The Investments Human Services Nonprofits Need

As community-based organizations struggle financially, they are experiencing staff turnover that hampers their crucial work.

Caseworker Lorenzo Lewis strives to make a human connection with public assistance applicants.
Emile Wamsteker
Last month, the Seattle City Council passed a bill that requires the city to adjust contracts for community-based organizations that provide human services, indexing the contracts to inflation. This measure is intended to address the chronic issue of employee turnover from low-paying jobs in the nonprofit human services sector. Across the country, the sector has seen staff turnover as high as 50 percent annually, which hampers the nonprofits' ability to provide vital services.

A similar move is underway in New York City, where Mayor Bill de Blasio recently announced a new labor deal to close a wage gap between early childhood education staff at community-based organizations (CBOs) and city Department of Education (DOE) employees with the same credentials. With CBO educators making an average of $20,000 less per year than DOE employees, the gap has caused an exodus of teachers from CBOs that provide crucial universal pre-kindergarten education.

Both of these measures are important steps in recognizing the value of human services CBOs and their critical role in promoting health and wellbeing, economic and educational opportunity, and safety and security.

In a given year, one in five Americans access some form of human services, such as mental and behavioral health, substance abuse prevention and treatment, disability services, early childhood education, job training, housing and homelessness services, and public safety and disaster preparedness.

And yet, despite the critical role that human services CBOs play, government seldom reimburses them for the full cost of providing these services. For some, this is a result of failing to keep up with rising costs over time. For others, it is a conscious decision to underpay based on a common belief that philanthropic funding should be available to close the gap. Restrictions in how government funds can be used and contractual rules that burden CBOs with undue paperwork can also impede their ability to cover their costs and deliver results.

These were just a few of the findings of a study released last year by the Alliance for Strong Families and Communities and the American Public Human Services Association, authored by Oliver Wyman and SeaChange Capital Partners and funded by the Kresge Foundation and the Ballmer Group.

Its findings signal a growing concern for the financial health of the nonprofit human services sector. The study found that, of the more than 210,000 human services CBOs operating in the United States, about half were running persistent operating deficits, in part due to unfavorable contract terms with government agencies. Nearly one in three had minimal financial reserves, covering less than one month of operating expenses. CBOs also lack access to capital to make vital investments in technology, staff development and evaluation.

Despite the financial stress being experienced by many CBOs, the report struck an optimistic tone, identifying five "north star" initiatives that, once implemented, could improve the ability of the human services ecosystem to generate population health and wellbeing, increase economic productivity, and lower social costs over time. Among those north stars were the need to adopt a more modern outcomes-based contracting and procurement process and to review and eliminate of some of the outdated and overlapping rules and regulations that impede progress. Seattle and New York City are two examples among many of meaningful strides being made to address the challenges faced by human services CBOs. We recognize that a long-term solution will require a comprehensive response from CBOs themselves, as well as from government and the philanthropic sector.

This is achievable, and it needs to happen soon. There is a business case to be made for economic return that results from strengthening families and communities. And most importantly, by embracing the potential of human services to transform our society, we are investing in the promise of enabling all Americans to achieve their fullest potential.

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