PI Original Angela Caputo Wednesday June 10th, 2009, 11:37am

Bare-Bones Budget Endangers Federal Matching Funds

If it seemed like Illinois' financial outlook couldn't get any
gloomier, consider this point: For every $1 that the state cuts for
programs like homelessness, child care, or domestic violence, agencies
who perform those services could forfeit as much as $4 in federal
...

If it seemed like Illinois' financial outlook couldn't get any gloomier, consider this point: For every $1 that the state cuts for programs like homelessness, child care, or domestic violence, agencies who perform those services could forfeit as much as $4 in federal matching funds. Under federal block grant guidelines, state agencies and social service organizations with government contracts are required to put up a matching fee as proof they have the capacity to carry out their work. In a recent blog post, the Heartland Alliance's Doug Schenkelberg explained why this "leveraging" of state dollars is so crucial:

Most non-profit service providers are putting together a patchwork of funding to cover the costs of the programs they run. They use state dollars, federal dollars, perhaps money from the city or county, and private contributions from corporations, foundation, and individuals. ... All of these dollars leverage each other. The federal dollars that flow to a non-profit only come in the door if that non-profit can show that there are other funding sources in the program, foundations want to see that their money is not the only money supporting the work, etc. It amounts to a fragile house of cards. When one piece of that funding is taken away – in this instance, state resources – the whole house is at risk of crumbling.

The Alliance to End Homelessness in suburban Cook County is among those organizations currently in a panic over the potential loss of matching funds. Executive director Jennifer Hill tells us she's staring down a potential $1.1 million state budget cut for supportive services alone next year. As we mentioned above, the resulting decrease in federal funding could be four times that amount. While devastating, that kind of loss doesn't compare with the amount of money the state could forego if it cuts the $380 million initially allocated for the Child Care Assistance Program.  According to the Ounce of Prevention Fund, $74 million in related federal dollars may vanish.

While state officials have declined to put a price on the potential loss in federal matches to the state, a policy expert from the Heartland Alliance tells us that an estimate floating out of the governor's office -- based on the bare-bones budget bill that passed the General Assembly last month -- puts the figure at a whopping $1.7 billion.

The fact that Gov. Quinn has done little to communicate how the looming cuts will shake out has only made the situation more confusing. This week, the state plans to send letters to state agencies that will give administrators a better sense of what is happening. In a recent interview with the Southern, John Markley, CEO of the H Group, a downstate mental health provider, said he's preparing to lay off 80 of his 300 employees if there is indeed a 50 percent decrease in state funding: "With that kind of a cut there would be no discriminating; everyone would be affected." 

House Human Services Committee chair Rep. Sara Feigenholtz tells us that she plans to hold hearings in Chicago later this month to get a handle on what programs are at risk and what sort of ripple effect the proposed cuts will have. "You want to drive the point home while their doors are still open," she says. "Because once they close, they may never open again."

In the meantime, advocacy groups are hoping to keep the political pressure on lawmakers to adopt an income tax increase -- clearly the best hope for salvaging the state's safety net.  Tomorrow, SEIU Healthcare Illinois is holding demonstrations outside the offices of Democratic Reps. Jack Franks, Mike Zalewski, Jim Brosnahan, and Kevin McCarthy, all of whom voted against a temporary income tax increase last month.

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