Follow Up on Virtual Briefing: Unemployment and Self-Insured Nonprofits, 7/15

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The virtual briefing, Unemployment and Self-Insured Nonprofits: Ending the Pressure to Lay Off More Employees, convened on Wednesday, July 15. It was the third of four briefings conducted as part of the #Relief4Charities Week of Action.#Relief4Charities This is a quick recap for those unable to attend and shares useful resources on the issue.

The speakers presented data and information about how their organizations are struggling to retain staff and maintain operations in the face of the COVID-19 pandemic. They each talked about the impact that burdensome unemployment costs are having on their ability to address immediate needs in their communities. Combined, they made the case that Congress needs to increase the federal unemployment insurance reimbursement for self-insured nonprofits to 100 percent of costs.

The Policy Ask

As explained in the new Nonprofit Community Letter, nonprofits are asking Congress to increase the federal unemployment insurance reimbursement for self-insured (reimbursing) employers to 100 percent of costs.

This policy enjoys broad bipartisan support among Senators and Representatives, and has been endorsed by the National Governors Association and the U.S. Chamber of Commerce.

Speakers

  • Chuck Collins, CEO, YMCA of Metro San Francisco, California

Chuck Collins opened with a staggering statistic: The San Francisco Metro Y is being billed $1 million per month from the state for unemployment benefits paid to furloughed or laid-off employees. This compares to unemployment costs of $575,000 for all 12 months of 2019. Nationwide, he said that the YMCA saw an excess of $800 million in lost income in just April and May, resulting in the closure of wellness facilities, camps, etc. Revenue losses throughout the YMCA network nationally are projected at $2.5 billion.  He explained that compared to today’s economic climate, the 2008 to 2010 recession “was a slow-moving target” for which the San Francisco Y was “able to make adjustments in terms of staff sizing on a much more normalized basis.” He observed: “But the tectonic nature of the pandemic caused a very, very huge fracture in our workforce,” that “is having a devastating impact on our fiscal bottom line and financial health.” This is most troubling, Collins explained, because “the economy really does depend on nonprofits helping to share the burden of the government.”

  • Jonathan Sturgis, CFO, Boys & Girls Clubs of Greater Houston, Texas

Jonathan Sturgis shared that the Greater Houston Boys & Girls Clubs have avoided layoffs thanks to a Paycheck Protection Program loan, but that the future is uncertain now that those funds have been spent. Nationally, Boys and Girls Clubs have experienced a loss of $137 million from local revenue sources, and many of those Clubs have had to make tough decisions already about staffing costs. All Boys and Girls Clubs will be charged an expected $4.9 million compared to the last period of $192,000, or 26 times higher than previous experience. “No one would have envisioned the total disruption of the self-insured unemployment model that we are seeing now,” Sturgis said, noting the distinction from other types of risk. “I’m down in Houston, Texas, and I’m not going to take a risk on hurricane or flooding down here.” He concluded, “no one would have ever envisioned, or any actuary out there who does actuarial stuff for a living never would have thought this would have happened going from a low experience rating overnight to having an extreme unemployment rating.”

  • Emily Turner, Executive Director, Ohio Association of Goodwill Industries

In addition to sharing that unemployment costs are ten times greater than last year, Emily Turner spoke directly to the question of why nonprofits that elected to self-insure should now receive relief from Congress. “The election to become self-insured was a very, very smart move in normal times. But nobody planned for a pandemic. Nobody planned to lay off 50 percent or 95 percent of their workforce all in one fell swoop” as has happened in Ohio. She said, “Our accountability is to the community. And, so, if we have an opportunity to reduce our costs, we need to do that. And not only because it makes good business sense, but also because we are accountable to you, the donors, … for all of our revenue and support. …This ability to be self-insured has been given to nonprofits, and … in most cases, it is our responsibility to follow through and elect that option so that we can be responsible and accountable to the public as a charity.” Yet now the unexpected pandemic is undercutting those prudent financial decisions made on behalf of the community.

  • Michael Weekes, CEO, Providers’ Council (Massachusetts), Moderator

Weekes related the experiences of several human service providers in Massachusetts, including a very large nonprofit in the middle of the commonwealth “whose unemployment costs in April 2019 were about $27,000, and this past April, they got a whopping bill of $279,480.”  He stated, “This is money that was not budgeted, was not expected. Of course, no one could expect that.” Weekes explained that “what we have here is a triple whammy…. You close programs, which means clients are losing services, and many of the services are mental health services to people with intellectual disabilities, child welfare, domestic violence, autism – a whole range of services will either get reduced or disappear. Clients will lose. The second whammy is you’re now laying off staff because you’re closing services and programs. That means there’s no revenue. And that means your unemployment costs will go up because now you’re laying off people because you weren’t able to pay your unemployment costs. And then the third whammy is the government itself. Because now, for many of them, who already have low wages, when you lay off people in this sector, more than likely, they’re right near close to being eligible for client services themselves. They become clients and consumers and ask for help as well. It’s a triple whammy that can be resolved” through federal coverage of the unemployment costs.

Additional Resources

  • New Nonprofit Community Letter, July 13, 2020, signed by nearly 4,000 organizations from all 50 states.
  • Unemployment Insurance: Types of EmployersSelf-Insured Nonprofits and Unemployment Insurance, article by David Heinen of the North Carolina Center for Nonprofits, March 23, 2020, providing an overview of the law of unemployment insurance as it relates to charitable nonprofit organizations.
  • Presentation slide explaining the three types of employers under state unemployment systems and the effect of CARES Act provisions.

Contact

For further information, contact David L. Thompson, Vice President of Public Policy, National Council of Nonprofits, dthompson@councilofnonprofits.org.

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