Volunteer Lawyers Project of Central New York Executive Director Sal Curran, pictured at the podium in the New York State Capitol building. Curran is pictured at an advocacy action at the Capitol this spring. Credit: Courtesy of Katy Lasell, a campaign organizer at the Right to Counsel Coalition

With New York State lagging on payments to nonprofits it contracts with, the Volunteer Lawyer Project of Central New York needed a lifeline.

The state owed the organization about $1.1 million as of July 31, according to VLP Executive Director Sal Curran.

But Monday, the Central New York Community Foundation came through with a stopgap: a low-interest loan of $750,000 through NBT Bank so VLP can continue its work. 

VLP contracts with the state to perform a number of critical legal services: It provides lawyers who handle immigration law, eviction prevention, family law, elder law, medical and educational debt, LGBTQ+ rights with a focus on transgender clients and a small business program for low-income entrepreneurs to start businesses — all pro bono.

“My board and I were having a discussion before we were able to enter this arrangement with NBT and with the Community Foundation, where we were saying, ‘At what point does it become too expensive for us to do this work?’” Curran said. 

The Community Foundation’s grant was necessitated by the state’s struggles to pay nonprofits on time. A Community Foundation survey of 50 local nonprofits found about 58% experienced delays in being reimbursed by the state. 

In response to questions from Central Current, Gov. Kathy Hochul’s office sent a statement that said the process for paying nonprofits is intentionally rigorous and includes oversight from state’s attorney general’s and comptroller’s offices.

“The Volunteer Lawyer Project has successfully received millions in state contracts in the past and we are confident they will receive these funds through this statutory process,” the statement read.

Earlier this year, the state owed VLP as much as $1.8 million, Curran said. VLP is regularly carrying a quarter of its operating budget in loans because of nonpayment, according to Curran.

Similar situations have forced nonprofits across the state to take out loans to survive. But loans come with interest, which nonprofits didn’t plan to pay when they took on state contracts. 

The loan VLP secured with help from the Community Foundation cut its interest rate in half — from about 10% to about 5%. Because of state delays, VLP has paid nearly $36,000 in interest since the start of the year. In that time, the state only paid about $400 to cover interest payments. 

Frank Rizdi, the vice president of community investment at CNY Community Foundation, said they hope the cheaper line of credit will make it easier to manage operations until the state funding arrives.

“We want to basically help them get through to when they finally get their reimbursement, but without having to spend too much on that loan,” Rizdi said.

Earlier this year, the Community Foundation put in place a similar agreement with Home HeadQuarters, providing $1.86 million in recoverable grants to cover delayed reimbursements from the federal and state governments. 

In May, New York State Comptroller Thomas DiNapoli released his Not-For-Profit Prompt Contracting Annual Report, which found 56% of state contracts with not-for-profits are paid late. If you remove contracts issued by the state’s Council on the Arts — which gives out a high number of contracts and pays two-thirds on time — the late payment rate jumps to 78%. 

“NFPs may need to borrow money while awaiting payments delayed due to late contracting, so any delay in receiving payments can cause financial hardship, especially in a rising interest rate environment,” DiNapoli wrote in the report. “The cost of having to borrow to maintain services or to keep the doors open is a direct hit to NFP finances.”

Curran said contracting with the state has increased in difficulty after the Covid-19 pandemic. Payment delays are only one part of the problem. 

Many state agencies require extensive documentation of how organizations like VLP spent the money set to be reimbursed, including paper receipts for purchases of office supplies. That often requires pulling a staffer away from their actual job to complete paperwork. Then, the documents for the state have to be precisely filled out or the process might have to be repeated. 

Curran lamented that VLP’s services are meant to help get asylum applications approved for refugees, help families facing eviction and to fight landlords who mistreat houses and tenants.

“We’re not in the business of scanning receipts of pencils,” Curran said. 

The state also caps administrative expenditures at 10%, preventing the nonprofit from expanding their finance team to respond to the state’s requirements. Curran said that VLP and other nonprofits perform essential work on behalf of the state, but the requirements for reimbursement are becoming “impossible to keep up with.” 

Inflation and rising costs during the pandemic have also forced nonprofits like VLP to do more with the same amount of money. 

“The reality on the ground has moved faster than the state’s contracting expectations,” Curran said. 

Curran said a higher administrative expenditure cap of 15% to 20% would allow VLP to meet the state’s paperwork requirements without pulling away from the nonprofit’s legal focus. 

On July 30, the New York Legal Services Coalition board and the New York Council on Nonprofits presented a sign on letter to Governor Kathy Hochul that offered several other recommendations to the state to address its delays in funding. 

Over 200 nonprofits signed onto the letter, endorsing suggestions that included:

  • Improving communication between the state and nonprofits
  • Assessing individual agency processes to streamline workflows
  • Evaluating potential fiscal savings through the adoption of consistent processes across agencies. 

The letter also advocated for the state to “Ensure timely registration of new contracts, expedited registration renewals, provide advance payments to mitigate delays.”

Ridzi echoed the call for advance payments, comparing the state’s allotment of funds to that of the Community Foundation – which allocates funding through grants before work is performed.

Curran expressed appreciation for the Community Foundation’s assistance, but said that the need for such assistance in the first place demonstrates the intransigence of NYS’s problems with funding nonprofits.

“It is sort of a systematic statewide issue that has kind of reached a boiling point,” Curran said.

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Patrick McCarthy is a staff reporter at Central Current covering government and politics. A graduate of Syracuse University’s Maxwell and Newhouse Schools, McCarthy was born and raised in Syracuse and...