Lawmakers, nonprofit leaders at joint hearing warn federal cuts and payment delays are imperiling services

At a joint California Senate and Assembly select committee hearing, lawmakers and nonprofit leaders warned that recent federal funding changes and frozen federal grants are squeezing California nonprofits and could force cuts to services that communities rely on.

The hearing brought together community foundation leaders, food-bank executives, state emergency officials and long-term disaster recovery organizers who described a sector operating at scale but under growing financial stress. "These are not new challenges in and of themselves," said Laura Seaman, who leads the League of California Community Foundations, but the current combination of scale, scope and speed of federal actions is creating "operational chaos" for many organizations.

Speakers emphasized two linked problems: an immediate increase in demand tied to federal program cuts and administrative practices that leave nonprofits vulnerable during funding disruptions. "The passage of HR 1 represents the most severe cuts to our safety net programs in history," said Monica White, president and CEO of FoodShare Ventura County, adding that the legislation could reduce CalFresh and other supports for millions in California and that FoodShare served 250,000 individuals last year. White said cancelled federal commodity shipments forced her food bank to replace about 200,000 pounds of food at a cost of roughly $400,000 and to scale back other programs.

Panelists and committee members described practical state reforms aimed at keeping community services intact. Proposals discussed include expanding advance payments for state grants and contracts, tightening prompt-payment expectations, and increasing allowable indirect cost recovery to reflect real overhead. "We need better infrastructure within state government and nonprofits really need a voice in state government," said Jeff Green, CEO of the California Association of Nonprofits, who presented a proposal for a small Office of Nonprofit Empowerment inside state government to serve as a centralized point of contact, policy researcher and interagency coordinator.

Financial data presented to the committee underscored the vulnerability of many providers. Annie Chang, vice president of community engagement at Nonprofit Finance Fund (NFF), said a recent NFF survey found that 26% of nonprofits in California are paid more than 60 days late; 45% tap reserves and one-third take out credit to cover cash-flow gaps. Chang also said 60% of organizations receive indirect-cost rates below the 2024 federal OMB guidance that raised the de minimis rate to 15%.

Long-term disaster recovery groups drew separate attention. Abby Browning, chief of the Office of Private Sector and NGO Coordination at the California Governor's Office of Emergency Services (Cal OES), described how private-sector donations and VOAD (Voluntary Organizations Active in Disaster) coordination have supplied shelter, food, transportation and other resources during major fires. Bruce Yurman, director of the Camp Fire Collaborative, said long-term recovery groups have provided millions in gap funding and housing support but currently lack designated, sustainable funding for operations. "Recovery is not six months. It's years, even decades," Yurman said, urging flexible state funding for administration and unmet needs.

Speakers repeatedly criticized reimbursement-only contracting that requires nonprofits to front costs and then wait for payment. "A reimbursement-only model forces organizations to take out high-interest loans or prevents them from bidding on contracts in the first place," said Alfredo Cruz Jr., executive director of Community Resource Project. Cruz said his organization paused a $660,000 program after two months of frozen payments and that payment delays in some cases approach three months.

Committee members asked for practical, interim steps as well as longer-term fixes. Witnesses proposed piloting standardized advanced-payment terms, formalizing prompt-pay targets with administrative consequences for chronic delays, and wider adoption of the OMB guidance on indirect costs. Several speakers and commenters urged legislators to use public attention and convenings to direct philanthropic and corporate partners to local needs.

The hearing included short public comments from coalition representatives, community lenders and labor advocates who urged higher overhead coverage, equitable contracting, and worker protections in contracted services. Vanessa Kahina of KP Public Affairs, speaking for a statewide promotora network, urged hub-and-spoke models that connect community-based organizations with government resources. A labor representative warned that disparities in nonprofit wages and benefits for workers who deliver public services raise equity concerns when the state contracts with nonprofits instead of providing direct public employment.

The committee did not take formal votes at the hearing. Lawmakers and witnesses left the hearing with several concrete follow-up items the panelists recommended: piloting and studying advanced-payment mechanisms, expanding prompt-payment practices across state agencies, adopting higher indirect rates consistent with OMB guidance, exploring sustainable funding for long-term recovery groups, and creating an internal state office or liaison to coordinate nonprofit–government partnerships.

The hearing underscored the scale of California's nonprofit sector and the interdependence of philanthropy, government and community organizations. As Jeff Green put it, an institutional bridge inside state government could speed problem-solving "and pay many dividends for the near and long term." The committee has signaled it will continue the work, with additional hearings and outreach anticipated.