Supervisors Hear Calls for Permanent Fix to Nonprofit Funding; Controller Says City Spent About $675 Million Through Nonprofits in 2013–14

The San Francisco Board of Supervisors Budget & Finance Committee heard detailed testimony on April 22 about creating a permanent, annualized cost-of-doing-business increase for nonprofit service providers. Chair Mark Farrell called the item after Supervisor Eric Marr framed the problem: years of flat funding had left many frontline nonprofit organizations struggling to keep staff and services in the city.

“We passed a resolution to prioritize approval of a supplemental appropriation up to $3,400,000 during fiscal year 2014–15,” Supervisor Marr said, framing the hearing as the start of a broader process to find a stable funding approach for the city’s nonprofit safety net. Marr also urged a stakeholder effort that includes city departments, labor and providers to develop a structural solution.

City Controller Ben Rosenfield presented the committee with the city’s fiscal picture for nonprofit contracts in FY2013–14, saying, “The total spend in 13–14 through nonprofit service providers on services totaled approximately $675,000,000.” Rosenfield told the committee that roughly 80 percent of that spending originates in the general fund and hospital-related funds and that public health and the Human Services Agency account for the largest shares of nonprofit contracts.

Rosenfield cautioned that aggregate figures mask important variation. He noted the mayor and board had authorized a 5 percent cumulative cost-of-living adjustment for nonprofits over the last three budget cycles and asked whether future increases should be handled through contracting (RFP and contract terms) or during the budget process. “How do we balance funding organizational infrastructure and inflationary costs and demands for new services?” he asked the committee.

Kate Howard, the mayor’s budget director, told the committee the city had set aside money to cover the nonprofit impacts of the recently approved minimum-wage increases, estimating the direct cost of reaching $15 an hour at about $10,000,000 a year and said the mayor’s office will propose that funding in the coming budget.

Speakers from unions, nonprofit networks and service providers filled the public-comment roster. Steve Fields, co-chair of the Human Services Network, called for a study group to design a lasting mechanism and urged a guaranteed two-year cost-of-doing-business increase for 2015–16 and 2016–17 while the task force works. Several unions and providers—including SEIU Local 1021, OPEIU Local 3, Baker Places, Larkin Street and Progress Foundation—backed a 5 percent bridge increase for the next two years and added that organizations face chronic wage compression, rising rent and health-care costs.

Speakers offered concrete examples of the consequences of flat funding: a case manager’s fully loaded annual cost for a comparable city position was cited at roughly $140,000, while nonprofit employers reported about $80,000 for the same role; nonprofit clinicians described wages that left them unable to afford San Francisco rents. Advocates urged the board not to rely on the “add-back” process in June and to create predictability for providers and their workers.

Supervisor Marr said he supported both a near-term, two-year increase and the creation of a working group to develop a long-term structure. The committee voted to continue Item 1 to the call of the chair for further work and follow-up data requests.

What’s next: The committee asked the Controller’s Office and mayor’s budget staff for follow-up analysis including (1) how much of year‑to‑year contract growth reflects federal or state pass‑through funding versus new city funding, (2) department-level variance in increases, and (3) options for programmatic or fiscal controls to ensure increases reach workers as intended. The item was continued to the call of the chair.