By David Abel | Globe Staff | 6/10/2002
As the region's largest homeless shelter bemoans proposed state budget cuts, warning it may be forced to slash an array of vital services, it's sitting on unprecedented cash reserves and providing six-figure compensation packages to its top five officials.
Unlike most social service providers, the Pine Street Inn took advantage of the past decade's boom to save money - so much that the shelter's cash reserves ballooned from about $2.5 million in 1994 to more than $15 million last year. The heady times also enabled the shelter to pay its president, Lyndia Downie, $134,500.
Although the shelter serves as a last line of defense against rising homelessness and hunger, and Downie and other officials foresee cuts in services as steep as 25 percent, they say they have no plans to use the reserves to offset the shelter's coming cash crunch. Nor do they have any intention of cutting salaries, which are in line with those paid elsewhere.
"We have to think about the long-term interests of the organization," Downie said. As for salary cuts to senior staff, she said, "It's the last place we would want to go."
With such significant reserves and salaries, Pine Street is facing a quandary more common for universities and museums: When do the immediate needs for money outweigh the benefits of investing in the future?
Because Pine Street is a provider of emergency social services, critics say the shelter may be remiss for cutting services while sitting on so much cash.
"It's definitely a questionable practice when there's such a demand," said James Stergios, a specialist on social services at the Pioneer Institute, a fiscally conservative think tank in Boston. "It seems to me hard to argue that the future is not now. Any other policy seems to me weird or hard to justify."
When it opened three decades ago, Pine Street served as a small shelter, providing little more than the proverbial "three hots and a cot" to a few hundred homeless men every night. Today, employing more than 400 people, serving more than a half-million free meals annually, and housing and training some 8,000 Bostonians a year, it has a $30 million annual budget and has become the largest shelter in New England.
About 60 percent of the shelter's budget comes from state dollars, with private donations, foundation grants, and revenue from shelter businesses filling the balance. Tax dollars go to paying salaries, Pine Street officials say, but only make up a small portion of the reserves.
With the fiscal crisis casting a cloud over budgets for the next few years, Pine Street officials argue they're not being miserly, but that they're taking prudent steps to protect the shelter's future. Since 1999, as state aid remained flat, the shelter has used 4.5 percent of its reserves - or $800,000 a year - for operating expenses, the limit set by Pine Street's board.
"If we thought this was a one-year state budget issue," said Terry Gagne, the shelter's chief financial officer, "it wouldn't be a problem to find the funds."
The shelter's savings primarily come from its investments, which remain healthy despite the stock market's instability.
Pine Street also has boosted its reserves by saving money the state provided for certain services. To promote efficiency, the state allows social service providers like Pine Street to keep as much as 5 percent of surplus cash from a contract. And the shelter has set aside money from a doubling of foundation grants and contributions over the past decade, including an anonymous $1 million gift.
As for salaries, Downie and Gagne insist Pine Street Inn pays its top employees wages similar to other nonprofit organizations, including some social service providers in Boston. Before setting Downie's salary, the shelter's board surveyed 33 other nonprofits in the area and found her salary ranked 18th, behind Bay Cove Human Services and The Home for Little Wanderers.
"This is a big organization; I don't think the salaries are out of whack," said Patrick Walsh, director of housing at the state Department of Transitional Assistance, which this year provided about $13 million to Pine Street - $2.4 million more than the Massachusetts House budget for fiscal 2003.
"As far as the cutbacks, we would strongly urge them to look at whatever means they can use to fill the gap," he said.
Other homeless shelters in Boston make do with small or no cash reserves.
While donations increased by 8 percent in the past year at Pine Street, St. Francis House, which serves about 600 meals a day and offers a range of other services to the homeless, is facing declining donations, no reserves, no increase in state dollars - and they have no plans to cut services, officials there say. Rosie's Place, the nation's first women's shelter that now feeds and cares for some 150 women and children a day, survives without any government money and an endowment of only $400,000.
At Pine Street Inn, which today runs four emergency shelters, two transitional homes, and 18 permanent residences, officials say they're waiting for the final budget before deciding which programs to cut. But Downie says some cuts are inevitable.
Programs likely to face the chopping block, she says, include a job preparation course that helps hundreds of people a year and an emergency outreach van that roams the city taking the homeless off the streets and into shelters.
While building a hefty reserve may be fiscally prudent - with interest over the long-term expected to earn on average about $1 million a year - critics contend that putting the future in front of the present is dangerous for an emergency shelter, which provides services that often mean the difference between life and death for the most downtrodden.
"That they haven't made the gesture to cut their salaries says something - like we're not willing to make the sacrifice, and let the poor people suffer," said Pablo Eisenberg, a senior fellow at Georgetown University's Public Policy Institute, who specializes in philanthropy issues. "I think there's a moral obligation to spend their reserves to maintain services. What else are they there for?"
David Abel can be reached at email@example.com. Follow him on Twitter @davabel.
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