By Marco Dorado and Jack Murphy

Colorado’s nonprofit sector is one of the most significant contributors to our state’s economic and civic life, with more than 14,000 registered nonprofit organizations supporting more than 262,000 jobs — approximately 10% of all the jobs across the state — and directly employing 182,000 people.

The 2024 Colorado Nonprofit Economic Impact Report found nonprofits generate more than $62 billion in total economic impact, contribute $25 billion to our state’s GDP, and add $9 billion in value through volunteerism. For every $1 million nonprofits spend, five nonprofit jobs and two additional jobs in other industries are supported. In short, nonprofits are not a side sector of Colorado’s economy; they are a central pillar of it. At the same time, most Colorado nonprofits operate on modest budgets. A majority have annual budgets under $500,000.

These organizations deliver essential public services on behalf of the state — from behavioral health and housing assistance to environmental stewardship and workforce training. Yet under current state practice, most grants are reimbursement-based. Nonprofits must first cover payroll, rent, supplies and program costs, then wait weeks or months for payment.

For some nonprofit leaders, that wait has meant opening a personal line of credit to cover staff salaries. Others have taken out short-term loans, drained emergency reserves, or delayed services while awaiting reimbursement. Last year, we heard directly from nonprofit leaders about how the state’s reimbursement-based grant system forced them to take on personal financial risk to make cash flow, or dissuaded them from pursuing state grants altogether.

These are not isolated anecdotes. They are structural consequences of a system that shifts financial risk onto mission-driven organizations — many of which lack the capital cushions of larger institutions.

House Bill 26-1274: State Agency Payments to Grant Recipients offers a pragmatic reform grounded in existing state practice. The bill would permit — but not require — all state departments and agencies to provide up to 25% of a grant award in advance to nonprofit recipients. This authority already exists for the Colorado Department of Public Health and Environment under prior, bipartisan legislation. HB 26-1274 simply expands that permissive authority to all state agencies.

Importantly, the bill does not mandate advance payments. It standardizes inconsistent practices within existing infrastructure, allowing agencies to retain flexibility while matching payment terms to program needs. Existing accountability measures, reporting requirements and administrative safeguards remain in place.

The policy rationale is straightforward. Permissive advance payments improve service delivery by allowing programs to launch on time. They expand access so limited, community-rooted nonprofits can compete on impact rather than balance sheet strength. They reduce administrative strain caused by repeated delays and workarounds. And they protect public dollars by minimizing service disruptions and staff turnover

When a sector that delivers essential programs and services is forced to front costs while awaiting state reimbursement, inefficiencies ripple across communities. Strengthening cash flow stability for nonprofits is not only sound public administration — it is sound economic policy.

Colorado relies on nonprofits to carry out public priorities. House Bill 26-1274 aligns state grantmaking practices with the economic reality of the sector that delivers those services. When nonprofits are financially stable, communities benefit — and so does Colorado’s economy.

Marco Dorado is managing director of Communities Lead Communities Thrive. Jack Murphy is director of government affairs at the Colorado Nonprofit Association.