Leveraging Government’s Role by Funding Designated Agencies and Specialized Service Agencies in the Nonprofit Sector

The socio-economic governance spectrum divides itself into the for-profit business sector, the nonprofit mission-driven sector, and the government sector. There are statutory regulations that, often rather loosely, regulate the governance and finances of each. But the nonprofit and government sectors, in practice, must often cooperate since not all needed services can be provided by either one. The two sectors’ fuzzy governance borders and the need to collaborate can often lead to gaps in basic services, causing both positive and negative outcomes in how we try to solve society’s problems.

In the business sector, there are businesses which sacrifice profits for the well-being of their workers, the communities they serve, and the environment, and which hold themselves accountable to a triple bottom line. They don’t subscribe to the Milton Friedman theory that the only responsibility of business is to increase shareholder value. They have a broader view, as indicated in the guidelines for a Benefit (B) Corporation. They see their role in the larger light of community benefit.

Among Vermont’s 6,700 nonprofits (more per capita than any other state in the country) there are perhaps 100 that make a significant difference in the lives of Vermonters, many of them small community churches. But here and around the country, there are sadly any number of nonprofits that our loose definition of “nonprofits” allows to function solely to enrich their founders and administrators. To our benefit, they are outed thoroughly by Charity Watch, a project of the American Institute of Philanthropy, which provides the only thorough and fully independent analysis of a nonprofit’s delivery on mission. Profiles of far too many “charities” show half or even less of each dollar donated going to the “good cause’ a donor intends to support.

Finally, there is the government sector, which is in many ways the least well-defined of all. We would all like to believe that government is “of the people, by the people and for the people,” but that definition shrinks when the economy is introduced, as in the combo-term “socio-economic.” Does the economy function for all or mainly for the benefit of business, which often has a larger voice, as it can afford to fund lobbying to limit taxation and regulation and by any means protect its own interests.

To address this issue, Vermont has in place a system of “designated agencies” (DAs) and “specialized service” agencies (SSAs) intended to provide a critical mental-health and developmental-disabilities safety net for communities throughout the state. Both the Vermont Department of Mental Health and the Department of Aging and Independent Living contract with eleven DAs and five SSAs that have organized themselves as a statewide collaboration called Vermont Care Partners, which offers care to Vermonters affected by developmental disabilities, mental-health conditions, and substance-use disorders. Chittenden County’s own Howard Center is the designated agency for the county, although their work extends well beyond its borders. And, although I pay close attention to and have sources at most of the designated agencies and specialized-service agencies I write about, it’s important to disclose that my wife Kate and I serve currently as volunteers on the Howard Center’s Honorary Council.

Although we would like to believe that our government can effectively oversee its citizens’ wellbeing as it relates to such social necessities as housing, education, healthcare, food systems and nutrition, criminal justice, and the environment, it can’t always meet these critical needs alone and must turn to the business or nonprofit sectors for help in fulfilling its obligation to serve its most vulnerable citizens.

All this is by way of shedding light on a persistent challenge… if Vermont’s government is indeed accountable for the wellbeing of Vermonters and it believes that a designated agency (DA) or a specialized service agency (SSA) can do a more cost-efficient job of meeting that commitment, it must then step up with necessary and sufficient funding for that agency to cover its operating costs and deliver on its mission. Because DAs and SSAs are dependent primarily on Medicaid and state support, with virtually no capacity­ to cost-shift to private insurance like other healthcare providers, the arrangement only works if there’s agreement on the amount of agency funding needed to deliver on its own mission consistent with government’s obligation to its citizens.

By way of example, in order for the Howard Center to deliver on the government challenge to provide assistance to those with developmental disabilities, mental-health conditions, and substance-use disorders  ̶   and to do so while paying market wages that support retention and reduce “moral injury” among its employees   ̶   filling the budget gap this fiscal year would require $19 million.

Breaking down institutional expenses for example, the cost of living has grown 17% over the last decade, while agency funding provided by the state, most often initiated by the legislature, has increased by merely 3.2% during the same period.

One detrimental result is that while state employee compensation increases are built into the state budget each year in a separate “Pay Act,” no such provision exists for DAs and SSAs. This creates significant disparities in the pay and compensation between state employees and the employees of DAs and SSAs for comparable positions, a disparity that makes it more difficult for  DAs and SSAs to retain talent. This funding gap puts the nonprofit partners in the position of limiting services or having long waitlists. In either case, the patient population suffers and the shared mission of achieving “population health,” which means quality care, universal, timely access, and affordability, is severely compromised.

Some 90% of the Howard Center’s services rely on state funding, even as it routinely seeks foundation grants, philanthropic funding, and revenue-generating initiatives to help close the funding gap.

Who wins? Neither the patients in need of services nor their families or communities. The government fails to fulfill its mandate to offer appropriate care to its citizens. The designated agency does the best it can with the funds allocated, but must inevitably turn away many in need of help, compromising delivery on mission.

Surely it is time to make these partnerships sustainable so they can fully meet the needs of Vermonters by providing genuine solutions to the problems society inevitably faces.