Amid the many bars, restaurants and nightclubs of Manhattan’s Lower East Side stand some of the city’s oldest settlement houses.

Tucked away at 80 Pitt St., near Manhattan’s largest concentration of public housing buildings is Grand Street Settlement, a nonprofit, community-based organization that dates back to 1916. About a half-a-mile away at 197 East Broadway is the headquarters of Educational Alliance, a 120-year-old Jewish nonprofit organization that runs 49 programs at 30 locations. These institutions have been among the few safe havens for lower-income immigrants and their families in an increasingly gentrified neighborhood.

Headquarters of Educational Alliance. Photo: Shanthi Venkataraman

Spiraling rents and upscale boutiques tell the tale of a prosperous Lower East Side. Still, nearly 30 percent of the residents live below the poverty line, most of them are Chinese and Latino immigrants. With multimillion-dollar budgets, Grand Street Settlement and Educational Alliance reach out to tens of thousands of these residents, offering services ranging from early childhood and after-school programs to mental health counseling, legal services and senior care.

But sustaining these services is proving to be a challenge in this recession, with donations from foundations and donors dwindling. And many nonprofits fear that the worst is yet to come, with cuts in government funding adding to their woes.

“It is like the perfect storm. We cannot seem to catch a break,” said Allen Payne, director of development and public relations at Grand Street. The nonprofit services more than 10,000 clients on the Lower East Side and has an annual operating budget of $11 million, more than half of which is funded by government contracts.

The New York Senate on Dec. 2 approved a measure to reduce the state’s budget deficit by $2.8 billion. A week later, Gov. David A. Paterson announced that he had directed budget officials to begin reducing aid to local governments, education programs and nonprofit service providers. The move places a heavy burden on the budgets of these settlement houses, which rely significantly on government aid. Government contracts often run into several hundred thousand dollars and are therefore, harder to replace with contributions from other sources.

Nonprofits are starting to see almost all their funding options dry up, even as demand for services is on the rise. Until now, they have managed to power through a challenging funding environment by reducing staff, trimming employee benefits and cutting non-essential components of programs. But with an already stretched workforce, nonprofits may be forced to withdraw even core service offerings in the next wave of cuts.

The pressure on nonprofits has been building for quite sometime. In the past 16 months, Grand Street has lost a total of $2 million worth of previously budgeted funding. It has had to close programs such as L.E.S. Teens, an after-school program that lost government support. Two other youth programs run by Grand Street absorbed the 60 students enrolled in L.E.S. Teens. But the program’s employees were laid off because funding was tied to the government contract. Grand Street could not specify the number of employees affected.

The nonprofit also lost Lehman Brothers as a sponsor for its College and Career Discovery Program after the investment bank filed for bankruptcy in September 2008. Grand Street was able to plug the $50,000 hole with support from other foundations. It continues to run the program at three schools and has about 500 students.

Educational Alliance, which operates on an even larger scale with an annual budget that exceeds $30 million, also has been affected. Earlier this year, its city-sponsored child- care center, which served 119 children, lost funding to the tune of $114,000, a tenth of the program costs. The organization managed to absorb the cuts by taking fewer field trips and reducing kitchen staff. “We did our best to reduce less essential expenses that don’t diminish the classroom experience,” said Daniel Rosenthal, senior vice president, external affairs, at Educational Alliance. “But it’s not possible to absorb a cut of that size without effect.”

Other organizations have been similarly affected, according to an October 2009 survey conducted citywide by United Neighborhood Houses, an umbrella agency of 37 settlement houses and community organizations.

Since September 2008, the beginning of the recession, 90 percent of UNH members said foundation grants fell; 60 percent said government funding declined; and 55 percent said individual contributions had dropped. As a result of reduced resources, more than 75 percent of UNH members have laid off staff and delayed or reduced planned salary increases.

During the past 18 months, Educational Alliance has laid off 10 percent of its full-time workforce. Management and nonunion employees have been asked to forego raises. Benefits under the health plan have been reduced. Grand Street has tried to keep layoffs at a minimum and enforced two-week unpaid furloughs to limit staff costs.

Now nonprofits everywhere are bracing themselves for more reductions. Youth services, after-school programs and senior care are generally among the programs most vulnerable to cuts, as government spending on these programs is discretionary.

At Educational Alliance, the drug-counseling programs may also come under pressure. Addiction services are funded by the New York State Office of Alcohol and Substance Abuse, which faces an $18 million cut in the latest reduction measures.

At Grand Street, senior services programs are estimated to be most at risk, with a $41 million cut to government spending on health care and aging programs outside Medicaid. “The senior population are always among the first to go on the chopping block. They are a very vulnerable population,” said Payne of Grand Street.

Grand Street celebrated the fifth anniversary of its Baruch Elder Services Team program in 2008. Courtesy: Grand Street Settlement

More than 15 percent of the neighborhood’s population of 85,000 is older than 65, according to 2000 Census data. And with its location smack in the middle of a number of public housing projects, Grand Street serves a large, lower-income, elderly population.

In the past year, state funding for Naturally Occurring Retirement Communities, or NORC, has been cut three times, according to Miriam Colon, director of senior services at Grand Street. That has created pressures both on staff and on the quality of services Grand Street can offer.

As it is, the senior services center is short-staffed, with its four staffers serving the needs of more than 2,000 seniors. Most of their clients are Asian and Hispanic. Yet, there is just one part-time employee who speaks Chinese and she juggles work at three sites.

Colon fears that further cuts would limit the nonprofit’s ability to reach out to the older community, most of who have significant language barriers and live in isolation. “If we do not have adequate staffing there is a risk that someone will fall through the cracks,” said Colon.

Colon hopes that the day will not come when she has to turn people away. Earlier this year, the organization had to cut activities such as yoga and dance classes to contain costs. Some seniors who are aware of the funding difficulties are stepping up with their own contributions of a few dollars to keep popular classes going, even though they can just barely afford it.

But activities keep them busy. Maria Martinez, 83, spends almost all her day at the Baruch Elder Services Team center on Columbia Street, where she plays bingo in the afternoons and takes art classes. She also volunteers to help reach out to some of her homebound peers. “This is my life. I cannot stay without this program. It would be like burying me alive,” said Martinez, at the prospect of funding cuts.

But it seems that little can be done to preserve these programs if they lose more funding. Said Payne, “It is not like we could shave off some things around the edges, give one staff member more responsibility…we have tweaked that already. Everybody is really stretched.”

Deciding which programs to cut is no easy choice when demand for services is so overwhelming. According to Payne, the demand for Grand Street’s Single Stop services, which helps with unemployment claims, legal issues, filing tax returns and so on, has grown exponentially.

At Educational Alliance, 400 children are waitlisted for the Head Start program. The waiting period for the organization’s subsidized housing facility is seven years.

In a way, nonprofits always have been used to doing more with less. “We have always had more demand than our funding allowed for,” said Robin Bernstein, executive director at Educational Alliance.

Only now, these organizations risk turning away even their existing clientele.

Nonprofits now seem to be pinning their hopes on advocacy efforts in Albany. In the past year, United Neighborhood Houses has campaigned successfully on behalf of its members to restore spending to youth services and senior care programs. But according to Nancy Wackstein, its executive director, the advocacy efforts might not work this time around. “One of the reasons our advocacy efforts were successful was that the city was able to use federal stimulus money to make up for the gaps in its spending. That is not an option now,” she said.

Wackstein believes that nonprofits will have to make some hard decisions about whether they can afford to deliver the same quality of service for the funding they are likely to receive.
“I think a successful organization in these times will have to determine what is core and essential about their work, and be bold enough to shed what is not.”