‘Our hearts won’t let us walk away’: Nonprofits still seek parity

Debbi Lerman’s message, like her colorful hair, is hard to ignore. As director of the Human Services Network, a coalition of nearly 80 nonprofit agencies in San Francisco, she recounts how frontline workers at these community-based organizations have struggled to get paid the same wages as their city-employed counterparts. This is an inequity her network has fought to remedy since its founding in 1997.

“It is a universal issue across our sector that our nonprofit contractors are underfunded and unable to raise wages to the level where they can compete with the city, with the public sector,” she said.

The largest disparities are seen between salaried, certified professionals like psychologists and nurse practitioners. Most nonprofits can’t even begin to compete with the salaries offered by the city, for-profit entities, and other employers.

At one nonprofit, the therapists make $65,000 a year. Kaiser recently ran a posting for the same job, for $90,000. 

Over the summer, SEIU Local 1021 compared salaries of nonprofits that the union represents with compensation of equivalent city positions and found an even greater gap: Nonprofit workers made, on average, 45 percent less than city workers with the same jobs.

“The solution to these problems is not lower labor standards,” said Nato Green, a Local 1021 labor organizer who crunched these salary numbers. “Creating more poor nonprofit workers isn’t a way to solve social ills. We want to expand the services, but improve labor standards at the same time. I think that’s both necessary and obtainable.”

The disparities remain. There is a pay gap at all levels of the nonprofit pay scale, which feeds into a staffing shortage, and fragile business models for nonprofits. The latter are put in further peril by having to front costs for public services until funding comes through.

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Various efforts, such as recent amendments to minimum wage requirements set in 2000, have set about improving the situation, but nonprofit leaders and advocates like Lerman say these are only band-aids. The system needs a structural overhaul. 

San Francisco’s use of nonprofits to provide essential services, such as addiction treatment and supportive housing, began long before the pandemic. The crisis of the last year, however, has underscored the city’s reliance on nonprofits to orchestrate everything from Covid-19 testing to vaccinations.

Community-based responses to the perception of governmental neglect have shaped and grown the nonprofit sector since the 1950s. A history of nonprofits in San Francisco written for the Human Services Network described how “both the City and patients benefited” from such efforts. Nonprofits leveraged volunteer workers as well as private funding, and the city saved money by outsourcing this work to nonprofits for temporary response efforts — some of which became permanent. The nonprofits, however, suffered. 

Lerman recently joined a panel with California Association of Nonprofits (Calnonprofits) CEO Jan Masaoka, another nonprofit veteran, to address these historic implications. 

“Contracting should be fair,” Masaoka told Mission Local prior to the panel. “Smart governments know nonprofits will do the work, and do it well,” regardless of whether they give them enough money, she said, articulating a sentiment other nonprofit leaders had expressed. “Our hearts won’t let us walk away.” 

Now the question Lerman, Masaoka, and others are asking is whether there will be a reckoning with the inequities of that system. So far, the city’s response has been piecemeal.

Rather than a comprehensive strategy, the city has cobbled together such pieces as the Minimum Wage Ordinance to mandate nonprofits pay workers on contract a livable wage and the Cost of Doing Business (CODB, formerly Cost of Living Adjustment) funds to cover for inflation over the life of contracts. 

Where the Minimum Compensation Ordinance is welcomed in theory, Lerman noted how the current rate of $17.34 per hour — around $35,000 a year — is hardly livable in or around San Francisco. 

Even when unionization and legislation succeed in requiring nonprofits to pay their employees more under city contracts, Lerman pointed out, nonprofits may still be left to foot the bill.

“Individual organizations might be able to go to the city and negotiate for more money, but that doesn’t solve the problem universally,” she said, adding that “the city is not committed to funding those raises.” 

The Cost of Doing Business inflation allowance allocated by the Mayor’s Office, while appreciated, is also difficult. “We’ve had to go back and fight for it every year, it’s not automatic,” explained Lerman. 

Nonprofit leaders and their advocates want to see high-level systematic change where necessary increases are institutionalized and automated and the existing pay gap is addressed, not just prevented from widening. 

So far, these things are not happening. 

The city’s budget is set by the Mayor and Board of Supervisors, and the Board has commissioned a report to address nonprofit compensation and sustainability. 

Two policy options were presented to the Board’s Budget and Appropriations Committee at an April hearing requested by Supervisor Matt Haney. The recommendations were far from a revamped system: One covered minimum wage adjustments and the other advised more data collection.

Supervisors Haney and Hillary Ronen have worked on Mental Health SF legislation that stipulates wage parity, but nothing is binding. In short, there is no permanent mechanism in the city’s budgeting process to ensure nonprofit compensation equity.

Ronen had considered introducing legislation to make Cost of Doing Business adjustments permanent, essentially removing them from the mayor’s annual discretion. The effort fell by the wayside when the mayor introduced adjustments for this budget cycle.

It seems a primary reason the Controller and Mayor have refrained from permanent increases is for planning purposes. “It ties their hands [for additional funding] in future crises, like this pandemic,” said Santiago Lerma, Ronen’s legislative aid.

The legislation, which Ronen may revive and  introduce in the upcoming budget cycle, would require each city department contracting with nonprofits to require automatic Cost of Doing Business adjustments, with exact calculations for the Board to incorporate into their budget recommendations. It would also require explanations for cycles when departments or the mayor do not allow for adjustments, such as during recessions or budget shortfalls.

Haney said he is continuing conversations with nonprofits and labor unions about nonprofit and nonprofit job sustainability, and Supervisor Gordon Mar also expects to be more active during the upcoming budget process. “This is the right time to be asking those questions,” said Mar.