Across California, nonprofit organizations serve as lifelines for our most vulnerable residents. At Community Bridges, we provide critical services to thousands of children, families and older adults across Santa Cruz, San Benito and Monterey counties. However, despite our essential role, we face significant financial strain due to delayed state payments and a lack of reimbursement for indirect costs — expenses that are essential to maintaining our operations.

Assembly Bill 880 offers a straightforward and necessary fix. This bill ensures that nonprofits contracting with the state are paid on time, eliminating an outdated exemption that allows delayed payments for contracts exceeding $500,000. Currently, these payment delays occur without penalty, even as nonprofits continue delivering services under contract.

The result? Organizations such as ours are forced to front the costs, draining reserves and increasing reliance on high-interest loans and banking fees — just to sustain programs we’ve already implemented.

AB 880 addresses two critical issues to resolve the issue of timely payments:

• It removes the exemption that permits the state to delay payments to nonprofits under large contracts, putting us on equal footing with other state contractors.

• It requires the state to pay all undisputed portions of an invoice on time, ensuring that nonprofits aren’t financially crippled by bureaucratic bottlenecks.

In addition to ensuring timely payments, AB 880 also addresses another inequity that nonprofits face: the state’s refusal to reimburse us for indirect costs. These are essential expenses — administrative support, technology and rent — that are necessary to keep our programs running. While for-profit contractors are routinely reimbursed for these overhead costs, nonprofits often struggle to cover them, forcing us to rely on private donations to fill the funding gap.

This imbalance isn’t just unfair — it’s inefficient. AB 880 would require state agencies to fairly and reasonably cover these indirect costs for nonprofit contractors, creating a more level playing field and improving the efficiency of service delivery funded by public dollars. These changes would:

• Level the playing field between nonprofit and for-profit contractors.

• Improve efficiency in delivering services, reducing transaction costs and bureaucratic red tape.

• Save state staff time by streamlining processes.

• Set clear timelines for contract and reimbursement processes.

• Lead to better outcomes for underserved communities.

Importantly, these changes are no-cost, high-impact solutions that ensure nonprofit partners are treated with the same fairness and respect as their for-profit counterparts.

Without these changes, California risks weakening the very organizations it relies on to provide essential services. As a 2024 CalMatters investigation highlighted, chronic late payments have already forced homeless service providers to cut back services, delay staff wages and reduce their reach. A forthcoming Little Hoover Commission study found that 40% of nonprofits have considered walking away from state funding altogether due to these financial strains.

Nonprofits are already navigating an increasingly challenging landscape — federal policy shifts threaten vulnerable communities, and rising costs make service delivery more expensive than ever. Delayed state payments and insufficient reimbursement for indirect costs should not be additional barriers.

AB 880 is part of the broader California Contracting Equity Initiative, supported by over 550 nonprofit leaders. We urge lawmakers to pass AB 880 and end the delays and inequities that threaten our ability to serve those in need. It’s time for California to pay nonprofits on time and fairly cover the full cost of services, just as it expects us to deliver on our commitments every day.

Ray Cancino is CEO of Community Bridges, the leading human services nonprofit on California’s Central Coast serving more than 20,000 people each year.