New Haven - Nonprofit organizations in Connecticut are welcoming a new state program that will provide $20 million for building renovations, energy conservation, technology and other projects, but say more must be done after years of level funding while the costs of providing services rose.

Gov. Dannel P. Malloy this week announced the start of the grant program for nonprofits that provides health and human services through contracts with state agencies. The program is designed to fund projects that cut expenses so services can be enhanced.

"Connecticut's nonprofit organizations serve every resident of Connecticut and play a substantial role in maintaining our safety net," Malloy said. "Partnering with our nonprofit organizations is a smart fiscal investment to ensure that these agencies can continue to provide services while doing so in an efficient, cost-effective way."

Malloy said he expects $35 million in requests for the $20 million.

Nonprofits have had to eliminate or not fill jobs, defer maintenance, cut pensions and other benefits, said Ron Cretaro, executive director of the Connecticut Association of Nonprofits. Some have not been able to give salary increases to employees for years, he said.

Organizations were hoping for cost of living adjustments to state contracts after years of little or no increases, Cretaro said.

"It's been difficult for the last five years for the nonprofits," Cretaro said. "This is a pretty positive alternative. This will allow them to be able to make some investments they need without figuring out where the money is going to come from. We would obviously like to see more."

Barry Simon, chief executive of Gilead Community Services in Middletown, said the funding could help his organization replace an old van, roofs and boilers and possibly even provide clients who have mental health needs with their own bedrooms rather than doubling up. He welcomed the new program but said state funding has not kept pace with rising costs, making it difficult for staff to be as engaged with helping clients with independent living skills.

"Nobody can run a business year after year for the same amount of money," Simon said.

Lois Nesci, chief executive officer for Catholic Charities of the Archdiocese of Hartford, welcomed the new funding, saying nonprofits sometimes have to give up services for capital projects. But she said there is a need to boost funding in state contracts to pay for rising costs.

"At the same time I think moving forward significant attention needs to be given to help organizations be able to provide just and living wages to their employees," Nesci said.

The state was able to boost the cost of living adjustment by 1 percent for the first half of the year despite grappling with a huge budget deficit in a show of support for nonprofits, said Terry Edelstein, Malloy's nonprofit liaison.

The new grant program reflects a different approach and if demand exceeds the level provided, Edelstein said she will advocate more funding.