By RNZ
Free budgeting services are bracing for a drop in funding right as the cost-of-living crisis hits and a recession knocks on our door.
The Ministry of Social Development funds 131 budget advisory services, but that will drop by $20 a session for the next financial year (July 2023-24).
Demand has surged as people seek help to make ends meet, and some advisors worry they will have to reduce staff when they need to hire more.
There’s a two-week wait for people in financial strife to see an advisor at Auckland Central Budgeting, where there has been a surge in demand.
General manager Tim Maurice recently found out the service was facing a $34,000 drop in its government funding from July.
“My question is, why? Why are we expected to do the same output for less money?” Maurice said.
“They’re still asking us to do the same number of sessions, but the amount of money has decreased. I wonder if it’s a budget issue at their end - but they didn’t give me an explanation.”
For the current and past financial years, the budgeting service received $270,000 in funding from the Ministry of Social Development (MSD). But from July, Maurice said that would drop to $236,000.
“We want to employ more staff to fill the need, but with our income dropping next year that would be fiscally irresponsible, so we can’t do that. We can’t employ staff to fill the need until we find some other income.”
He will have to apply for grants to top up the shortfall, or reduce staff.
“All the money’s appreciated, but it will still be a shortfall on last year’s funding, meaning we’re going to have to make some cuts somewhere or not be able to employ the same level of staff we’ve had.”
It was a similar story at the Pakuranga and Howick Budgeting Service, where manager Megan Dangen said its government funding would decrease by $20,000 come July.
“We have to look at our staff hours and how we can manage the service, maybe on less hours, and we just have to start thinking creatively. It might mean that we can’t see as many people as we’d like to.”
They have already seen more people than they are funded for this financial year, which Dangen said means they may start the next financial year in deficit.
“I’d like the government to acknowledge and recognise that demand has increased. It hasn’t decreased because Covid has gone away - we’re actually seeing families in incredible financial hardship.”
She said applying for grants had become more challenging.
“It’s worrying, because that’s my role - I’ve got to try and find this extra funding. I guess there was a lot more leniency during Covid times with funding, there was a lot of kindness going on, but that’s sort of gone now.
“Our service is probably competing with all the other budgeting services that are all trying to find that extra money from other partnerships.”
Karin Dalgleish, MSD acting general manager - safe, strong families and communities, said in a statement the ministry appreciated “all the valuable work that budget advisors have done to help their communities, particularly during the past few years of increased demand”.
She said while the funding was decreasing, it remained $7 million above what it was before the pandemic.
“The Government also provided an additional funding boost of $3 million in March to help meet demand for Building Financial Capability services in the wake of cost-of-living pressures that have been exacerbated by recent severe weather events.”
Those services were free, Dalgleish said, and people did not need a referral to use one.
Non-government organisation FinCap supports 200 free financial mentoring services, of which 131 receive government funding. Chief executive Ruth Smithers is concerned some budget advisors will close.
“The services themselves are also under cost-of-living pressures, just with the cost of rent and salaries as well. I do believe that services will be severely impacted, and we may see some smaller services fold.”
She said free budgeting advice was vital, especially in a tight economy.
“They provide a critical essential service now more than ever because people are struggling. They’re experts at working with whānau, so they can avoid going without food and getting them back to a level where they’re able to pay their bills.”
FinCap surveyed government-funded budget advisors last year and found they get just over 60 per cent of what they need.
“We recommend taking it up to 100 per cent and including the unfunded services, so we’re asking for a lot.”
FinCap has a bid in with the Minister of Social Development for more funding in the next budget round.
The 19-year-old was found in a remote area in the hills of Upper Hutt.