Senate Select Committee on Select Committee on the Nonprofit Sector

Here today. This is a really important subject. The Nonprofit Select Committee Hearing on Advancing Institutional Support of Nonprofits to address the unprecedented challenges and threats facing the sector. Just a level set. California's nonprofit sector makes up 10% of the state's workforce with over 1.7 million people.

In my home of Santa Barbara county, we have over 2,000 registered nonprofits, with around 7.5% of the workforce working for one of those organizations. Senator Limon and my districts account for one of the highest concentrations of nonprofits per capita in the entire State of California.

Nonprofits play a vital role by delivering important services, protecting vulnerable populations, and advancing progress. Our state's nonprofits serve on the front lines of disaster response, environmental protection and advocacy, and community services in all areas. This hearing comes at a critical time for California's nonprofit sector, a time marked by mounting pressure and unprecedented challenge.

The nonprofit communities facing these pressures, they are not abstract. They impact real communities, real families, and real lives across all of California. As my colleague Senator Limon will be discussing, this hearing has multiple goals. We want to understand the evolving landscape of challenges and how these are impacting nonprofits ability to continue to deliver services.

From federal funding disruptions to climate driven disasters, 2025 has brought significant challenges to our essential nonprofits. Many nonprofits rely on federal funding to operate programs like housing, education and health services. These interruptions will force nonprofits to replace this funding or to be forced to pause or reduce services.

The new tax policy under the Federal Administration will also impact our nonprofits. According to the Congressional Joint Committee on Taxation, the recent federal legislation will reduce resources available to nonprofit organizations by at least $81 billion over the next 10 years.

I also look forward to hearing a discussion of the vital role nonprofits play in disaster relief and how the state can continue to support that effort. Establishing partnerships between the public and nonprofit successors before disasters happen can encourage sharing resources and coordinating responses.

Our panelists will also discuss the role our state can play in advancing solutions to support a thriving nonprofit sector. I'm excited to see that collaboration between California and the nonprofit community continue. And today you'll hear from leaders deeply embedded in this work. Their experience will help inform the policy solutions we should continue to consider. A Legislature.

Thank you again for all being here and for your continued commitment to this work. I look forward to hearing our panelists share their expertise. And with that, I think we'll begin with our first panel so folks can come on up. Would any of my colleagues like to make any introductory remarks?

Happy to hear.

Okay, thank you all for being here. Our first panel is on the unprecedented challenges and threats facing the sector in 2025. And if you would just introduce yourself as you begin, look forward to your opening remarks. Who'd like to start?

Chairman Hart, Committee Members, thank you. My name is Laura Seaman. I have the privilege of leading the League of California Community Foundations. Community foundations are place based anchor institutions that serve as hubs of generosity and civic engagement. And they've been part of the fabric of some of California's neighborhoods for 110 years, going back to 1915.

Every year, they award millions in scholarships to local students. And they give billions in dollars in grants to power the nonprofits that make our neighborhoods cleaner, healthier and more thriving places to live. They also serve as conveners, as advocates, as leaders in disaster resilience, and as community leaders around a wide range of local issues and solutions.

Today, our coalition of 40 community foundations collectively serve the counties where 99% of Californians live. Our Members support thousands of nonprofits across every district in California who do the work on the ground of caring for our neighbors, providing everything from food and shelter to education and health care to music, art, and access to a thriving natural world.

And this noble work is powered not just by philanthropy, but by the public sector as well. In every state, every legislative district, and in more than 95% of counties across the country, public charities receive government grants. Roughly 30% of nonprofits that file an IRS form 990 report stewarding public funding as part of their operating model.

That's over 100,000 nonprofits stewarding a total of $300 billion every year to deliver essential programs and services. In California, just over $42 billion in government funding helps fuel the work of nonprofits in our state, with those in Los Angeles, San Diego and Alameda counties handling the largest share.

A recent survey by Cal nonprofits of their Members found that funding uncertainty is the top challenge faced by 80% of respondents. And 34% say that loss or delay of federal funding is their most pressing concern.

In the coming months and years, nonprofits in every district in California will be overwhelmed, as some already are, with a tsunami of rising need from the largest health care cuts in American history, steep federal cuts to food assistance, and plummeting resources from the sudden cancellation of billions in community investments.

To be clear, these are not new challenges in and of themselves. Seasoned nonprofit leaders are well familiar with the realities of shifting policy environments, boom and bust cycles of funding and surges in community need. Well run nonprofits know how to navigate these dynamics, and community foundations have over a century of experience in supporting them to do so.

What's unique about this scenario is the scale, the scope and the speed of actions at the federal level that are poised to ignite multiple crises at once or to inflame existing ones for our most vulnerable neighbors.

And the sudden and severe reduction in funding for so many essential needs will create a harmful ripple effect on our state's nonprofits. A sharp and sudden drop in resources causes operational chaos, staff layoffs, furloughs, downscaling or elimination of programs and services, and an inability to budget and plan for the future.

We commend the proactive approach of the California Attorney General and the Department of Justice for working to safeguard roughly $168 billion through an early lawsuit challenging a freeze in federal funding and for protecting an estimated $11.1 billion in federal grants for education, health care, transportation and more.

As we navigate this challenging new chapter for our communities, we also see a new window of opportunity to focus our energy. As the saying goes, not on fighting the old, but on building the new.

Specifically, we have an opportunity to co create an enabling environment for nonprofit success and to make California the best place in the country for nonprofits to leverage both philanthropic and public resources to power their work.

We can use this moment to strengthen the vital conditions that our nonprofits need to thrive so they can strengthen the vital conditions that all nonprofits, that all Californians need to thrive. We are grateful to our steadfast partners in state government and we invite others to join us in co creating this enabling environment for nonprofit success.

In the near term, this could include common sense reforms to state grant making and contracting with nonprofits, things like advanced pay, sustainable indirect cost rates and contract flexibility during disasters and emergencies. It can include streamlining nonprofit registration and reporting and clearing paperwork backlogs so our nonprofits can get to work raising and deploying funds for vital community services.

In the medium to long term, it can look like institutionalizing a voice for the social sector within the halls of state government and finding new ways to support our nonprofit workforce of over 1.7 million and our many generous volunteers who donate the equivalent of 331,000 full time jobs worth of time each year.

It can look like partnership between state agencies and the social sector in implementing statewide community level investments like those coming from Proposition 4. California is in many ways a place of abundance, of generosity, of ideas and of civic spirit.

And together we know we can weather storms both natural and human made and come out stronger and more resilient. We thank you for supporting and championing the hardworking nonprofits in your district, several of whom you'll hear directly from this afternoon.

We're grateful to have a state Legislature that recognizes and supports the critical role that nonprofits and their staff, volunteers and donors play in making life better for Californians,

every day. We invite you to leverage our close knit statewide web of local anchor institutions like place based nonprofits, foundations, and other trusted community organizations to meet our shared goals of building thriving communities.

On behalf of the Community Foundations of California, I look forward to finding new ways for for our sectors to collaborate with creativity, courage, and generosity. Thank you.

Thank you so much, Ms. Seaman. That was very helpful. Great to start to us. Ms. White, you want to go next? You're the CEO of Food Share of Ventura County?

Yes. Do I need to turn this on? I'm on. Okay. Good afternoon, Chairwoman Limon and Chairman Hart. I don't know if it's on. Is it on? Is there a button there? Am I on now? Maybe get closer. Oh, okay.

How about that?

That's what it is. That better? Wonderful. My name is Monica White, and I'm the President and CEO of Food Share Ventura County. And I appreciate the opportunity to speak at this critical point in time for nonprofits as Ventura County's food bank.

For the nearly 50 years our organization has been on the front line combating hunger and by distributing millions of pounds of food annually across our diverse community, from the agricultural fields of Oxnard to Simi Valley, the home of the Ronald Reagan Presidential Library.

Today I want to share how federal funding cuts are causing unprecedented challenges, not only for our food bank, but for nonprofits like ours throughout the state. In addition, fears driven by ICE activity are creating barriers to access, leaving vulnerable populations even more isolated. These threats are not abstract.

They're reshaping the landscape of food insecurity in California as we speak. Let me begin with the stark reality. The passage of HR1 represents the most severe cuts to our safety net programs in history. Up to 5.5 million Californians will be affected by cuts to Snap CalFresh, with further harmful impacts expected for those relying on Medicaid Medical.

HR1 devastates this vital lifeline by nearly $30 billion in California alone, creating a ripple effect at food banks statewide. As the demand for emergency food assistance increases. These reductions will add immense pressure on food banks that historically provide one meal for every nine meals that SNAP provides.

The majority of people receiving SNAP CalFresh benefits are children, seniors, and people with disabilities, making these cuts a direct assault on those seeking help. In addition, data from Feeding America shows that Snap reductions could push an additional 50,000 Californians below the poverty line this year, many of whom will turn to food banks as their last resort.

The California Association of Food Bank, representing our 42 Member network, has expressed deep disappointment over the passage of HR1. It breaks decades of federal commitment by shifting billions in costs to states, reducing assistance for millions, and ultimately creating an immense gap that food banks simply cannot shoulder alone. At FoodShare, we've already seen this play out.

Last year we served 250,000 individuals. That's one in four in Ventura County who needed food assistance. These cuts threaten our ability to feed our neighbors in need. FoodShare receives about 25% of our food from Federal Government, along with 10% of our $9 million annual budget. These resources have already been impacted.

In April, the United States Department of Agriculture canceled eight truckloads of food that was coming through the Commodity Credit Corporation. These cancellations hurt. We are expecting essentials such as milk, cheese, pork chops, eggs and chicken. The loss resulted in over 200,000 pounds of food that cost $400,000 for food share to replace.

This in turn forced us to cut on other important programs such as food for our unhoused neighbors. But funding cuts are only half the story. Compounding this crisis is a climate of fear in our immigrant rich community.

Local health advocates recently shared that undocumented or mixed status families in Ventura County are avoiding public services due to deportation concerns, a fear amplified by the recent raids in our county. We've seen the same hesitation at our food distribution sites, where the fear is spilling over into no shows at our pantries.

In communities like Oxnard and Santa Paula, where nearly 40% of our clients are from immigrant backgrounds, we've seen a drop off in attendance even as overall need arises. Families tell us they're afraid to show up, worried that waiting in line for food could target them and lead to family separation.

In response, Food Share has stepped up to support our network of 200 nonprofit pantry partners, many of whom have turned to us for guidance. Last month, we hosted an immigration rights forum, bringing together subject matter experts, legal aid organizations and community leaders to educate our network on how to best navigate this new reality.

The event drew over 100 attendees and has already helped reduce some barriers by empowering our partners with knowledge. While we've seen a decrease at our pantries, our weekly drive thru distribution at Oxnard College has increased in numbers we have not seen since the start of the pandemic.

Our clients consider this drive thru distribution a safe space where they can wait in their car with the engine running before they receive their weekly box of food and produce today, as we plan, how many truckloads of food do we need to deliver for this distribution?

We've also had to develop emergency contingency plans to keep our staff, volunteers and clients on the ground safe should there ever be a mass exodus due to ICE activity. In closing the works of food banks, like food share is more vital than ever. But we can't do it alone.

By bolstering institutional support, California can lead the nation by example, by protecting its nonprofits and the millions we serve. Thank you for your time and attention today and I look forward to your questions and continued collaboration in serving our Californians.

Thank you, Ms. White. That was a great story. Appreciate your resilience and creativity and adapting to the situation.

Thank you.

Do we have questions for these two speakers? Anybody have anything they'd like to ask? Yes. Assemblymember Hadwick.

I just want to thank you guys for your work and for continuing to have to do that work with grit. I grew up on a lot of those programs, so they were instrumental in our family and a lifeline and many of my. I have 11 counties in my district, very low income, very rural.

So our non profits really fill a lot of holes for us and something that I'm very passionate about. So thank you.

This is the first panel, right? You want to say something? Yeah, this is another panel.

You know, I'll wait till all the panelists. Next. We'll have our second part of the first panel, which is Wildfire Recovery. Supporting the role of nonprofits in disasters and emergency mitigation. We have Abby Browning, the Chief of Private Sector and NGO Coordination Office. The governor's office is Emergency Services.

And then Bruce Yerman, the Director of Operations for Camp Fire Collaborative. So would you like to begin?

Absolutely. Thank you. Good afternoon, chairs and members of the Committee, thank you for the opportunity to speak today about Cal OES's work with nonprofits before, during and after disasters in California. As mentioned, my name is Abby Browning and I'm the chief of the Office of Private Sector NGO Coordination with the California Governor's Office of Emergency Services.

The purpose of Cal OES Office of Private Sector NGO Coordination is to design, coordinate and implement statewide outreach to foster relationships with businesses, associations, companies, universities, as well as our many nonprofit, non governmental and philanthropic organizations.

The office works with Cal OES to maximize the inclusion and effective use of program, private sector, philanthropic and NGO staff and resources in all phases of emergency management.

Within these partnerships, they can help with filling our supplementing or supplementing a variety of resource needs such as logistics, facility space, established comms networks, availability of supplies such as food, water, construction materials, other critical goods, equipment such as transportation vehicles, telecommunications and other technology pieces and personnel such as those with the expertise or special specialized skills.

This office also disseminates critical information to California's business, NGO and philanthropic communities regarding disaster preparedness, response and recovery as well as gathering vital information from these communities to help Cal OES leaders prioritize response and recovery efforts during all state declared disasters.

The Cal OES Office of Private Sector NGO Coordination remains actively engaged to coordinate offers of donations from the private sector and our NGO partners. The Office has efficiently connected donations with the appropriate organizations to best serve those California survivors.

Here are a few examples of the donations and partnerships that have been facilitated during the initial phases of the disasters from the private sector. Airlines like Southwest and United have donated flights to carry our firefighters into California and assist in the responsibility.

Uber and Lyft have offered free rides, meals and freight services to support wildfire response and the American Red Cross sheltering operations specifically for the Thomas Fire. Apple donated $1.0 million, Verizon and other telecom companies waived fees and several NFL teams came together to donate over 5 million to survivors for the campfire.

Tesla donated solar and battery power to the shelters, Delta Dental donated 2,000 dental hygiene kits to the survivors and several grocery stores donated food and drinks for survivors and hosted a very large community Thanksgiving meal.

Currently for the LA fires, the big one was Airbnb provided evacuation housing credits for more than 25,000 people including school employees and local government employees that totaled in over $26 million in credits.

Regarding nonprofit organizations, an organization called Baby2Baby donates several truckloads of diapers and hygiene supplies during disasters as well as air purifiers to those cabins communities impacted. Direct Relief, a non profit organization out of Santa Barbara, provides respirators, additional PPE and critical medical supplies to local clinics during our disasters.

The Information Technology Disaster Resource Center ITDRC coordinates with donation of tech support for first responders as well as providing Internet access to survivors during recovery. The nonprofit organizations organize themselves to through the voluntary organizations Active in Disaster.

It's a VOAD system to coordinate and share resources and the California VOAD will activate to Support all local VOADs when they are in their efforts sending additional volunteers, supplies and organization methods.

It's a very impressive system that all California counties utilize, most recently through coordination with INLA, the Emergency Network of Los Angeles, which is their VOAD, and the California VOAD, a wildfire resource hub ran for six days in Pasadena, located in a donated space and 48 different NGOs served the public, including over 1200 volunteers.

$8.5 million of financial aid was distributed and 2.9 million in goods totaling about $12 million distributed over those days to those families. 12,725 families were actually served. For philanthropy,

Cal OES partners with philanthropy California as well as the League of California Community Foundations to provide a list of vetted funds that actively collect and distribute monies to survivors and nonprofits in the fires. This list will include local community foundation as well as other funds that are directly to tied to the communities experiencing the disaster.

These vetted funds are linked directly to the local VOAD and the nonprofits serving the survivors. We also work with larger nonprofits such as the American Red Cross and the United Way of California to support additional local nonprofits serving survivors with direct financial resources.

Several major corporate partners also donate directly to these foundations, including millions from companies like Amazon, Amazon, Walmart, Disney, Meta and Netflix, to name a few. After the initial response efforts conclude in disasters, Cal OES will work closely with nonprofit organizations to continue with the recovery. Long term recovery groups are formed.

You will hear from one next to help coordinate, support and facilitate disaster case management. For the Thomas fire, there were groups formed in Santa Barbara and in Ventura Counties working with United Work and local community foundations. For the Camp Fire, the Camp Fire Collaborative was formed in affiliation with the North Valley Community foundation to support those survivors.

Currently in Los Angeles, four different long term recovery groups are forming to support the survivors of the Eaton and Palisades fires. These long term recovery groups will grow to change and fit the needs of the community for several years- several years following a disaster, many times covering multiple disasters that impact that same community.

As you can see, our nonprofit partners are involved in every aspect of the response and recovery. Of course, these lists are not exhaustive and certainly not final. We capture information that we can and encourage donors to connect directly with those nonprofits.

But many of these relationships happen organically and go unnoticed by the larger public, but are essential central to our survivors. Thank you and I'm happy to answer any questions that the committees may have.

Thank you, Ms. Browning. We'll have questions after Mr. Yerman concludes his remarks.

It's an honor for me to share the perspective of the Campfire Collaborative, a nonprofit serving Butte County and surrounding regions. It's also an honor for me to sit next to Abby Browning and express gratitude to Cal OES for its response to the Camp Fire and its continued mitigation efforts.

Thank you, Chairwoman Limon and Chairman Hart and Members of the Committee. Thank you for this invitation. My name is Bruce Yerman. I'm the Director of the Camp Fire Collaborative, which is the long term recovery group after that fire.

As a survivor, I have experienced firsthand the benefit of its support. The Camp Fire Collaborative was born after the 2018 campfire, the deadliest and most destructive wildfire in California history. That fire destroyed more than 18,000 structures, burned 150,000 acres, and claimed 86 lives. In the aftermath, it became clear that no single organization could handle recovery alone.

So we built the collaborative nearly 100 organizations strong, including local nonprofits, national partners and faith communities and municipalities all united to help families recover and rebuild their lives. When the fire struck, the scale of destruction demanded a coordinated response.

That's why we formed the Long Term Recovery Group, commonly known as LTRGS, a model FEMA and Cal OES recognize as a best practice. Through this structure, we've helped more than 2,000 families secure housing and directed over 17 million in gap funding when no other resources were available.

And that figure does not include the direct support of all our partners through each of their programs. But here's the challenge. While LTRGS is recognized in state and federal training, there is no designated funding to sustain them. I've asked at national conferences and at Cal OES directly where's the funding for long term recovery groups?

The answer is it's local, which means especially in rural areas, it can be difficult to find a sustainable source of funding. And I would add that in Butte County right now there are three concurrent long term recovery groups for three different disasters.

Now, FEMA and Cal OES do provide support of great value to LTRGs, training, knowledge, mentoring and connections. And we are grateful. Yet it's still up to each LTRG to secure office space, build fiduciary systems, cover Administration, and raise funds for unmet survivor needs. And families don't stop needing help when the declarations expire.

Yet the very structure built to serve them is also left to scramble for resources. Disasters as the FEMA Deputy Administrator Eric Hooks has said, all disasters are local. I've also heard it put in informal settings, including when I worked at FEMA. The disasters start locally and end locally. Both of those are true.

Disasters begin suddenly, but their impact lasts long after federal and state support may fade. Even today, nearly seven years later, disaster case managers in Butte County working with the Camp Fire are still serving more than 100 active cases with new cases each and every week. What makes our work sustainable isn't just one organization.

It's the collaboration itself, our council of chairs. The committees you see: Housing, Case Management, Wellness Construction and more bring leadership, talent and shared resources together. Each of these committees is led by a respected leader in a nonprofit, bringing together multiple talents and resources to a recovery.

What's important to me in this slide is not necessarily who are those chairs or co Committee chairs, but that those logos represent the leadership of other nonprofits participating in the recovery. In this next slide, there are the logos of nearly 100 organizations inside those committees. Nonprofits and civic groups, faith based organizations and government allies.

Each one represents bringing its own mission and vision to the table, leaning on each other to support survivors. An example of this was just this last week in our housing Committee. The Committee chairs are the Director of Habitat for Humanity of Butte County, the Director of Community Housing Improvement Program, and the Director of Valley Contractors Exchange.

And participating in those committees still seven years after, were 30 different organizations that included Butte County, the town of Paradise. But most of the rest were nonprofit organizations still participating in that Committee. We see ourselves as a wagon wheel. At the Campfire Collaborative at the Hub, we're holding those spokes together.

Each organization, like the ones that I've listed, is pointed in a slightly different direction with a slightly different vision, with a slightly different mission. It is that diversity, when coordinated at the Hub, that gives the Wagon wheel its strength. It's the managed tension of many organizations, mostly non profits, working together, that makes long term recovery possible.

This model works, but it can be precarious because it's sustained entirely by donations. Families don't stop needing help when federal disaster declarations expire, yet the structures designed to support them are scrambling.

If I could leave you with three recommendations, they would be flexible spending so nonprofits could respond quickly, sustainable investment in long term recovery groups and streamlined partnerships so resources flow faster to survivors. Recovery is not six months, it's years, even decades.

Thank you, Mr. Laird.

But when government and nonprofits and communities work together, we don't just rebuild what was lost, we build stronger and more resilient futures. Thank you.

Are there questions for panelists? Yes. Assembly Member Hadwick.

I just want to thank you. I was the Deputy OES Director for Modoc county for five years and worked on that fire and many others. And I think I say it a lot that the north, the north state really works together and collaborates in a whole different way.

So coming here, I'm new, I'm kind of shocked that the rest of the world doesn't do that. But we do it out of necessity and survival and our nonprofits really do plug those holes for us. What can we do to make your life easier? And is there something at the local level that we can help encourage?

Well there is the connection that was mentioned earlier with the local community foundations. And right now, that is what is keeping the campfire collaborative alive. Basically, we have two buckets. There's the Administration, the operational bucket, and then there's the unmet needs bucket.

We're actually, at least at the campfire, the unmet needs bucket is being served by other nonprofits and faith groups, and we're still going seven years after that. It's the operational bucket that is more of a challenge, and it's just a fraction of the cost of the donations aside.

I would say that what I'm witnessing firsthand are the other disasters. Struggling with both of those buckets. And anything that the state could do to help fill either of those buckets at the beginning, but in a long term, sustainable way can help, because as I...

As I shared, we're still finding new families every week for different reasons that are finally coming forward for support.

Okay, thank you so much. My district is plagued by fire. So unfortunately, it's our normal, and it's just. It's something that we have. We have to do better. We have. Period. So thank you. Thank you.

Thank you. So I wanted to thank you all for presenting, for being here today. As you probably got wind of, there's a lot happening in the Capitol this week and every day after.

But I wanted to, you know, picking up on your comments and what you've shared, to ask you about the future of what a partnership looks like between our nonprofit sector in a time of natural disasters.

I'm a representative, you know, as is Assembly Member Hart, who has had natural disaster after natural disaster, really, my entire time in the Legislature. I want to know what the partnership, how the partnership evolves and what it looks like in the future. And are there things that you can imagine will evolve out of this?

I think what I've noticed in the eight years that I've been here is that one of those elements has been just an establishment and understanding of a need to work together. Right. Versus, like, who's doing what.

Turns out that you have enough of these in the district to know who does what and why you need to work with them and who, you know, how you pick up the phone. But I'm just wondering if you can imagine a little bit more further out. And how does this. How does this evolve?

What does it look like from your lens? And that's for anyone, not anyone in particular, but whoever would like to answer.

I would be happy to give it a go. I have an example where the Camp Fire Collaborative came down twice to meet with HCD because of the implementation of one of its programs. And I want to express the gratitude for that program because it has put people in housing.

The case management from that program was not local and it was not trauma informed. To their credit, they allowed us to provide some trauma informed training. But CDBGR funding for programs like that and other programs, these municipalities, and I'm talking about municipalities now, have the talent to operate those programs closest to the point of implementation.

And they also have the ability to interact with nonprofits locally to help with that implementation. So one of the things I could see evolving, especially with the increase in potential disasters, is more local responsibility. And to make the distribution of some of those programs more efficient, we need the state.

And I'm really glad we have the State of California kind of both as a buffer and as a distributor of funds, rather than in other states where it's maybe directly from the Federal Government. But as big as we are, we have a lot of talent locally.

And so that would be one of the areas, another example, and there could be dozens. But even when we have tried to apply for funding some of the grants, it almost feels like doing some gymnastics to try to make them fit into a disaster mode.

You know, they may be for a certain demographic, and that demographic is somebody we're working with all the time, but the grant is not set up necessarily for a disaster. So in a disaster, maybe some flexibility there. The other is many of the grants, and these may be federal grants coming through the state.

It's just not my area of expertise are reimbursable grants. And some of these nonprofits cannot carry the load of expenditures and then come back and ask for reimbursements. And so we've simply had to push certain grants aside for that.

And so I could see things evolving with criterion to be able to just make that a bit more flexible.

I'd like to add on behalf of the state's community foundations that we are designed to be perpetual organizations. We say we're here for good forever, and so we stand ready to partner with state and local government on disaster resilience and many other issues.

Thank you.

And I'll say from firsthand experience, just in the past few years, a really powerful area of partnership has been having liaisons, public servants whose job it is to liaise with the social sector broadly with Nonprofits and with philanthropy, and in Abby's case, with the corporate sector as well, to in some cases create those types of partnerships in real time that really make a difference on the ground and also build resilience into the future.

And then just to reiterate some comments from my testimony earlier, we're interested in continuing to advocate for advanced pay and contract flexibility and emergencies for the many, many grants and contracts that nonprofits, including community foundations, steward on behalf of the state on behalf of their communities.

Thank you.

You know, as you were all talking, it occurred to me that, you know, we have a pretty well developed disaster response system in California because we have gone through so many disasters. And I think you're right, we do a good job of pulling together and using everybody's abilities.

And the description from the first two panelists about the disaster that we're going through right now with the federal budget is more like a wildfire or flood response because of the timing of what's happening to us than historically would be the case with budget cuts and stuff.

And it just seems to me that we need the same sense of urgency now to respond to what you're talking about that we generally bring to a natural disaster. And this moment is so different and so unique and so challenging and overwhelming in so many ways.

The state's ability to really backfill the funding that the Federal Government has taken off the table, the institutional knowledge that's being lost as nonprofits, you know, are forced to cut payrolls and eliminate people who have been doing important work in the communities, is a disaster as well.

And I wonder, you know, how do you do the community foundations that are here forever balance this critical moment in time with long term investments that you need to make to be strategic and provide for the future.

With the crisis that the food share programs are facing right now, is there anything that we can learn from what we do well with disaster response that we can apply to this current disaster?

It's a unique spot to be in. And the shared goal of community foundations, which really fall across a huge spectrum of certainly geography, size and scope, staffing, tenure, is that they exist to build thriving places and thriving futures for the people in them.

And they are always working in two directions the same direction, I would argue, of meeting the urgent needs of today and also building a solid foundation and a more thriving future. And it's a privilege to be able to do that work. It is challenging. It's more challenging at times. When there is chaos and change coming suddenly.

It's hard to plan for and to adjust quickly for any organization and certainly one that has a long time horizon. I will again underscore the importance of public sector partnerships to be able to get creative and flexible and pivot when needs change.

And then I'll also specifically underline Mrs. Browning's comment about VOADS as one strategy that we find to be really effective, clearly for meeting urgent needs when disaster strikes. To have a well organized network and connective tissue, if you will, of local community based organizations to respond.

What we find often is that those are also the same organizations that respond in moments like we're talking about now, with rapid cuts in funding to essential services. Certainly those were the similar groups that, that mobilize in similar networks that mobilized together in similar ways during the COVID crisis, the early days of the pandemic.

And so that local connective tissue and infrastructure is one of the key areas that we see community foundations investing in and their donors, both for that ability to be flexible and meet immediate needs, and also to build community resilience going forward.

To that point, Ms. Browning, do you think there is an opportunity to help with private philanthropy and the public sector or the private sector response to this crisis of human needs?

The funding cuts that the food share program is looking at, other service providers that are, you know, desperate to keep services, and the creativity that Ms. White described about, you know, doing the drive through services to try and reduce the trauma from our community that is living in fear of deportation and not able to access the services they need.

What can we do that's different than what we have been doing in the past to make our response more effective now?

That's a very good question, and I'm actually glad that you brought up the current situation that these nonprofits are facing is very much like a disaster because it came on suddenly and it's changing constantly and nobody can predict what's going to happen.

I was thinking, you know, my job is to work within the confines of what I have, what I've been given. But I can go to the private sector, I can go to the corporations to find things to help fill those gaps.

And one of the most important things that I see that we have a problem with is attention span. Because, for example, right now, Los Angeles, we're about seven months out from the disaster, knock on wood. We're waiting for the next one to happen. The attention will shift. Public attention shifts. With the current federal Administration.

There's a new thing every day. Public attention shifts. And so using the platforms that our legislators have, by bringing attention that these nonprofits are filling the gaps. The Ventura County Food Bank is doing exceptional job jumping over hoops, doing everything they can to serve these people. Let's spotlight them so people can help.

If I have the money and I know they need it, then I can help them. And that's what I always encourage legislators to do during disasters because we have lots of disasters that do not rise to the federal level. Camp Fire was huge, but those other long term recovery groups, were they federal disasters?

The Caldor Fire, it was a massive disaster, destroyed a whole town. And that was not a federal disaster. But most people forgot about it because other shiny thing happened over here. And so just by bringing that attention, I think that is a huge thing that we can continue to do.

I don't know about any kind of fixes about the government or anything like that, but that's the big thing that I always see that is needed to be done.

That's a great example. Concrete one. I know Senator Limone and Assemblymember Bennett are having a town hall meeting in Venice, Ventura on Friday to spotlight some of the nonprofits that are doing great work in Ventura County.

That's a great example, I think, of using that attention to focus attention in the community on the service needs of the organizations in Ventura County. We should be doing more of that around the state. In this moment right now. It's a plug for your event.

Thank you. Thank you from Assembly Member Hart for plugging that event. But also I think it's an invitation for other legislators to do similar right work in their districts to be able to bring our nonprofit community together, but also share and exchange information. I think that that's important.

Yeah, I'm going to make a point of doing that in my district as well in Santa Maria. Well, thank you all for taking time. Is there anything that you'd like to add before we invite our next panel to come up?

I just want to comment on something that Senator Limon mentioned about seeing the need. I think a huge benefit to all of this is just a mutual respect across the board, understanding that Ventura County Food bank knows how to serve the Ventura County residents.

And I don't need to be sitting in Sacramento and telling her how to do it. I think that just encouraging that throughout all of our relationships is just a massive benefit. And I think it would go a very long way for mutual respect.

That's a great last word. Thank you. Appreciate your time and attention and contribution today to the discussion. Next we're going to have Jeff Green, the CEO of Cal Nonprofits, and we're going to be talking about advancing solutions and new institutional support for nonprofits. Establishing a voice of, by and for nonprofits in state government.

The inspirational idea of having an Office of Nonprofit Empowerment. Page two.

Additionally, we're also going to have Annie Chang join the panel. Vice President of the Nonprofit Finance Fund, Wilfredo Cruz, Jr. Executive Director of Community Resource Project, talking about equity and contracting reforms to support accessing and managing state resources.

All right, ready when you are. Excellent. Well, good afternoon, Co-Chairs Limon and Hart, and thank you so much for making the time to engage on these critical issues. I'm Jeff Green. I have the privilege of serving as the CEO of the California Association of Nonprofits, better known as Cal Nonprofits.

We are a membership organization that spans the entirety of the diverse nonprofit sector in California. 2000 formal members and an additional broader coalition of some 10,000 organizations whom we work alongside.

And today I'm here to share some of the results of some creative and collaborative thinking that we've done alongside nonprofit leaders, as well as some state leaders and veterans in state government. And that is a proposal for a new office within California State government, one that would serve as really a voice of and for our nonprofit community.

The problem that we're seeking to solve is that across state government, there's really no central body to encourage innovation, systemic coordination, alignment across different entities and agencies, with regular engagement with the nonprofit sector in the way there is, say, for small business or other parts of our communities and economy.

So for the purposes of today's presentation, and it will be brief, I'll refer to this as the Office of Nonprofit Empowerment or one, because acronyms can be useful, though it could be just as appropriately called the Office of Nonprofit Partnership or Advocate or Services as one would see fit.

Establishing a central office would enable nonprofits to better coordinate with the state in our shared missions, to provide quality service to all Californians, to strengthen economic contributions of the nonprofit sector itself within our state, and continue addressing hurdles that may dissuade smaller or under resourced communities from seeking state support and funding or implementing state funded projects.

As you all know, nonprofits truly are the backbone of California's economy and the communities. They get the job done in their communities. I don't think it's an exaggeration, in fact, to say the California community is largely run on nonprofits and over 100,000 organizations strong, according to our Attorney General. And that's just in California alone.

The nonprofit sector is central to our state's economy and our diverse workforce. In fact, the workforce of the nonprofit sector is more diverse by gender, race and ethnicity than the larger workforce as a whole.

As far as being representative to the broader diversity of our state, obviously, the state relies on nonprofits to provide health care, to build housing, to care for children, seniors, other vulnerable community Members, and to fight contagious disease, protect natural resources. On goes the list.

Recent examples where the state was heavily engaged with the nonprofit sector would include the census count in 2020 to make sure that we had an accurate and complete census, robust pandemic response 2020 through 2023 and ongoing responses to disasters of every type. If you just heard in the previous panel.

So partnering with nonprofits to provide services is really not a nice to have, but rather it's core and central to the state, county and city levels of government across human services many other areas.

So collectively we rely on hundreds of these partnerships to get all of these various jobs done with state government and nonprofits at any given time.

And of course they come in all shapes and sizes, can at times be complex, face unforeseen challenges, run into administrative barriers, and yet there's really no bat phone that one can pick up to try to solve a problem or access help immediately.

So above and beyond the long standing challenges, obviously the direct attacks on the nonprofit sector from the Current Federal Administration is the new disaster referenced in the prior panel that requires all to jointly safeguard our values here in California and our vision of a California truly for all.

So in short, we need better infrastructure within state government and nonprofits really need a voice in state government.

So Cal Nonprofits is proposing that the state invest in this Office of Nonprofit Empowerment and we create a formal bridge between government and the nonprofit sector, expand opportunities for nonprofits to build and scale their critical efforts, provide technical assistance to nonprofit organizations in navigating state policy and regulation, and make recommendations on ways to continue the reducing barriers, improve efficiency and so on in the increasingly complex world of our nonprofit partnerships.

So more specifically, and I'll end on this, what we'd recommend the office play the following roles and perform these sorts of functions going forward. One would be to serve as a centralized point of contact for nonprofits. This would provide technical assistance to nonprofits navigating state policies, processes and regulations, ultimately supporting the growth of the sector.

It would strengthen compliance. It would help us all on both sides of those really relationships linking nonprofits to state entities on emerging or ongoing issues, and collecting input to inform state priorities and activities. The second role would be really policy research and development, making recommendations to promote greater transparency, efficiency and equity in procurement.

Grant making Roles and Processes Obviously, Members here have had specific roles in this. We would specifically hope that this entity could provide policy recommendations to the Governor and Legislature both in expanding advanced payments, ensuring equitable and prompt reimbursement, and other promising government practices which do exist in bits and pieces across state government.

But this would help normalize them and reduce hurdles for nonprofits who substantively serve Californians while maintaining the accountability that we all want and require finally, interagency coordination, convening relevant agencies and departments to promote greater alignment and ensure that contracts and grant programs account for the various unique ways in which nonprofits do business, depending on the communities they serve and how they're structured.

Also training and education, developing and implementing training, including on how to do advanced payments, for example, taking examples from strong agency leadership where they have implemented some of these forward thinking practices and sharing those out across the state government for the structure of the office, we believe that a staff, a small but mighty group of, say, a half dozen staff, could actually perform these necessary services and accomplish all of the above if, if designed correctly.

And again, we're seeking to build a permanent stable infrastructure within state government that would support stronger, more efficient, more effective nonprofit government partnership.

And we believe that the ability to quickly solve those problems that might arise, either long standing or new, share innovative practices, consistently recommend improvements that would serve the state, our nonprofits and our communities well, would be a truly strategic investment and pay many dividends for the near and long term. So thank you.

I'll wait till the end for any questions. Thank you. Mr. Green, Ms. Chang, would you like to go next?

Great, thank you. Chairwoman Limon, Chairman Hart, other Committee Members who are listening in and here today, thank you for the opportunity to share my perspectives. My name is Annie Cheng. I'm the Vice President of Community Engagement for Nonprofit Finance Fund. NFF for short, is a national nonprofit community development financial institution.

So we're a CDFI that provides lending for community facilities and working capital to bridge any delays in payments, financial consulting and community centered research and advocacy for nonprofits across the country. We serve nationally, but our second largest market is California after New York.

And we're really proud to have an experienced team that's been working with nonprofits across the state as lenders and financial consultants with nonprofits of all sizes and sectors that serve all different types of communities across the state. And we really support what their most pressing financial challenges.

Thank you so much for having this meeting, taking the leadership to be able to convene a Select Committee on nonprofits. California organizations. As you've heard already, our community centers, health clinics, arts and culture organizations and more are part of our infrastructure as a state. They're as vital as roads and power lines, but often unseen.

They carry out the daily work of strengthening, enriching, healing and repairing communities. When the nonprofit infrastructure is healthy, coordinated and connected, it makes our communities strong and vibrant.

NFF is a proud Member of Cal Nonprofits and is one of the 550 nonprofit and community leaders across the state that signed on to support the California Nonprofit Equity Initiative to advance a package of bills that address unfair contracting practices to better support nonprofits that are trying to meet diverse community needs.

We sincerely thank you for leading the passage of AB590 as it addresses one of the key aspects of challenges nonprofits face the reimbursement payment model for services that are rendered by your local nonprofit partners.

As a lender supporting working capital needs and a nonprofit financial consultant, we see firsthand the challenges that nonprofits in California face with payment delays after submitting an invoice, delays in the invoicing process from going back and forth on the details of the invoice, delays in contract execution after award and duplicative reporting requirements that all take time away from nonprofit leaders who should be focusing on the impact in their communities.

Today, NFF would like to share data on two important topics that warrant this Committee's attention and to support improved nonprofit partnership upfront capital through advanced payments for state grants and contracts prompt payments for nonprofits that partner with the state to provide critical services and appropriate indirect cost coverage to support the infrastructure of nonprofits providing these services.

To address these issues, we appreciate the leadership of Assemblymember Bennett, Senator Lamon and Senator Umberg working to advance AB 880 this year, and Assemblymember Hart advancing AB 1039. NFF has connected 10 National State of the Nonprofit Sector surveys over the last 15 years and we just conducted our 10th one at the beginning of 2025.

My team was proud to lead the survey and to partner with Cal nonprofits in being able to have a strong California representation.

The survey was open from January 30 to March 14, a critical period in this state, and I'm from Los Angeles, a critical time in LA and we had over 500 nonprofits of all sizes and sectors weigh in on their financial and operational health. The survey revealed data on what we already know and what's been shared today.

A sector that is foundational to communities working harder than ever for those they serve, but really experiencing a point of financial fragility. So what did we find?

Nonprofits need the State of California to take on leadership on prompt payments for their contracts so community leaders can focus on strategy and community impact versus managing the stress of cash flow. 26% of nonprofits in California get paid over 60 days late and how do they cope with the situation?

45% have to draw from existing resources like reserves. 1/3 have to take out lines of credit or loans to support their cash flow meaning they're paying interest on these delays that's not reimbursed. Oftentimes, 27% have to delay payments to their vendors and 22% have to pause or reduce their services when they face these delays.

Just over half of organizations have three months or less of cash to manage their operations, meaning if their doors close, they'd have three months to be able to continue. And 17% are existing on one month or less. This takes a real toll on organizational leadership as well as the communities they support.

The second thing that we found that we really want to emphasize today is that nonprofits also need their public sector partners to practice the OMB Uniform guidance issued in 2024 that raised the guaranteed De minimis rate for indirect costs from 10 to 15%.

One out of 10 organizations in our survey received 0 to 5% indirect rates on their government contracts. 49% received between 6 to 10% overall. That's 60% of organizations in California that are receiving less than the OMB guidance. Indirect rates cost cover the cost of necessary supports that nonprofits need to efficiently and appropriately run their mission focused organizations.

This supports critical organizational needs for them such as finance, compliance, legal, it, hr, communications. These are all necessary in the for profit sector, necessary for nonprofits to be able to make their impact. We you're about to hear more on the ground impacts of these challenges from community resource projects.

I just want to close by saying we really appreciate the attention of this Committee is paying to the nonprofit sector as it's key to California to be a thriving state. We thank you for your support in leading and passing AB590, which is a great first start that other states are looking to, other communities are looking to.

California is paving the way nationally for states and public sectors on how they can partner with nonprofits to support their success with the communities that both the nonprofits exist to serve. This was a great start. Thank you.

Thank you Ms. Cheng, Mr. Cruz, Chairman. Limon, Chairman Hart and Committee Members. Thank you for the opportunity to share my perspective as a nonprofit leader serving communities in the counties of Sacramento, San Joaquin, Sutter and Yuba. My name is Alfredo Cruz Jr. Executive Director, Community Resource Project.

We strive to enhance the quality of life and improve opportunities for people in need by delivering fundamental services for families and individuals through energy efficiency, health, education and career development. Nonprofits like ours have strong partnerships with several government agencies because we are trusted to serve community needs after decades of experience and local expertise.

As an example, in 2024 alone, our energy program helped nearly 2,500 families avoid power shutoffs and dispersed approximately 11.1 million in total energy benefits. Also in 2024, our health and nutrition program served more than 221,000 mothers, babies and children nutrition and food services, disbursing close to 17 million in WIC food packages to needy families and children.

While we're proud to support the underserved Californians through many federal, state and local contracts, the state could do more to address inequities by improving access and distribution of state resources to the communities.

When nonprofits like mine partner with the state to meet community needs, too often the contracting practices are burdensome and costly, making it harder for nonprofits to access and manage state resources. I'm here to talk about the need for reforming state government contracting practices with a focus on fairness, efficiency and stability.

As a Member of Cal Nonprofits, I am also proud to be on the Nonprofit community, one of the nonprofit and community leaders across the state who sign on to support the California Nonprofit Equity Initiative. I can say firsthand that the passage of AB 590 was an important step in the right direction.

For too long, the current system has created barriers for many of our most effective community partners. It's a system where nonprofits are forced to operate on reimbursement only models. They must front all the costs for new programs, hoping they'll be paid back later. This isn't just an inconvenience, it's a critical problem.

A reimbursement only model operating forces the organizations to take out high interest loans, or worse, prevents them from bidding on contracts in the first place simply because they don't have the cash on hand to get started. This model disproportionately harms smaller nonprofits, those in rural areas and those led by or serving people of color.

Those are often the very organizations that are close to the communities that need the Most support. But AB5990 changes this. The Bill expands the practice of providing advanced payments, which are often called startup funds, to all state grants and contracts. It clarifies that Nonprofits can receive 25% of a grant or contract's total value upfront.

Some of our contracts currently offer what is called working capital advances, and this greatly increases the potential of nonprofits like ours to ramp up and succeed in accomplishing the requested deliverables for our contracts. This isn't just a small change, it's a game changer.

It means nonprofits can launch a new program on day one without having to wait for a reimbursement check. It ensures that organizations don't have to choose between serving their communities and taking on crippling debt.

By leveling the playing field, AB590 opens the door for more nonprofits to partner with the state, but more state agencies need to incorporate the payment practice. Nonprofits need widespread implementation of advanced pay across state government to advance much needed programs and services.

Beyond advance pay and the challenge of reimbursement based funding, other legislative interventions are still needed to address the following contracting hurdles. First, delayed payments. There are frequently long waits for payments, further exacerbating cash flow problems. This creates the inability to pay staff and suppliers.

The most urgent threat is the inability to make payroll, a situation that can lead to staff departures and potential collapses in service. Nonprofits are forced to delay payments to their own vendors from landlords or program suppliers, potentially damaging our credit and reputation. This in turn creates a depletion of our reserves.

If we are focused and forced to drain our limited cash reserves to cover the gaps, we are left with no cushion for future emergencies or unexpected opportunities, as we saw earlier this year with our current federal Department of Energy Infrastructure Investment and Jobs act weather Assistance program.

The contract was frozen for about two months and we remained unpaid for work we had completed to the tune of approximately $660,000. We had to stop operating this contract as the payments had been delayed. Many clients in any of the crucial energy services we were providing were put on hold or cancelled.

Many clients needed this crucial energy service kept on calling and we weren't available in many cases. In talking to colleagues, some nonprofits had to resort to using credit cards to pay off vendors and subcontractors.

Some decided to eliminate crucial staff Members as at the time it was not known whether the program funds would be unfrozen or would ever receive payment for the work we'd completed. Staff that took over a year to train between necessary certifications and classes. Thousands of dollars were invested in each employee.

We've seen the unbelievably high cost of hiring, training, retaining key staff Members. This isn't new information, although the situation was a bit different. It shows the issues that could arise from delayed payments, which at times have been up to three months in our experience.

Second, inefficient indirect cost coverage the funding provided often doesn't fully cover the actual cost of delivering services. Rising operational costs are affecting our operations. Persistent inflation is increasing the cost of goods, services and program delivery, stretching our budgets thin.

Many nonprofit organizations are facing a surge in demand from their communities, often without corresponding increase in resources and lastly, workforce and staffing crises. The lingering effects from the pandemic, coupled with the heavy workloads and emotional strain have led to widespread exhaustion, making recruitment and retention of key staff very difficult.

A new issue brief from the Little Hoover Commission revealed that over half of nonprofits are challenged by payment delays, with nearly a quarter of them waiting for more than three months for reimbursement. Low compensation has always been a systematic issue with nonprofit organizations. However, over the last several years this has become more apparent.

We struggle to compete with for profit sectors and benefits and salaries as well, resulting in high turnovers and challenges in attracting qualified talent. In a recent report titled navigating workforce challenges 2025 trends and solutions for the Social Sector, it is noted through alarming data that 22% of nonprofit employees live in households that cannot afford basic necessities.

The problem is even more pronounced for minority workers, with 34% of black and 35% of Hispanics nonprofit employees facing financial hardships. The nonprofit sector is experiencing a particularly challenging time due to the federal funding freezes and political targeting from the current Administration.

Legislators should prioritize supporting nonprofits at this time, not making it more difficult for our work that we're completing. When we look at what makes our state great, we often see the work of nonprofits. They are the ones feeding families, housing the homeless, protecting our environment as well as so much more.

The sector is not just part of our state, it's essential to its well being. But we can't take the strength of nonprofits for granted. Policymakers must fully understand their challenges and successes, such as the contract I've presented on.

Only with a clear and complete picture can we take the steps needed to strengthen them, ensuring a thriving, a thriving future for all Californians. Thank you for your time. Thank you, Mr. Cruz. That was really well said.

Questions for the panel? Yes, Senator Limon.

So thank you so much and thank you all three of you for your ongoing efforts in this particular space. And certainly, I mean, I would agree, as one of the authors of the bills that you've mentioned, I would agree that there needs to be more legislation.

One of the things that I've grappled with, and I guess I'm going to invite you to grapple with me on this, is the state budget has been really challenging and it is, I think in some of the veto messages. It also that challenge is reflected in some of the veto messages that we've seen on these bills.

But certainly I'm still very committed to this. Are there in between steps that we can take that aren't the full, you know, the Full ask because I foresee that we're going to continue to have challenges at the state level for 2026, but we also want to make progress. And what does that look.

Like?

And I can also just invite you to think about it and we can have an ongoing conversation in the future. I just feel like I put you all on the spot. So that was not my intention as much as, again, just trying to think about how we grapple with that.

You know, we have a tough state budget this year. There's going to be a tough state budget next year. Probably 2027 may not be, you know, even better. And so we have this trend of tough, challenging years. And so are there in between steps? And it's not just on one thing. I mean, right.

We talked about what the office would look like, but there's also legislation in terms of that. You talked about the prompt payments and the. What can we. How can we think about this?

I think the answer is yes. You know, some of those would be interim steps between just purely permissive, as we have now for advanced payment and some form of complete requirement. And there's intermediary steps between those two ends of the spectrum. And the other is the sharing of information.

And it would be, I think, helpful for any and all state leaders to be active in that sharing of it when a good example is seen. And there are agencies, and we certainly talked about them, that have started to model some of these.

There have been experiments and let's pilot this and study it on the back end and see what we learn. And Little Hoover Commission was also mentioned. They've been a partner in trying to identify some of those. So there are steps that look more like organizing and we're certainly happy to pull our weight and then some on that.

But I do believe that in the long run, if you're going to solve the problem, it's got to be normalized across the entirety of the state. So whether that's stick carrot or a little bit of both, I think it's. It remains to be seen.

I mean, I'll just echo what Jeff's sharing as far as allowing for the advance payment towards requiring the advance payment as an option. I think that's been discussed a lot by the nonprofit leaders in Los Angeles to be able to have that option and to be forthright.

So it's fair so that it doesn't have to be just because you're in the know and you're wilfredo and, you know, you can ask for it that you're going to ask for. It, but smaller organizations who just shy away from contracts at all, but they're doing that amazing work and you want to partner with them.

If it's on the form, like, you could get 25% advance pay. And my thought is, you know, that's the amount that they're going to be paid anyway.

It's just the timing of them getting that so that they don't have to front the costs of a new program and hiring staff and take the risk of when that payment's delayed. And my hope is that if it was required, adopted across all agencies, there was direction to do that.

And the reasons why that that will allow for more nonprofits to be able to access that and just have a fair chance at when they launch those programs, too.

Yeah. And to add on to that, I know delayed payments is pretty rough, especially nonprofits are exactly that. Nonprofits don't tend to have a lot in the reserves. So when you look at an agency that's operating, ours is a little bigger. But, you know, it's not the case for many nonprofits.

You're operating a contract for 23 months and not being paid. You have to realize that that is hitting that agency in terms of the loans you're taking, the interest rates, what they can provide.

So it's really, for me is realizing what can be done to really, if not get rid of, diminish those delayed payments and just figure out how fast can we get paid and put those under the contracts.

Because per the contract, you know, you're supposed to be paid while the work, after the work's been done, that's supposed to be, you know, a Max in 30 days is what we see for the most part. Right.

But anything past that really puts smaller agencies in a race to, you know, to really have to, I hate to say that, but cancel the kind of services they're providing. And, you know, if you don't got money, you can't pay staff.

And if you can't pay staff now, you took time to train staff and how much, like I said earlier, how much did you pay to train staff, the certifications and all that. But they also have to be paid. They also have to live their lives.

So it's really finding a way to figure out how we can stop, you know, delaying payments to our agencies. That's really what I'd like to see.

Thank you.

You know, I think this panel and the previous panel overlap on the sense that there's a, this is an opportunity to do things differently than we have because we have a crisis and that we shouldn't just do things the way we have always done them.

We need to respond to that crisis by helping nonprofits do the work that we depend on.

And it is so obvious that the stress and the distraction of focus and the trepidation that comes from delayed payments, you know, failure to get advanced payments, you know, is the minimum that the state ought to be solving right now in this crisis. And I'm glad we're having this hearing to illuminate this issue.

You know, I hope that everybody at every level of government is watching to say, you know, what can we do to make things better in the moment right now? You know, we have to be better than what we've been. And this is a really simple, logical, common sense way that has been demonstrated to be successful.

And, you know, it should be a minimum. I'm curious, Ms. Chen, because you have the lens of being able to look across the country. Are there other states or other communities around the country that are doing a better job that we should be looking to as examples?

I will say there are other states who are able to, if the it's really egregious as far as how delayed their payment is, that that agency needs to pay and cover the costs of those interest fees. And I think that is the stick.

That's the stick towards agencies to really figure out what is hampering you for paying, as your contract says that you should be paying in 30 days.

And I think that's an interesting opportunity that feels like, you know, to put light a little bit of a fire towards, you know, what could you do internally to really move that invoice faster, to be able to make sure you're respecting the time of the team that's doing the work.

And it's interesting, there's other things that are going further as far as increasing that indirect rate and allowing for them to be able to really cover those costs. I think that is being seen in other states as well at the state level.

But I know that Jeff also has insight to all the different nonprofit associations and other policies that might be happening.

Yeah, as you suggested, this is not a California only issue. I think we have a particular challenge when it comes to the timeliness question. Compared to most of our state peers, not all. And I think we can divide this into a couple of different categories.

So one is the timeliness of payments, both advance and just timely payment as per agreement. And it seems rather indefensible from our perspective that anyone would suggest it is okay to not honor that agreement. The other category Though I would would say is the question of indirect cost, or what we would call real cost rate.

And you know, it's been said before, I'll say it here. You know, you don't walk into a coffee shop and ask how much for your fancy coffee? And they tell you it's $4 and you say, great, I'll pay you 275. Because I don't feel like paying for that part or that part. I mean, that's not done.

And yet in the nonprofit sector, some funders at state and even in other areas believe that it is appropriate to suggest that. So what we, I think need to change is a narrative that that's, that's something that's on the table.

And it's really not if we're going to treat the nonprofit sector as the businesses that they are, that we just need to do so. And if it takes legislation to do it, that's one.

I think modeling is really powerful though, and I think that's something where every state leader could help by showing examples of where it's done well, because once people see it and it's doable, there's no entity that couldn't do it. It's just a matter of often getting caught in long standing practice or habit.

And we have to find ways to get past that.

And your first point about the Office of Non Powerful Empowerment at the state level, to have that focal point and to have that advocacy within the State Administration pushing these issues, making sure that people are accountable, that there is progress, not just, you know, reacting to legislative efforts, but to lead in this moment of a crisis, to make services available, to educate all the constituents that need them right now.

Assemblymember, did you have any questions you wanted to add or any comments?

No, I was just happy to be able to join at least for panel two, and really interested in the nonprofit space and how much positive reform needs to happen to help them operate and be functional in the State of California and to elevate new nonprofits to emerge.

We have to make it seamless and easier for them to operate so that new ones can grow even in the looming landscape of, you know, not looking so great for funding for a lot of nonprofits.

So I think the more nimble we can be to help protect, preserve and grow for the short term and then the long term is super critical. So just happy to be part of the dialogue and broadening my awareness of where we need to lean into for public policy.

Thank you.

Thank you for those comments. I think we both are challenged here with time. But are there any concluding remarks that you'd like to make?

Just want to thank you all for this hearing, for participating. Thank everybody that is here. Thank you.

And I will just echo those comments too. This has been really illuminating and helpful and appreciate you taking the time. Come to Sacramento and share your stories with us and we'll continue to persist on all the effort and advocacy that we're doing. So thank you.

All right. We are.

Yeah, go ahead.

We're going to welcome public comment if folks just want to do A quick, quick 30 seconds.

Thank you very much. Vanessa Kahina with KP Public Affairs on behalf of Vision and Compromiso, the statewide network of 4,000 promotoras and community health workers. Vision and Compromiso is the convener of a group called La Alianza which is a coalition of expert community based nonprofits across California with a long history of integrating the promotora model.

We build the capacity of other organizations that do have a lot of the technical difficulties that you heard about in some of the other panels today. In fact, some of your colleagues are having a hearing today on some of the terrors and horrors that are going on as a result of immigration raids.

Promotoras, community health workers can be puentes De salud in all of this, but we do look towards having the bigger bolder scenarios of having these hub and spokes models and having a responsive state government that knows how to work with community based organizations.

So with that we look forward to working with this Committee and moving the work of CBOs forward. Thank you.

Great. Thank you and echo their wonderful work.

Good afternoon. Rachel Mueller, on behalf of the California Coalition for Community Investment, CCCI. We're a coalition of more than 50 mission driven lenders, CDFIs that support economic opportunity across the state.

Nonprofit CDFIs like ours are financial first responders that invest in and partner with small nonprofit organizations to help build affordable housing, invest in small businesses and entrepreneurs and address or expand and advance child care healthcare services and address disasters and pandemics in across the state in disadvantaged communities.

Just wanted to echo and uplift the comments of California nonprofits and NFF and echo their comments and their policy recommendations. Thank you so much.

Thank you. Good afternoon Madam Chair and Members. Jennifer Fearing, longtime Sacramento advocate for California Association of Nonprofits. I just wanted to offer a brief thought that occurred to your question about what are bites we can take.

I'd say with respect to prompt pay, I challenge the notion that the state is truly that it would be a budget impact unless of course it's okay for the state to earn interest on late payments to nonprofits, which we would humbly submit is not an equitable or fair way for the state to, like, protect revenues for the state.

However, with respect to advance pay, you know, a thing that we're hoping to look into in the coming year is whether some of the requirements that were part of a pilot advanced pay program that were mirrored in AB590, whether there's actually costs on both sides for the state and nonprofits, and whether all of those requirements are necessary and we could reduce costs, advanced advance pay policies for the state if we, if we trim.

So it's something we should all be looking into. Thank you for this. Thank you.

Hello. Chair Limon, Committee Members, Brian Miramontes of Bastmi California, representing 300,000 workers in the state, including both workers employed by government and also workers employed by nonprofits across the state. Our Members in both sectors work together, responding to disasters, serving families, experiencing homelessness, and providing mental health services.

When these partnerships work well, as we've heard today, they exemplify California's values of innovation and community care. That's why we must address the systemic issues undermining these partnerships. Our Members, social workers, case managers, community health workers, often work side by side, doing identical work for California's most vulnerable residents. The reality is stark, though.

Nonprofit workers consistently earned significantly less wages and less benefits for the same essential services that your constituents depend on. The Little Hoover Commission, as described in the background error, did confirm what impacts your districts directly when public funds flow to organizations that underpay frontline workers while maintaining substantial administrative overhead, including Executive compensation.

We're not maximizing California's investment in these critical services. Services and your constituents deserve compensation that reflects both the value of the work and California's commitment to economic justice, regardless of the employer.

I'll just wrap up by saying as policymakers, you understand that accountability protects both taxpayers and service recipients, and a strong public sector workforce must remain the foundation, with nonprofit partnerships supplementing and never replacing direct public employment. And when contracting is appropriate, workers must meet the same rigorous standards as public employees.

And we must prevent these contracts coming through from the state to circumvent worker protections or eliminate jobs that should remain in government control.

Thank you.

Thank you.

Good afternoon, Madam Chair and Committee meeting Members. My name is Shonda Moore and I represent California Humanities, our state's nonprofit partner of the National Endowment for the Humanities. We Fund filmmakers, libraries, and community based nonprofits across every region of California, helping tell stories that connect us and strengthen our civic life.

But today I'm not here to just speak about our organization, but the sector as a whole. Though only 5% of the GDP, the nonprofit sector's importance cannot be overstated. And we are the responsive R and D arm of the public sector, A testing ground for new ideas as well as old wisdom and new context.

We are the connective tissue between government and the grassroots. And we don't do this work just to enrich ourselves, but to strengthen communities. Across California right now we're seeing a broad amount of federal attacks on culture through funding. Attacks with the neh, nea, the Smithsonian, and even public media.

These cuts weaken our very institution that preserve our history, tell our stories and connect us as Californians. California can lead by creating state level cultural hub or another, you know, kind of bring trust that unites cultural nonprofits, culture bearers, artists and community leaders.

This would give us a stronger collective voice and help us build new narratives about why culture matters and protect the institutions our communities rely on. Nonprofits are direct pipeline to your constituents. The public sector is stability. Our role is to be nimble and responsive. But we share one bottom line and that is the well being of Californians.

This moment matters and we're calling on you to help strengthen and give nonprofits the support and infrastructure that they need to keep California going. Thank you very much. Great.

Thank you so much. Again, I want to thank everybody who has been here today who has participated in the Joint Hearing for the California Senate and California Assembly Select Committees on the nonprofit sector. We are going to come to an adjournment. Thank you.