PORTLAND — The somber news that Chicago’s Hull House had to close its doors after 122 years is as big a story in the human service sector as the collapse of Lehman Brothers was to the investment world. And, as the banking industry still struggles to right itself, so too social service agencies are trying to identify the lessons of Hull House’s collapse and to avoid a similar fate.

Hull House was founded in 1889 by Jane Addams, inarguably one of the most important pioneers in social work, public health, community organizing, and peace and social justice advocacy in this country’s history.

The first American woman to win the Nobel Peace Prize, Addams left a legacy that will certainly survive the closing of the agency she founded. Nonetheless, it was a sad day when Hull House could no longer provide its programs to 60,000 vulnerable clients.

It may turn out that there was a series of bad decisions made by the leadership of Hull House. But reports indicate that primarily what caused its downfall is the fragile and sometimes unsustainable business model that human service organizations work with, under and around to be responsive to their communities and meet their missions.

Like many nonprofits, Hull House offered services to low-income families, foster children, abused women and isolated seniors, partly funded by the government. But government funding paid for only 85 percent of the cost of those services.

Hull House’s experience is not unique, as government funding often lags far behind the actual costs of services it contracts with nonprofits to provide.

In a 2010 Urban Institute report, 83 percent of responding Maine nonprofits indicated that payments for contracted services fell below the full costs of those services, causing problems for their operations. This disparity will grow as local, state and federal budgets continue to be cut.

In response, Maine nonprofits have employed creative strategies to maintain important services for children and adults with disabilities and serious mental health issues, as well as fundamental necessities such as child care and fuel assistance for our elderly.

Organizations are exploring and implementing new business models, expanding collaborative strategies, increasing private fundraising efforts, and even merging when appropriate.

While these activities demonstrate the resourcefulness of the nonprofit sector, our current system of care still faces mounting stress.

The Nonprofit Finance Fund reported that 74 percent of Maine nonprofits experienced increased demand for services in 2011 and 81 percent anticipate an increase in 2012.

With only 64 percent indicating they are able to meet this increased demand, reduced funding will further threaten the health and well-being of Maine residents falling through the widening cracks.

Preble Street, for instance, provides a range of services to prevent and end homelessness in Greater Portland, and need has risen 31 percent at our soup kitchens as more people become homeless.

Meanwhile, some of Preble Street’s core programs — Florence House, Logan Place, Resource Center, and Food Programs — receive an average of only 46 percent of their funding from government contracts, and must increase revenue from private philanthropy and other sources to meet urgent needs.

While it’s easy to say that private philanthropy should make up the difference between what government is willing to pay and the true price of service, the evidence is clear that this is not a sustainable or systemic solution.

There are not nearly enough charitable dollars to offset the budget gaps created when the government contracts for services and pays far below actual cost.

Nonprofit human-service organizations like Preble Street already fundraise a lot. Thankfully, individuals, businesses, the faith community and foundations are extremely generous.

But those resources cannot fill the gaps that are getting larger due to insufficient public-sector support.

We need to begin an honest and thoughtful dialogue toward creating a human-service delivery system that mirrors our values of caring and concern for our fellow citizens and that is financially sustainable.

The Maine Association of Nonprofits has begun this conversation by convening stakeholders and providing research assistance.

Government, philanthropy, service providers, consumers and advocates all need to have a voice in priority setting and assessing reasonable cost structures. And each has to be able to hold the other jointly accountable for providing the most efficient, compassionate, and effective delivery of quality human services to ensure the dignity and safety of our most vulnerable citizens.

We’re good enough to do this.

Mark Swann is executive director of Preble Street. Scott Schnapp is executive director of the Maine Association of Nonprofits.

– Special to The Press Herald