After 30 long years of Reagan-inspired hatred of government services, we're seeing the policies come to their logical conclusion. Because we didn't so much cut the size of government as we outsourced it. Most people are oblivious to the fact that large numbers of government social services were simply contracted out to local non-profits because it meant towns, cities and states didn't have to pay for the additional benefits of a government employee to do that job.

And now, anyone in need of those services is screwed - because those agencies aren't getting paid:

SCO Family of Services, a nonprofit agency based on Long Island, started the year with a $25 million credit line at its bank, which it planned to use to pay its bills while awaiting government reimbursements and donations.

Now, after its bank has cut its credit line twice and withdrawn a promise to support a critical bond offering, the organization is worried about whether it can pay its employees this month.

“I spend a good part of my day every day just trying to manage cash flow,” said Johanna Richman, chief financial officer at SCO, which provides services to children with developmental disabilities.

SCO is one of hundreds of charities caught in the credit crunch as skittish banks reduce their lines of credit or cut them off entirely at a time when the need for their services is climbing sharply, nonprofit leaders say.

“While nonprofits are working feverishly to accommodate increased demand, they are facing severe financial constraints that are threatening their ability to go on, much less expand their services,” said Diana Aviv, president and chief executive of Independent Sector, a nonprofit trade association.

Almost three-quarters of nonprofits in the United States receive some type of government financing, according to new research by the School of Social Service Administration at the University of Chicago, and about half of those count on that aid for at least half of their budgets.

As a growing number of states delay payment, nonprofits must rely on lines of credit to help them get by. In Illinois, the state is running as much as 150 days late in making reimbursements, and California has told nonprofits to expect i.o.u.’s in lieu of payment starting next month.