Opinion: FEGS is the Dead Canary in our Social Service System

Opinion: FEGS is the Dead Canary in our Social Service System

August 17, 2015

In the spring of 2015 the Federation of Employment and Guidance Service (FEGS) became the largest non-profit social service agency ever to go bankrupt in New York State, if not the nation.  After 80 years, more than two thousand employees, including 1,400 unionized workers, lost their jobs after years of dedicated service every year to over 100,000 disadvantaged clients.   Steven Malanga’s recent opinion piece, “Charities on the Dole,” would have City & State’s readers believe this agency went under because of the lure of public money, its failure to remain true to its stated mission (which originally was to be a charity for the Jewish community) and the unionization of its employees.

Contrary to Malanga’s view, the problem is not that government funding exists or that organizations like FEGS take on tasks to help people outside of their original mission statement.  Instead, because of years of multiple, successive rounds of reduced governmental support, masked as so-called “reforms,” social service agencies like FEGS have been forced to struggle each year to maintain quality and quantity of social service delivery by trying to figure out how to do more with less.  Eventually, as was the case with FEGS, economic reality crashes in and programs are harmed or eliminated.  

That is not to say that FEGS’s leadership may be completely without fault.  A serious question does exist about why there was such a sudden need for FEGS to immediately divest itself of its programs and file for bankruptcy given the relatively small size of its deficit relative to its annual operating budget.  And, as Malanga points out, executives were highly compensated with the head of FEGS received $638,000 in compensation and now suing for an additional $1.2 million in pension. When the workers are poorly paid, to some extent such salaries for the higher-ups reflect the broader problem of income inequality in our society and the ethos of corporate greed oozing into the non-profit sector.  

But to think that FEGS’s financial problems were caused by unionization is completely counter factual.  No one disputes that during the years before it went out of business that FEGS continued to deliver not only excellent, but the highest, quality of care. At the same time, FEGS workers did not receive a wage increase in the seven years preceding its bankruptcy. Workers agreed each year to forgo raises and keep helping those in need because the agency was being starved of government funding.

District Council 1707 AFSCME represents nearly 20,000 workers at non-profit agencies in the social service, direct care, child care, home care and other sectors, which together make-up much of the social safety net protecting the poor and working class population of New York City.  Whether the funding source is through the City, the State or the Federal government, it is growing ever more inadequate to meet the costs of actually providing these essential services.  Unless we find the political will to have government at all levels recognize the need to increase funding for the non-profit sector, we face a tsunami of misery sweeping not only through the poor and working class but also rising high enough to hurt the middle and upper-middle classes of our city.  

The theory behind governmental support of non-profit agency social service delivery is that by using non-profits we can deliver better quality of care and at less cost to the taxpayer than if government itself delivered these services.  While many in our society question the size of government and some even question whether government should be in the business of  helping people in need, no serious attack can be mounted against the cost effectiveness of well managed non-profit social service delivery.

But it is now time for government to step-up and begin to put more money into the non-profit social service sector.  We cannot be a society that believes economic justice requires a fast food worker to make a minimum wage higher than what we pay many of the workers caring for our sick, elderly, disabled and less-able neighbors.  We need to pay our social service workers an adequate wage with decent benefits to attract and hold the good people we want working at these agencies.   

FEGS is like the dead canary in a coal mine; its death has utility if it warns us of impending danger causing us to take immediate action.  We need to strengthen our non-profit social service agencies.  To hold our society together, we must properly fund the agencies we rely upon to not leave the unfortunate among us to fend for themselves. 


Victoria Mitchell is vice president of AFSCME International and executive director of District Council 1707, representing the 1,400 unionized workers who lost their jobs in the wake of FEGS' collapse. 

Victoria Mitchell