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Hospitals Are Not the Only Nonprofits Waiting for Back Payments

by Brenda Peluso

Portland, Me, January 17, 2011 – Governor LePage’s supplemental budget request includes almost $70 million dollars in money owed to Maine hospitals. This is an excellent first step toward repaying Maine’s debt to the many health and human service providers, in addition to hospitals, who provide numerous services to Maine people through contracts with the State of Maine.

In communities all over Maine, there are hundreds of small, medium and large nonprofit organizations who are also facing cash flow and solvency issues, similar to those faced by the hospitals, because the State has not paid old claims. A recent series of reports from the Urban Institute and the National Council of Nonprofits attempts to quantify the problem.

  • Nearly 2/3rds of Maine nonprofits responding to the Urban Institute survey reported that payments from government were late in 2009.
  • Of those organizations, 80% indicated that the late payments were causing problems for their organization’s sustainability.

In response to the late payments, nonprofits are employing a number of strategies to continue providing the important services such as housing and day programs for adults and children with cognitive and physical disabilities, outpatient mental health services, child care services, and supports for the elderly. These responses are taking a toll on the health of organizations and the local economies. They include:

  • Taking out expensive lines of credit
  • Drawing down any reserve funds they may have
  • Freezing staff wages and reducing benefits
  • Laying off workers

“The demand for our services is not decreasing, yet our resources are. Our partnership with the State is vitally important to the residents in our community, but our agency is owed almost a quarter of a million dollars and in one area, we have not received a claims payment since September 1, 2010. The repeated efforts to collect these valid claims only add to our costs. In the last year, we’ve laid off workers, cut our benefits packages, drawn on our cash reserves, and accessed $40,000 from our lines of credit. Continuing to operate in this manner is contrary to all good business practices, yet we are committed to serving our vulnerable constituents in as quality a way as possible,” says Ron McHugh, Executive Director of Oxford County Mental Health Services.

These issues are hitting human service providers, who are the economic backbone of many small Maine communities, the hardest because they tend to operate on narrow margins and lack adequate cash reserves to float the State. We urge the legislature and the Governor to work to help the Department of Health and Human Services ensure that these service providers are paid in full as soon as possible.

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