On Wednesday, December 28, the New York State Department of Labor finalized a wage order that significantly increased the salary thresholds for executive and administrative employees. This wage order, which took effect a mere three days later on New Year’s Eve, was intended to bring the employee classification system into line with the recently increase minimum wage, and it resulted in thousands more workers across the state becoming eligible for overtime pay. The Human Services Council of New York (HSC) supports this effort to ensure that employees are compensated fairly for their labor. At the same time, we are deeply disappointed by the government’s failure to provide the funding that nonprofit human services organizations need to comply with the wage order. The latest wage order is yet another example of an unfunded mandate that will further destabilize a brittle but critically needed sector.
As noted in our public comment on the proposed rule, the government outsources much of its obligatory social service delivery to nonprofit organizations. The nonprofit sector is an economic engine in our state, providing nearly 1.3 million jobs to 18 percent of the state’s workforce, with wages totaling $62 billion. Contrary to popular belief, nonprofit human services organizations are not “subsidized” by government. Rather, they are partners of government, delivering required services on behalf of the government agencies with which they contract. They are no more subsidized than private school bus companies or defense contractors.
Unfortunately, government routinely imposes unfunded mandates on nonprofit organizations that compromise their financial and operational stability. For example, copious and often redundant audit requirements divert already scarce resources from pursuit of an organization’s mission. These mandates, paired with unrealistically low limits on indirect or “overhead” costs, arbitrary and crippling restrictions on spending, and stagnant contracts that have not kept pace with inflation, create the very conditions in our sector that government, the media, and the public often malign. They have left many organizations precariously balanced at the brink of collapse. As such, few human services organizations can cover the cost of the state’s new wage mandates.
Of course, the new wage requirements affect employers in every sector. As we explained in our comment, however, the nonprofit human services sector is unique because service organizations’ budgets are largely determined by the stagnant government contracts mentioned above. These organizations are not at liberty to change their pricing. For nonprofits that deliver services on behalf of government, the ability to pay staff is directly tied to the size of their contracts. These contracts are notoriously inadequate. The new wage requirements leave nonprofit organizations holding the proverbial bag. Nonprofit organizations that do business with government should be good stewards of the public dollars that they receive, but they must be supported—rather than financially sabotaged—by government contracting practices.
The human services workforce is comprised mostly of people of color and is predominantly female. Since the financial crisis of 2008, these workers were denied cost-of-living adjustments (COLAs) in state contracts for five consecutive years, while the cost of living increased at a rapid clip. Many found themselves turning to the same public assistance programs that their clients use. Furthermore, the sector delivers a wide range of services to diverse clients across the state, helping them cope with challenges and live healthy, safe, productive lives. Care for children, seniors, the disabled, victims of violence, and the homeless; treatment for those suffering from trauma or addiction; and services for individuals facing barriers to employment or justice system involvement are just a few examples of the contributions of this important sector. When service organizations falter, the communities that they serve suffer. All of this makes the sector an ideal conduit for advancing the Governor’s equity agenda.
It is time for the state government, as an outsourcer of human services, to ensure that its nonprofit partners are set up for success. One meaningful way to do so is to invest in the sector’s workforce. Accordingly, HSC urges the Governor and the Legislature to appropriate funding to mitigate the financial effects of the minimum wage increase and the new exempt employee salary thresholds on its nonprofit partners.
 According to the Department of Labor, the increase in the salary thresholds was adopted in order to bring the thresholds in line with the newly increased minimum wage—a policy change that HSC, FPWA, the Fiscal Policy Institute, and many other partners vociferously advocated in conjunction with a call for additional funding.
 On this point, philanthropy is often guilty as well. No one wants to pay the workers, but everyone wants the work to get done.
by Tracie Robinson