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Minimum Wage Hike Puts Nonprofits in an Awkward Position

Many nonprofits support wage hikes because they help the populations they serve but the increases can create challenges for the nonprofits themselves.

Many businesses upset by the new minimum wage hike have a standard warning: We’ll have to raise prices to make it work. But that’s not an option for most San Diego nonprofits.

They’ll either need to pull in more cash, or cut back.

Few San Diego nonprofits have spoken publicly about what the escalation to a $15 statewide minimum wage might mean for them. Some are backing both the state increase and the local one on the June ballot.

But some nonprofit leaders are openly grappling with what those increases mean for their workers and the people they serve.

The increases can put nonprofits in an awkward position: Many nonprofits support wage hikes because they help the populations they serve but the increases can create challenges for the nonprofits themselves.

Debbie Case, CEO of Meals-on-Wheels Greater San Diego, confesses her nonprofit – which has more than doubled the number of meals it annually served seniors in the past six years – may need to start wait-listing new clients.

The group’s budget is already tight and hiking wages only adds pressure.

“There’s very little wiggle room, so the only way to do it is we have to put a halt on taking clients in,” Case said.

Home of Guiding Hands CEO Mark Klaus fears cutbacks.

Klaus’ organization serves more than 1,500 developmentally disabled adults, teens and children annually at 31 group home across the county and a larger campus in Lakeside. His organization’s budget is largely dependent on reimbursements from the state Department of Development. The state agency is expected to increase its reimbursement rates along with the minimum-wage hikes.

Which brings us to Klaus’ major dilemma, which mirrors that of many business owners. The majority of his workers aren’t paid minimum wage. Many have put in years on the job and have specialized skills and training. But if Klaus’ entry-level workers get raises, he’s convinced it’d only be fair to give those who now make just over the eventual minimum wage salary increases, too.

So he’s estimated resulting wage hikes at the agency’s 31 group homes alone will cost $2.1 million annually.

Klaus isn’t optimistic about raising the cash to make that happen, or that state reimbursements will put a significant dent in the problem.

“At some point we’re going to be forced to close programs,” Klaus said.

Yet nonprofits like Klaus’ aren’t coming out in droves to oppose the wage hikes.

CalNonprofits, the state nonprofit industry’s lobbying arm, conditionally endorsed unspecified wage-hike proposals last year. Weeks before that announcement, 77 percent of nonprofits that responded to a CalNonprofits survey backed an increased minimum wage.

CalNonprofits policy director Nancy Berlin said about a quarter revealed they’d need to pull in more cash to make it work.

More recently, most nonprofits have been mum about how a $15 minimum wage might affect them.

Berlin said the silence was both tactical and philosophical.

“(Nonprofits) were nervous but they didn’t want to look like they were opposed,” Berlin said. “It didn’t look like the right thing to do.”

After all, Berlin said, most nonprofit leaders who have communicated with CalNonprofits do believe raising the minimum wage is the right move.

Some are just worried.

CalNonprofits has taken steps to try to help. Last year, as city and state groups debated minimum-wage ballot measures, CalNonprofits circulated an open letter to California foundations urging them to boost their grants to nonprofits to help them cope with minimum-wage hikes.

Laura Deitrick, who leads the University of San Diego’s Institute of Nonprofit Education and Research, said she hasn’t heard major outcry locally about the wage hikes.

Her department recently released a survey that aims to gauge local nonprofits’ feelings about the wage hikes, among other issues.

Deitrick said the challenge for local nonprofits is clear: “The cost of (workers) is going up and in the case of nonprofits, you can’t hand that off to your customers.”

Deitrick said she believes most local nonprofits can successfully shift up their wage structures.

That’s not to say it’ll be easy.

“It’s going to be challenging and it’s complicated but it doesn’t mean that it’s not the right thing to do,” Deitrick said.

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