Audio Nonprofits struggling with state and county budget cuts (story audio) Photos Susan Phillips at the Safe House in St. Paul Forced to merge Melissa Stone View full slideshow (4 images) More from MPR Session 2003: Budget and taxes Resources Minnesota Council of Nonprofits Lutheran Social Services Chrysalis Your Voice Join the conversation with other MPR listeners in the News Forum.

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Nonprofits struggling with state and county budget cuts
by Tom Scheck, Minnesota Public Radio
October 5, 2003

Susan Phillips at the Safe House in St. Paul. She says the teenage homeless shelter was forced to close because of budget cuts. (MPR Photo/Tom Scheck)

Nonprofit organizations around Minnesota say they're being forced to lay off workers, consider mergers and think about closing as a result of the recently passed state budget. The groups say cuts in government grants, combined with the tough economy and a decrease in corporate and individual giving, are forcing them to cut back the services they provide. They say the cuts will hurt the state's most vulnerable residents.

St. Paul, Minn. — Minnesota's nonprofits are getting squeezed. Individual and corporate giving are down, while state and county funding has declined after the Legislature passed a budget this spring that fixed the state's $4.5 billion deficit without raising taxes. The state and counties pay some nonprofits to deliver some services.

	Melissa Stone

University of Minnesota professor Melissa Stone studies the nonprofit sector. She says the bad economy and government cutbacks are causing nonprofits to re-examine their balance sheets. Stone says nonprofits should prepare for even less government funding, since Gov. Pawlenty has vowed not to raise taxes.

"It's a political decision. And if that political decision stands for -- well, it will stand for four years and could stand for eight years -- and the economy doesn't improve fast enough, it means a longer-term crisis for nonprofit organizations," said Stone.

State finance officials and members of the nonprofit sector say they don't track exactly how much state money goes to nonprofits. Nor do they know the extent of the budget cuts.

Many nonprofits, however, say they've been hit hard by state cuts. Officials with Lutheran Social Services say they laid off 58 people as a result of the state budget. A spokesperson says they won't know the full extent of the cuts until January, when counties are required to finish their 2004 budgets.

	Forced to merge

One of the programs cut is a safe house in St. Paul. Lutheran Social Services has operated the safe house since 1990. It provides beds for up to six homeless teens between the ages of 16 and 20.

The safehouse looks like most of the older homes in the Merriam Park neighborhood of St. Paul. It has elaborate woodwork, hardwood floors and creaky stairs. It's empty now, although notes hang on the wall next to the photos of the 13 staff members who were laid off in July.

Susan Phillips is the program director for Lutheran Social Services Homeless Youth Programs. She's lobbying Ramsey County and area businesses to find $300,000 to reopen the safe house. She says the teens who used the safe house have been forced to find other, less desireable places to sleep at night.

"We know that kids are sleeping outside at the end of summer," Phillips said. "Often times, they couch hop. They'll stay at a friend's house for a week until they wear out their welcome, and then they stay at another friend's house until that time wears out. They'll just kind of move around."

	Gov. Pawlenty

The Minnesota Council of Nonprofits says nonprofits laid off 468 people and are leaving 215 positions unfilled as a result of the state budget.

Other nonprofits are looking at mergers.

Chrysalis provides a wide array of services for women, including health care and legal advice. The organization says it's seeking a merger partner. Executive director Cindy Murphy Kelley says she hopes to find a partner by next spring.

Murphy Kelley says government cuts to chemical dependency and mental health services are forcing Chysalis to make the decision. She says Chrysalis is planning for more cuts since the Hennepin County Board has proposed reducing mental health services.

We have a budget crisis, and we are holding back budgets, and laying people off, and reorganizing and streamlining all of our affiliate groups. That includes the nonprofits. They have to do the same thing. - Gov. Pawlenty

"I expect more people calling, and being disappointed that they can't afford the service or the waiting list is long," Murphy Kelley said. "We anticipate, in the nonprofit community, that the waiting list will increase. The demand for services doesn't go away because the dollars are cut."

Gov. Pawlenty says he's not surprised by the cutbacks, even though he said last year that he wanted nonprofits to deliver some of the services cut by government. Pawlenty now says he expects cutbacks and consolidation in the nonprofit sector.

"We have armies of nonprofits who -- in part or in whole -- rely on government funding, and government funding has been reduced or contained," Pawlenty said. "We have a budget crisis, and we are holding back budgets, and laying people off, and reorganizing and streamlining all of our affiliate groups. That includes the nonprofits. They have to do the same thing."

Pawlenty has said he'd like to provide additional tax breaks to encourage individuals to give more to nonprofits.

Several officials in the Pawlenty administration say the consolidation of services and cutbacks in the nonprofit sector aren't entirely a bad thing. They say the tough economic times will force nonprofits to become more efficient.

Nonprofits say the cuts mean they won't be able to deliver the same amount of services to the public.

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