DANA comments regarding the FY23 Department of Health and Social Services Budget

photo of Melissa Hopkins

To: Members of the Joint Finance Committee
From: Melissa Hopkins, Executive Vice President of Sector Advancement
Date: February 22, 2022
Subject: DANA comments regarding the FY23 Department of Health and Social Services Budget


President Joe Biden is famous for saying, “Don’t tell me what you value, show me your budget, and I’ll tell
you what you value.” Frequently nonprofits hear how their work is appreciated and valued, but we look at
the State of Delaware’s budget growing year over year, with unprecedented projected revenues and
contracts and grants to nonprofits in our state remain flat overall.

Nonprofits are key to the State’s economy, providing critical services on behalf of the state and
contributing to the state’s overall quality of life, and remain the third largest collective employer in the
state. The Governor’s Recommended Budget emphasizes investment in for‐profit business, but we do not
see an equitable investment to those organizations that the state partners with to serve the people of our
state.

As the Joint Finance Committee evaluates the state’s funding priorities, we ask you to consider the reliance
the State places on partnering with nonprofits to deliver the State’s health and social wellness priorities,
and the importance in funding their work at total cost.

Delaware nonprofits are compensated for this work through contracts and grants. We have consistently
heard from DANA nonprofit members, that year over year, these contracts and grants are not adjusted to
reflect the increased cost to deliver those services. With an increase to the minimum wage, increase
operating costs due to supply chain issues, inflation impact and unfunded state mandates such as paid
leave, these costs will only continue to grow. This is a phenomenon that extends to multiple divisions
through the Department of Health and Social Services, and on behalf of the nonprofit sector we request
increased funding support for nonprofit partner agencies through reassessment of contracts, increase in
Grant‐in‐Aid, and resources applied to improve payment schedules.

Within the Governor’s Recommended Budget, there is an acknowledgement of the increased cost of salary
costs for state employees to not only meet the requirement of minimum wage increases, but also to recruit
and retain talent. The recommended allocation of funds for salary did not filter to contracted service
providers, yet nonprofit service providers face the same challenges. For contracts and grants awarded for
FY 2020, DANA members indicate there was not an adjustment to cover the last increase in the minimum
wage. Unlike a retail business, most nonprofits are not able to raise prices to offset rising costs, and thus
would be dependent on public donations to cover those increases – or worse, will have to reduce services
to clients, employee hours or even jobs.

We hear the perceived solution for nonprofit providers to offset rising overhead and employee costs is seek
more donations. It is important to note that most donors restrict their donations, not permitting nonprofits
to use those contributed funds for salaries. This only compounds the challenges nonprofits face to not only
meet the service demand, but also to invest in the IT, impact evaluation and accounting systems to provide
the required reporting necessary to secure future grants and contracts.

As we start to look beyond the pandemic, and plan on how we restore our communities’ health and
wellbeing, it will be nonprofit partners who will be relied upon to assist the state. It is important they have
the financial resources to move quickly and effectively to move us out of this crisis. We request you resolve
this issue with a commitment to raise contracts and grants for every service provider, year over year, at the
by the rate of the increase in the minimum wage.

Finally, it is important to note that Grant‐in‐Aid is an important funding source for nonprofits who do not
have contracts, and while the FY2022 Grant‐in‐Aid grew in investment, most of that increase was to offset
government spending. Over the past several years, the allocation of Grant‐in‐Aid to nonprofits has declined
– while government projects and one‐time spending has increased – nonprofits received minimal increases
that do not cover the cost of inflation.

We would request that there be an effort to increase Grant‐in‐Aid with one‐time dollars to organizations to
support their efforts in the community.

Thank you for the opportunity to speak with you today.