofits to provide services,” said State Assemblymember Amy Paulin, a downstate Democrat who authored the bill. “This is just another reason why it’s so important that they are paid and paid on time. Now more than ever we cannot afford to have them cut back on services, or worse, cease to exist.”

As legislators and advocates go back to the drawing board on legislation that would reform the contracting process, Hochul said she directed her Office of Customer experience to identify administrative burdens to help nonprofits operate more swiftly.

“Charitable organizations — and the people they serve — cannot wait,” Legal Services Coalition members wrote in a statement. 

The dismal economic paradigm in the horizon that advocates and lawmakers are forecasting is already impacting the state’s budget process, as state budget officials have warned departments to prepare for a lean year.

State Budget Director Blake Washington wrote in a letter dated Oct. 9 that cuts to programs being proposed by the federal government will foist new operation costs upon the state. 

“Due to imprudent federal policies, economic headwinds remain as labor markets are cooling and inflation remains elevated,” Washington wrote.

He recommended that state agencies review operations and reform outdated policies and agency rules and that departments should be economical in their operations. 

Washington wrote that while some revenue streams for the state remained strong halfway through 2025, the spending bill proposed by the U.S. Congress will exacerbate funding concerns.

“The forecasted growth will not be adequate to address structural gaps exacerbated by

H.R. 1,” he wrote. “We have an obligation to do more with less.”

Advocates say the nonprofits need stability amid this climate of financial uncertainty. 

“What we’re looking for is just consistency, predictability, and, quite frankly, funds to be able to deliver services,” said Sal Curran, the the executive director of the Volunteer Lawyers Project of Central New York. Curran helped author a version of Paulin’s bill. 

Kristin Brown, the CEO of Empire Justice Center, said she foresees cuts to contracts with the federal government, as well as reductions in funding due to the state losing funds for social welfare programs. 

Empire Justice Center is a nonprofit that employs around 70 people, has a budget of $14 million, and helps residents with matters pertaining to public benefits, health, civil rights, the criminal justice system, and housing advocacy.

“Our organization is over 70% funded by state contracts, and so it is really hard to overstate how challenging it is to run a business, to manage a budget with all of these unknowns at play,” Brown noted.

Some of Empire Justice Center’s programs have already faced funding uncertainty this year due to federal cuts, including a service that provides representation for unaccompanied minors whose migrant families have been subject to removal from the United States, Brown said. 

Brown and Curran say the bill passed by the New York State Legislature last year could have helped amid financial concerns. 

The legislation tweaks existing contracting laws, streamlines how all state agencies approach contract renewals to improve timeliness, clarifies when organizations can expect payment, guarantees the state can deliver interest payments for late disbursements, and locks in automatic contract renewals.

More than 700 nonprofit workers across the state, representing an array of sectors including civil legal services, domestic violence support, civil rights advocacy, arts and culture, education, health, community services, environmental recently signed a letter urging Hochul to sign the bill.

Irregularities with the contracting process have caused nonprofits to suffer financial strain.

A recent survey conducted among nonprofits in the state revealed that 33% of the organizations with contracts with the state were owed funds for services already delivered, totaling at least $58 million in tardy disbursements. A report from the Office of the State Comptroller released this January indicates that in 2023 more than half of the state’s contracts were executed late. 

OSC also estimates that in 2022 the industry made up around 1.3 million of the state’s jobs.

For the Volunteer Lawyers Project of Central New York, lapses and gaps in how state funds are disbursed made the organization take on a line of credit to continue offering services.

Central Current reported in summer 2024 that VLP took on a low-interest loan facilitated by the Central New York Community Foundation to be able to continue its pro bono work, which includes advocating for tenants facing eviction, aiding residents with their medical and educational debt, and protecting LGBTQ+ rights.

At that time the state owed VLP about $1.1 million out of its $5 million total budget. The lower interest loan the organization took to continue operating at full capacity required the organization to pay interest of $2,500 a month, which Curran said is relatively manageable.

“But it’s not like the CNY Community Foundation can do this for every nonprofit,” Curran said. “It isn’t fair. We need a systemic fix to this.”

The bill updated parts of state contracting law, asking state agencies to provide an advance of 25% of the contract, and require the payment of interest by the state when reimbursements are late.

The legislation also established a 15% administrative cost rate across the board for all state contracts. These costs typically entail the overhead necessary to provide the services outlined in the contract. Included in that are utility and office space costs.

“New York’s nonprofits are doing critical work — feeding the hungry, housing the homeless, helping our most vulnerable residents,” Paulin said. “This bill provides the predictability that they need to stay afloat and serve the people who depend on them.”

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Eddie Velazquez is a Syracuse journalist covering economic justice in the region. He is focused on stories about organized labor, and New York's housing and childhood lead poisoning crises. You can follow...