Lawmakers are warning nonprofits not to expect any money this year or next from a legislative grants program that used to serve as a safety net for agencies, doling out millions annually to services ranging from feeding the hungry to helping disadvantaged kids.

The news is yet another blow for Hawai'i nonprofits trying to meet a dramatic increase in need while also seeing their funding sources dwindle, and comes as a new survey reveals just how badly nonprofits are hurting. The survey of 159 agencies shows that 44 percent have cut services, 48 percent laid off administrative staff and 31 percent laid off direct service employees.

It also said 73 percent are bracing for more cuts in the coming quarter.

"We're really concerned," said Alex Santiago, executive director of PHOCUSED, a consortium of nonprofits that conducted the survey with the Hawai'i Alliance of Nonprofits.

He said the decline in the grants-in-aid program, which has given out as much as $11 million for operating expenses in previous years and millions more for capital improvements projects, means nonprofits will no longer have a safety net for struggling or new programs. He added the cuts are doubly worrisome when considered with other cuts in state funding, big declines in donations and foundation giving, all while the requests for need are up.

Nonprofits nationally — and internationally — face similar situations. As government spending drops, cuts to services are inevitable.

But Santiago said the reason why the cuts in Hawai'i are so troubling now, compared to previous economic downturns, is because so many of the services the state used to provide, it now relies on nonprofits to do.

Nanci Kreidman, chief executive officer of the Domestic Violence Action Center and a board member of PHOCUSED (Protecting Hawai'i's Ohana, Children, Under Served, Elderly and Disabled), agreed. She said lawmakers are in an "unenviable position," but should be careful where they cut given that the state is no longer providing many services.

She added that slashing funding to programs now could have future negative impacts, from increased crime to broken families to homelessness. "Either we pay now or we pay later," she said.

DROP IN FUNDING

The legislative grants-in-aid program got its first major cutbacks last year, as the economic crunch set in.

About $1.8 million was issued in judiciary grants-in-aid in 2008 for programs that provide free legal aid and other services. No general grants-in-aid for operating expenses were approved, while about $9.7 million was given to capital improvements projects.

That compares with $43 million in grants in 2007. Of that, about $6 million was for operating expenses.

State Rep. Marcus Oshiro, chairman of the House Finance Committee, said he doesn't expect any grants-in-aid for operating expenses to be approved this year or next. He also said it is "highly unlikely" that grants-in-aid will be approved for capital improvements projects or for judiciary grants-in-aid.

Oshiro added that it appears many nonprofits suspected the grants-in-aid program would be facing big cuts this year. As of yesterday, the Legislature had received only two dozen grants-in-aid applications. In 2008, some 250 applications were submitted.

Oshiro stressed that lawmakers are not cutting the grants program lightly.

For Na Loio, a program that provides free legal services to immigrants, the cut in grant funding is especially distressing. The nonprofit was able to get a $292,000 judiciary grant-in-aid last year. If the grant isn't approved this year, the agency might have to start charging for services, laying off staff "or it means we don't exist anymore," said Robin H. Kobayashi, executive director.

'THINGS WILL GET WORSE'

There are about 5,000 charities in the Islands, some 1,800 of which reported annual operating budgets of $25,000 or more in 2006, the National Center for Charitable Statistics reports. The nonprofit sector also employs more than 50,000 in the Islands.

Kreidman, of the Domestic Violence Action Center, said her agency is seeing a steady increase in requests for help. Domestic violence tends to go up during tough financial times.

Kreidman hasn't had to lay anyone off yet, she said, but "we have been very cautious this year in terms of staffing and programs."

One big unanswered question for nonprofits is whether any proposed federal stimulus funds will be spent on core health and human services or other programs.

State Rep. Michael Magaoay, who used to oversee grants-in-aid applications, said nonprofits would likely benefit from the federal funding. The problem, he said, is that they can't count on it.

He also said lawmakers are trying to be as light-handed as possible with funding cuts to nonprofits, which he added provide a wide array of "core services," from sheltering the homeless to running free food pantries.

"If you cut the whole program, you have to start again," he said.