Loans provide raft for nonprofits during Pennsylvania’s budget impasse
November 7, 2015 | Natasha Lindstrom | Pittsburgh Tribune-Review
State budget gridlock in Harrisburg has provoked months of turmoil and anxiety at Melting Pot Ministries, a South Hills community nonprofit focused on keeping low-income youths out of trouble through childhood and on track to succeed as adults.
The Mt. Lebanon-based center canceled its after-school program slated to resume in September. Its employees haven’t been paid since.
Five part-time instructors are awaiting word on when teaching will resume. Three full-time staffers continue to work without pay, relying on their spouses’ incomes to pay personal bills, said Brenda Lockley, Melting Pot Ministries’ executive director.
“My biggest problem is that we worked with so many children last year who were and have been benefiting from some tremendous, superior teaching, and we don’t want our relationships interrupted,” Lockley said. “One child had, in fact, been chosen last year as the most improved student in seventh grade. My concern is that by the time we see him again this year, will he have lost some traction?”
The South Hills center found a temporary reprieve this week, however, by securing a $100,000 low-interest loan from Bridgeway Capital, a Downtown-based nonprofit lender that partnered with The Forbes Funds to offer short-term loans to nonprofits struggling amid the impasse. The state owes Melting Pot Ministries nearly $70,000 — 22 percent of its annual budget.
“The services that these nonprofits provide are vital and fall directly in line with our mission-based lending,” said Royce Woods, senior growth officer at Bridgeway Capital. “Unless we do this, or a miracle happens and the state budget gets passed tomorrow, these nonprofits are going to go broke and people will go out of work. And then the mentally ill, people recovering from drug and alcohol abuse and at-risk kids would not have these resources.”
With Pennsylvania’s budget stalemate in its fifth month — and no deal in sight — such emergency funding options are proving essential for nonprofit human service providers to keep from folding or halting services until the state pays its bills.
Bridgeway Capital has completed or begun work on 17 emergency lending deals totaling more than $2 million, Woods said. The nonprofit recipients include drug and alcohol resource rehabs, mental health counseling centers, domestic violence shelters and programs serving children and families.
The state owes Bridge to Independence Inc. in Braddock about $300,000 — nearly 35 percent of its budget. The 14-employee nonprofit risked having to severely scale back its mental health and drug abuse services and perhaps turn away the dozens of homeless women, children and families it shelters before Bridgeway Capital phoned to announce approval of a $100,000 loan in late September. Two private banks refused to do so.
“I just choked up, and then my secretary choked up, and it just seemed to go down the line. The whole staff cried” on learning of the approval, Bridge to Independence’s executive director, Deana Nell, said. She said she hasn’t experienced such dire straits in 17 years. “If it hadn’t come through, I don’t know what we would have done.”
Bridgeway Capital’s short-term lending program boasts better loan terms than most private banks would offer cash-strapped nonprofits — but they still carry the cost of interest. The terms start at a 5 percent fixed interest rate with a 1 percent origination fee, Woods said. The loans must be repaid in full 60 days after the nonprofits receive their owed state funds.
The Forbes Funds, the nonprofit consulting arm of The Pittsburgh Foundation, has joined with Staunton Farm Foundation to set aside $50,000 in grants so nonprofits can pay interest costs on loans taken out because of the impasse. The funding is limited to $5,000 per organization, and nonprofits must provide mental health or substance abuse treatments to be eligible.
To cover its estimated $5,000 in loan fees, Melting Pot Ministries is holding a garage and bake sale Nov. 21 at South Park Fairgrounds.
The state budget is 131 days late. Gov. Tom Wolf, a Democrat, continues to clash with the GOP-led Legislature over taxes, spending, pensions and liquor reform.
The state House reconvenes Monday, but the state Senate doesn’t return from its recess until Nov. 16.
“There doesn’t appear to be any urgency, which is unfortunate because (the impasse) affects the most fragile members of society,” Nell said. “These people in Harrisburg need to have a fire lit under their tail.”
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