BILL NUMBER: S7001
SPONSOR: MAYER
 
TITLE OF BILL:
An act to amend the state finance law, in relation to contracting
between state agencies and not-for-profit organizations; and to repeal
subdivision 7 of section 179-v of such law relating thereto
 
PURPOSE OF BILL:
To make changes to the prompt contracting law to address nonprofits'
challenges with state funding.
 
SUMMARY OF SPECIFIC PROVISIONS:
Section 1 amends subdivisions 9 and 14 of section 179-q of the state
finance law to include within the definition of "renewal contract" a new
contract providing similar services delivered under a previous contract
and to amend the definition of "written directive" to require the inclu-
sion of a schedule of invoices and payments within the written directive
and to require written directives to include instructions on how to
access the not-for-profit short term revolving loan fund program.
Section 2 amends subdivision 1 of section 179-s of the state finance law
to establish rules for when an agency requests that a not-for-profit
commence services prior to execution of a contract, including, estab-
lishing a work and payment schedule, and requiring late payments be
subject to interest.
Section 3 amends subdivisions 1, 2, 3, and 4 of section 179-u of the
state finance law to establish automatic advance payments after a
contract has been executed and to establish rules for advance payments,
including the creation of a written directive, when the execution of a
contract is delayed more than 30 days.
Section 4 repeals subdivision 7 and amends subdivisions 1 and 2 of
section 179-v of the state finance law to remove the ability of a state
agency and a not-for-profit to waive interest due; to require all inter-
est due to a not-for-profit be paid in full with the first payment made
to the not-for-profit; and to establish that interest due shall be at
the current prime interest rate.
Section 5 amends subdivisions 1 and 4, and adds a new subdivision '5 to
section 179-z of the state finance law to increase the maximum loan
amount from one-half of the first quarter payment to the full contract
amount and to require that information on the revolving loan funds be
provided to every not-for-profit that receives a written directive,
contract, or renewal contract.
Section 6 amends section 179-aa of the state finance law to require the
not-for-profit advisory committee to comment and report on the not-for-
profit revolving loan fund and to require that the advisory committee
reports be made available to the public via the web.
Section 7 amends subdivision 3 and adds new subdivisions 4 and 5 to
section 179-ee of the state finance law to establish a time period for
approval of contract modifications and to require that modification be
deemed approved when a state agency fails to respond to a request for
modification; to establish that the minimum indirect cost for a not-for-
profit be 15%; and to define certain expenses as direct expenses.
Section 8 amends paragraphs (a) and (e) of subdivision 2, and subdivi-
sion 3 of section 179-f of the state finance law to clarify that
contractors who do not receive advances may pay subcontractors after
receipt of payment on an invoice and to clarify that stop the clock
notifications should only be used for material defects, not scrivener's
or rounding errors.
Section 9 sets the effective date.
 
JUSTIFICATION:
New York State has long contracted with not-for-profits to provide crit-
ical services in communities throughout the state - from early childhood
education and mental health services to homeless housing programs and
substance abuse treatment. These social safety net services are provided
as an "extension of the state" to millions of New Yorkers every day.
But delays in receiving funds to provide such services and a cumbersome
contractual process have long challenged not-for-profits. A recent
statewide survey of not-for-profits found that 33% of those awarded
state funds reported being owed more than $58 million in payments by New
York State for services already delivered. Using these findings for all
contracts held by nonprofits, New York State owes nonprofits an esti-
mated $650 million statewide.
Delays in reimbursement regularly last months and can sometimes last
more than a year. Not-for-profits are often forced to pay interest on
credit lines so they can make payroll while waiting for reimbursement by
New York state interest that is not reimbursed by the state. In a recent
survey among the New York Council of Nonprofits' 3,100 members, the
statewide organization found that 65% said they are concerned about
funding basic operations in 2025, up from 62% the year before.
This bill seeks to make changes to the prompt contracting law to help
address not-for-profits' largest challenges with state funding. Changes
include clarifying language in the existing law, expanding the use of
written directives, mandating and increasing the interest rate on late
payments and more. Similarly, clarifying, standardizing, and streamlin-
ing these processes will benefit the state agencies that process these
contracts.
Addressing these challenges is particularly critical now, as an increas-
ing number of not-for-profits report they are struggling financially.
These financial struggles are also directly impacting agencies' ability
to recruit and retain staff to deliver services, a problem that is being
further compounded by funding cuts,and the further threat of funding
cuts, to not-for-profit services providers at the federal level.
 
PRIOR LEGISLATIVE HISTORY:
New Bill.
 
FISCAL IMPLICATIONS:
None.
 
EFFECTIVE DATE:
This act shall 180 days after it shall have become a law.

Statutes affected:
S7001: 179-s state finance law, 179-s(1) state finance law, 179-u state finance law, 179-v state finance law, 179-v(7) state finance law, 179-aa state finance law, 179-ee state finance law, 179-ee(3) state finance law