How the state budget impasse is hurting these 6 nonprofits

In two weeks, a state program that could dole out up to $150 million to Pennsylvania’s education nonprofits could be thrown to the wind.

Why? Because it’s caught up in the crosshairs of the state budget impasse.

Created in 2001, Pennsylvania’s Educational Improvement Tax Credit (EITC) program allows corporations to donate to educational improvement organizations (think Big Brothers Big Sisters and the Free Library of Philadelphia) through the state. In turn, those corporations can receive up to 90 percent of their donations back in tax credits.

All of that is in flux right now as the state budget continues to be stonewalled — but the clock is ticking. There are only two weeks left until the end of the fiscal year. If a budget isn’t approved by Dec. 31, this could be the first year the EITC program could fail.

In reality, organizations are working on a much shorter deadline. Those credits need to be approved by the state first, and letters of approval need to be sent before Jan. 1. What happens if the letters of approval aren’t sent?

Not only do educational nonprofits lose funding, but corporate donors could very well lose interest in a program that is not consistently effective. Here’s how the holdup is affecting area nonprofits:

Big Brothers Big Sisters Southeastern Pennsylvania

According to President and CEO Marcus Allen, BBBS SEPA could stand to lose $500,000 — eight percent of the nonprofit’s total revenue.

“If those letters of approval aren’t sent by the end of the month and the EITC credits are forfeited, what that means for us is many of our site-based programs [at Temple University and Saint Joseph’s University] will go unfunded and we would have to hustle to find other sources of revenue to support those schools in such a short period of time,” Allen said. “This would be detrimental to us from a service perspective.” 

Philadelphia Futures

The college success nonprofit stands to lose 12 percent of their operating budget for their high school programs Sponsor-A-Scholar and College Connection.

“If the tax credits are lost, it will have a significant, negative impact on the resources and services available to students who are already the Commonwealth’s most vulnerable,” said Executive Director Joan Mazzotti. 

Free Library of Philadelphia

EITC dollars make up more than half of the Library’s budget for its Summer Reading program, which is free to every child in Philadelphia and serves 40,000 kids each summer, according to Director of Corporate Relations Ruth Auslander.

“While we would hope that our corporate supporters would continue to lend their wonderful support regardless of the EITC program, we do recognize that EITC is a major incentive for this additional and crucial support,” Auslander said. 

Need in Deed

The nonprofit stands to lose $300,000 — that’s 35 percent of their operating budget for the fiscal year. But that’s not the only problem.

“Here are interest fees on the line of credit we have activated to maintain our cash flow. At a rate of 3.75 percent, this will translate into several thousand more dollars in costs we will have to absorb, regardless of the ultimate outcome,” said Associate Director Ena Rosen. “Beyond the purely monetary concerns, there is the loss of momentum in cultivating important relationships with the corporate entities that contribute to NID through the EITC program.” 

Summer Search 

Last year, EITC contributions represented four percent of Summer Search’s revenue — though the credits accounted for over one-third of their revenue from corporate donors. According to Executive Director Amanda Jefferson, the college success nonprofit was hoping to increase EITC funding in the upcoming cycle to support its programming.

“EITC donations help us to diversify our revenue streams to ensure sustainability,” Jefferson said. “If these letters are not sent by the end of 2015, these contributions are in jeopardy. Without this support, we will need to find additional resources to meet the needs of our students.”

Children’s Scholarship Fund Philadelphia

This is the big one, and Executive Director (and former lawyer) Ina Lipman has been very vocal about the budget impasse in the past few months — for good reason. Those tax credits are deeply ingrained in Children’s Scholarship Fund’s mission.

“We’re getting about $7 million through that program,” Lipman said. “That’s why we’re fighting tooth and nail.”

Every year, CSFP gets approximately 10,000 applications for scholarships and issues 2,000. Next year, if the EITC dollars don’t come through, that number will dwindle.

But Lipman said Governor Tom Wolf has the ability to take the EITC program out of the state budget spectrum — something she said Ed Rendell did in 2003. Back then, the letters of approval were sent on time, even though the budget wasn’t resolved until deep into December.

Lipman said the program “is not an appropriation” and should not be “held hostage.”

“It’s lawful for him to do it. We’re just imploring him at this point as a show of good faith, given the diversity of the organizations that are impacted,” Lipman said. “It won’t impact his ability to negotiate. It may actually strengthen it.”