In abstract
Homeless service suppliers are scaling again and taking out loans as they watch for late funds from the federal government.
California’s homeless service suppliers have an issue: They aren’t getting paid on time, and it’s making it even tougher for them to get folks off the road.
Nonprofits that present the whole lot from shelter beds, to counseling for homeless residents, to inexpensive housing, say they repeatedly are saved ready weeks, if not months, for town, county and state funding they depend on. Which means they’re struggling to pay their workers, make lease funds for his or her shoppers, and, in some instances, even hold the lights on. Some are turning down new initiatives regardless of the large want for providers of their communities. Others are borrowing to remain afloat, ending up paying tens of 1000’s of {dollars} every month in curiosity — cash they’d somewhat spend on serving to homeless Californians. It’s hampering the state’s efforts to resolve what’s arguably its greatest downside: Almost 186,000 folks have nowhere to name residence.
“It is the single biggest factor in our inability to grow and serve more people,” mentioned Vivian Wan, CEO of Abode Companies, which offers shelter, housing and different support for unhoused folks throughout seven Bay Space counties. “This is a huge issue.”
And it’s getting tougher to disregard. With inflation driving up bills and the rising homelessness disaster driving up want, some nonprofits have reached their breaking level. After a group of Los Angeles-based homeless service suppliers raised the alarm earlier this 12 months, the county Board of Supervisors overhauled the way in which it doles out funds. Suppliers hope the transfer might be replicated all through the state.
Why are nonprofits lacking tens of millions of {dollars}?
It’s the form of downside that’s a trademark of paperwork.
When a metropolis opens a brand new shelter or housing program, it lacks the capability to run this system itself, so it contracts with a nonprofit that has experience working with unhoused shoppers. The nonprofits who present these providers informed CalMatters that as a result of metropolis officers try to maneuver shortly, they often arrange this system and begin offering providers instantly — even earlier than a proper contract is signed. The nonprofit can’t get reimbursed for the providers it’s already supplied till that contract is finalized, which may take months.
However even when a contract is drawn up immediately, it typically requires the nonprofit to begin work earlier than getting paid, after which ship an bill to town asking for reimbursement. That course of can get slowed down in delays at a number of ranges.
First, drafting invoices is onerous and time-consuming, requiring the nonprofit to account for each penny spent. Subsequent, town or county has to go over every bill with a fine-tooth comb, which may take weeks or months. Discovering any issues means the method begins over.
Delays additionally crop up when town is ready for state funding to pay its contracts.
Santa Cruz County normally pays its invoices inside two to 4 weeks, mentioned Robert Ratner, director of Housing for Well being for the county. But when there’s an issue with the bill, fee could possibly be delayed one other month.
“I think everyone involved would like it to go faster,” he mentioned.
On any given day, Abode typically is owed between $35 million and $40 million from their varied authorities contracts, Wan mentioned. Regardless of these lacking funds, Abode nonetheless has to make lease funds on the primary of each month for its 1000’s of shoppers residing in backed housing.
“We’re not going to let people become homeless or not get their rent paid,” Wan mentioned.
As an alternative, she’s turning down new initiatives that might make the group’s funding hole worse — to the detriment of the folks in determined want of Abode’s providers. She not too long ago determined to not apply for a contract offering rental help on behalf of the Santa Clara County Probation Division, regardless that Abode is without doubt one of the few organizations that might do the work.
A number of nonprofits CalMatters spoke with mentioned they’ve needed to take out high-interest loans to fill the gaps whereas they’re ready for presidency funds. The Individuals Concern, which offers homeless providers in Los Angeles County, is paying $63,000 a month in curiosity on its strains of credit score. The nonprofit won’t ever get that cash again, even when its authorities checks are available.
“That’s $63,000 a month we should just be burning, because we can’t be compensated for it,” mentioned CEO John Maceri.
Funding delays are also hampering Los Angeles Mayor Karen Bass’ signature effort to get Angelenos off the streets. By means of this system dubbed Inside Protected, town contracts with nonprofits to maneuver folks from encampments into inns.
PATH was one of many nonprofits that jumped on the probability to take part, again when this system first launched in 2022. However currently, CEO Jennifer Hark Dietz is extra cautious. As of final month, town owed her group near $7 million for its work on Inside Protected. Town, beneath latest strain from native nonprofits to hurry up its reimbursements, paid off a few of that final week. But it surely nonetheless owes PATH $1.18 million for work achieved in June, Dietz mentioned.
Now, to keep away from over-extending her group, she’s having to make arduous decisions. She’s began refusing when town asks her to tackle new Inside Protected places earlier than a contract is in place.
“It’s definitely for me, personally, heartbreaking,” she mentioned.
Mayor Bass is aware of there’s an issue, and says her workplace is engaged on an answer with town council, however she hasn’t supplied particulars on what that answer will appear to be or when it would roll out. The state of affairs got here to a head in Could, when town owed $26 million on its homeless providers contracts. In September, the mayor mentioned that cash has been paid and all Inside Protected invoices for the primary quarter of the fiscal 12 months have been processed.
“We must transform the City’s entire approach to payment — going beyond the payments for service providers — to overhaul and modernize the entire system,” Bass mentioned in an emailed assertion.
Los Angeles County not too long ago tried to just do that. Now, the county affords nonprofits advances on a few of their contracts upfront, in order that they don’t must do work with out first getting paid.
“It’s new,” Paul Rubenstein, deputy chief exterior relations officer for the Los Angeles Homeless Companies Authority, mentioned of the overhaul. “But it feels like it’s working.”
California’s position in the issue
Generally, the state authorities is accountable for these delays. In April, Gov. Gavin Newsom awarded his newest spherical of grants by way of the Encampment Decision Funda program that doles out state cash to assist cities and counties clear encampments and transfer camp occupants indoors. Marin County, which received an $18 million grant, was informed to count on the contract in July, mentioned Gary Naja-Riese, director of the county’s Entire Particular person Care and Homelessness Division. As an alternative, the doc saved getting delayed, and now it’s been 5 months and nobody has but to see a penny. The state lastly despatched out the contracts final month, nevertheless it’s unclear when the cash will come by way of.
That’s created a giant headache in Santa Barbara County. The county received a virtually $8 million grant to clear 21 automobile encampments, and it contracted with nonprofit New Beginnings to do the work of connecting with folks residing in automobiles and RVs, providing them providers and transferring them into housing. New Beginnings bought straight to work as quickly as its contract with the county was signed in June, and up to now has moved at the very least 23 folks into shelter and one other six into everlasting housing. They couldn’t afford to attend: the grant has a strict timeline, requiring recipients to spend half the cash by June 30, 2025, or threat shedding it.
However New Beginnings has but to be paid for that work. The nonprofit has needed to borrow cash — $350,000 up to now, at a 9.5% rate of interest — to make ends meet within the meantime, mentioned Government Director Kristine Schwarz. She’s nervous borrowing an excessive amount of extra will plunge her group right into a gap it could’t get out of. So she’s pulling again on the providers she affords. Which means she’s leaving folks on the road as a result of she will’t afford a resort room for them, she mentioned.
“I can’t just continue to spend money without any idea of when we’re going to get reimbursed,” Schwarz mentioned.
The delay on the state degree is at the very least partly as a result of the California Division of Housing and Group Improvement took over the grants from one other state company this 12 months.
“The ERF Round 3, Window 1 standard agreements were somewhat impacted by the transition and additional accountability considerations, but that should not be an issue going forward,” Megan Kirkeby, deputy director of housing coverage growth for the Division of Housing and Group Improvement, mentioned in an e-mail to CalMatters. Cities and counties might be reimbursed for cash they spent earlier than the contracts had been signed, she mentioned.
‘I need my money when it’s due’
Funding delays are an particularly dire downside for small nonprofits. Kalain Hadley’s group Reclaim-Chance offers 44 beds in Los Angeles for males not too long ago launched from jail and jail. Hadley opened proper earlier than the COVID-19 pandemic struck, and since he had no shoppers and subsequently no revenue, needed to burn by way of his financial savings and go into debt to maintain the group afloat.
Now, his funds come from the state and Los Angeles County, by way of two contractors that act as intermediaries. They’re normally at the very least just a few days late, Hadley mentioned. Which may not be a giant deal for a bigger nonprofit, however for a corporation like his that has no cushion, it’s devastating.
“I’m running around trying to withdraw cash so I’ll be able to pay my folks over the weekend. And that’s the pattern every month,” he mentioned. “I need my money when it’s due.”
To remain afloat, Hadley is making the most of a brand new lifeline in Los Angeles County. Nonprofit Future Communities Institute not too long ago launched a program known as the LA Working Capital Fund to offer no-interest bridge loans to homeless service nonprofits ready for presidency funding. To date, Hadley has taken out 4 loans starting from $15,000 to $20,000 – all of which he’s paid again.
Future Communities Institute hopes to lift cash to scale up this system and supply extra loans, mentioned Justin Szlasa, director of homeless initiatives.
With out that cash, Hadley’s nonprofit might need shut down by now, he mentioned. Besides, the loans aren’t an answer to the overarching downside — they’re only a Band-Support.
“Somebody needs to figure out why we can’t get paid on time,” Hadley mentioned.
