Archive for the ‘Education’ Category

What Price Democracy?

December 27, 2012

There’s an old joke about a man who asks a woman to sleep with him for $1 million. She agrees, whereupon he asks her to sleep with him for $1. “What kind of a girl do you think I am?” asks the woman indignantly. “We’ve settled that,” replies the man, “We’re just arguing about the price.”

This came to the Nonprofiteer’s mind in response to this story about the price of the Broad Foundation’s generosity to the schools of New Jersey. A recent Broad Foundation grant stipulates that it will be available only as long as Chris Christie remains governor.

The Nonprofiteer has often argued that private philanthropy in education (and other areas) is at best a mixed blessing, because it reflects approval of the notion that public assets should be run according to private preferences.   But she never imagined any philanthropy would go this far, offering its generosity only on condition that the public sacrifice its right to choose its own leaders. The question isn’t whether or not Chris Christie is a good governor; the question is whether the Broad Foundation—as opposed to the voters of New Jersey—should get to decide that.

Sure, you can say that no voter is likely to sacrifice his or her rights for a grant of $430,000, but then we’re just arguing about the price. And sure, in form, the voters of New Jersey still hold the power, but the Broad Foundation grant gives them to understand that the cost of exercising their power is losing a lot of money—or, put another way, that the cost of the money is their democratic rights. By comparison, “the vig” (excessive interest rates) charged by organized crime look like a bargain.

Not content with specifying the outcome of an election, the grant’s terms also exempt from disclosure anything having to do with the grant, purporting to provide it with immunity from application of the Federal Freedom of Information Act. Perhaps this was intended to minimize the impact of the grant on voters: What they don’t know can’t influence them. But when the subject of the grant is the most public of concerns—the education of the next generation—a commendable motive doesn’t excuse unacceptable means. Voters need to know on what basis decisions are being made about their schools so that they can change the decision-makers if they disagree. The grant terms are an effort to protect the foundation and its direct beneficiary, the current Republican government of New Jersey, from that straightforward democratic notion.

Defenders of charter schools and other forms of privatization of public schools argue that such restructuring attracts private philanthropy that would not otherwise be available to those schools. That’s probably true, but is that a cost or a benefit? It’s a slippery slope, from good-willed private philanthropy in support of public goals to a system in which private goals predominate—specifically the private goal of eliminating public input (or even public knowledge) from the governance of the public schools.

We could argue about whether the loss of public input would be worth it if the donation were $430 million. But under the current circumstances, just what kind of girl is New Jersey?

A cheap date, apparently.


No good deed goes unpunished

November 22, 2011

Now here’s something that breaks the Nonprofiteer’s heart: the MacArthur Foundation is making grants to a dozen libraries and museums nationwide to establish youth computer learning centers modeled on YOUMedia, the Chicago Public Library’s innovative youth learning project.

Why does such good news evoke such profound sorrow?  Because the Nonprofiteer can remember when the notion was that the philanthropic sector would serve as a laboratory, trying out new approaches to solving social problems and then passing along the ones that worked to be funded by the government.  What we have here, however, is a model already vetted in the public sector whose future sustenance apparently will have to come from private charity.

This role-reversal is particularly galling here in Chicago, where the reward for the library’s pioneering work has been a substantial chop in the city’s library budget.

It’s hard to read a computer screen, or learn anything, when the world is upside-down.

Beyond “Will not!” “Will so!”

October 27, 2011

Kudos to the Nonprofiteer’s nonprofit consulting colleagues Campbell and Co. for sponsoring a study by the Indiana University Center on Philanthropy to determine the impact on giving of increased marginal tax rates and a cap the charitable-giving deduction.  While some of us have been arguing that both of these moves toward social justice should be supported by the nonprofit community, and others have been arguing that the world will come to an end if every penny of tax savings isn’t afforded to the generous rich, these institutions decided to look for the facts.

The facts–as elegantly stated in a Congressional Research Service study that came to the same conclusion–are these:

The estimated effects of the cap and other elements of the budget package depend on whether the proposals are compared with the current tax rates of 33% and 35% or the rates scheduled for 2011, 36% and 39.6%. Compared with current rules, estimated effects are between one-half a percent and 1% decline in charitable giving . . . . When compared with tax rate provisions in 2011, charitable deductions are estimated to fall by about 1.5% if only the cap is considered, but if income effects from the entire budget package are included contributions actually rise 2.5%.  The relatively modest effects of the proposal arise because (1) the effect of caps on the subsidy value is limited, (2) only a fraction (about 16%) of charitable giving is affected, and (3) because evidence suggests that behavioral responses to changes in subsidies are relatively small.

(Emphasis the Nonprofiteer’s.)  To paraphrase: the tax subsidy isn’t much reduced; that small reduction doesn’t affect 84% of charitable giving; and, in fact, charitable giving isn’t all that tied to tax benefit.

So whether we take the IUPUI findings that charitable giving is likely to decline modestly if these tax reforms are enacted, or the CRS findings that it might actually go up, we should realize that everyone who’s hyperventilating about the impact of these changes on their poor struggling private school, museum or hospital should just take a deep breath.   Given that the reforms will support many of the social programs, environmental protections, educational institutions and health care options the nonprofits themselves seek to provide, it’s about time for the community to stop whining and agree to pony up.

Flip It to Fix It: A Cure for What Ails Us

May 31, 2011

Who are these people, and how did they get to be so smart?

A new study has found that inverting state tax structures—whereby the highest income earners would be taxed at the current percentage of income for the lowest income earners, and vice versa—would collectively raise $490 billion in new revenue, immediately eliminating states’ budget deficits and avoiding the serious consequences of budget cuts.

The report, titled “Flip It to Fix It: An Immediate, Fair Solution to State Budget Shortfalls” was released today by Boston-based United for a Fair Economy and 13 state organizations around the country.

What’s being “flipped,” of course, is the current regressive tax system, which depends on getting more and more money from those who have the least of it—or, as a study co-author bluntly phrased it, “squeez[ing] water out of a stone.”

Is there any possibility that state legislatures will accept this sensible suggestion?  Maybe not this minute; but the Nonprofiteer suggests we all wait until crime spikes this summer (not enough police officers) and schools open this fall with huge classes (not enough teachers).  Maybe then our elected officials will get a clue that dismantling workers’ compensation and blaming public employee unions will be insufficient to preserve essential services.

The rich get richer, once more

January 19, 2011

Take a look at this piece from the Chronicle of Higher Education documenting the important role of legacy preferences—admissions boosts to the children of alumni—in college acceptance rates.  It raises the question, as our colleague Rick Cohen puts it at the Nonprofit Quarterly, “why tax preferred institutions of higher education in many cases get to use their tax-exempt status to serve children of immense wealth and privilege.”

This is the real issue embedded in another question frequently asked: “Why do well-endowed universities get tax breaks?”   The answer to that can easily be “because education is a public good,” but if that good is available disproportionately to a tiny subset of the public then the entire edifice of tax protection for elite institutions starts to crumble.

Legacy preferences are regularly justified on the grounds that they’re necessary to assure alumni loyalty and therefore alumni financial support.  As the Chronicle article documents, the evidence for this is ambiguous at best.  But even if it were true, it’s not clear why the convenience of fundraising officers should trump society’s legitimate questions about how it’s allocating scarce benefits among competing groups of beneficiaries.  And as long as universities receive tax breaks, it is the broader society that’s doing the allocating and has the right to ask the question.

And here’s another question we have a right to ask: why is affirmative action a problem when it benefits poor people and minorities but not when it benefits wealthy white people?  “Legacy preferences” is, after all, a euphemism for making sure that thems that has, gits—and gits more.

Most colleges and universities these days would regard it as an ethical violation to accept tobacco money, or porn money.   Why should their ethical standards tolerate accepting privilege money—which means, essentially, accepting a bribe?  It makes little sense for the source of money to be evaluated for purity while its purpose goes unquestioned.

As an ex-admissions officer, the Nonprofiteer is more familiar with legacy preferences than she ever wanted to be, and she can assure her readers that merely being the child of an alumnus is not a bona fide occupational qualification.   Plenty of successful alumni have no-‘count kids—hence the old saw about “shirtsleeves to shirtsleeves in three generations.”  Nor does it matter that the practice is long-established.  Ivy League colleges had a long-established practice of coordinating their scholarship packages (to keep students from choosing among them on the basis of cost), until someone read and implemented the antitrust laws.  The sky didn’t fall as a result of that change, and it won’t as a result of this one.

Of all the ways in which universities violate the spirit if not the letter of the laws granting them tax advantages (from running semi-professional sports teams to serving as research arms of the military), legacy preferences are perhaps the most damaging.  Every legacy preference helps perpetuate a system of inequality.  Every legacy preference deprives someone better-qualified of an opportunity s/he’s earned.  What’s more, the howls of protest that go up when that accusation is leveled at some other system of preference are nowhere to be heard.

If institutions of higher learning want to maintain their tax-favored status, they should abolish legacy preferences.  If they don’t—if they go on practicing white people’s affirmative action—they deserve to be knocked off the comfortable perch on which they now sit.

Are you a tax-exempt charity? Sure about that?

August 18, 2010

While it’s not yet true that “Illinois Does A Few Adult Films To Make Ends Meet”, the state has begun to cast lascivious glances at its nonprofits.  Those property-tax exemptions look mighty comfortable.  Why don’t you push that  cushion over to my side of the bed? And with most interactions taking place behind closed doors, don’t expect a warning before the moment of truth arrives—or to be kissed while you’re getting screwed.

Unlike other localities re-evaluating nonprofit tax exemptions, Illinois has bypassed the legislative process, allowing county assessors and the Department of Revenue to take the initiative.  And this spring the Illinois Supreme Court decided that the state’s constitutional provision exempting charities from property taxes applied not to all nonprofits but only to genuine charities.

When the Court ruled that Provena Covenant Hospital didn’t merit a property tax exemption because it failed to provide adequate charity care, there was a brief frenzy of press speculation about the decision’s impact on hospitals—but hospitals only.  Rarely do the media connect the dots between the budget crises of state and local governments and their relationships with nonprofits, and then generally the focus is on the governments’ failure to pay nonprofits for contracts they’ve already performed.

But revocation of property tax exemptions poses an even bigger and longer-term threat than governments’ failure to pay.  And it’s a threat of which few nonprofit executives—let alone members of the public—are aware.

Two cases of denied exemption, one in nearly-bankrupt Chicago and the other in one of its suburban counties, are now working their way through the Illinois courts.  Each concerns a luxury retirement community, and either could break new ground by clarifying what qualifies as “charity” and how much of it a nonprofit has to provide.

The state legislature hasn’t specified a percentage of charitable services required to support continued property-tax exemption.  And though the Provena court ruled that the hospital’s practice of charging fees for nearly all patient care meant it could not be considered a charity, it too stopped short of prescribing when enough charity will be enough.

“The property-tax assessors out there are going to be aggressive, because they need you back on their rolls,” said Elaine Waterhouse Wilson, a partner at the Quarles & Brady law firm. “They’re going to make you come in and prove” charitable work.  Ms. Wilson said the charities that may be at risk “include organizations that are supported primarily by fees . . . . It was very clear [under the ruling] that you had to be giving things away rather than providing general charitable benefits,” she said.

It’s not a tragedy that people are asking whether Illinois nonprofits are worthy of favored tax treatment.  What would be a tragedy is if the challenge came as a complete shock, catching agencies unaware with the sudden need to prove their charitable nature.  Yet that’s what seems likely to happen.

Executives at several Chicago-area nonprofits seemed incredulous at the idea that Provena would be applied to them.  “We provide human services and all our activities are nonprofit,” said Karen  Singer, Executive Director of the Evanston/North Shore YWCA.  “So it’s not on my radar screen at the moment.  It probably should be, but there are only so many things I can think about.”  William Ratner, Executive Director of Lawyers for the Creative Arts, and Alvin Katz of Mayer Brown LLP, the attorney for Victory Gardens Theater and the Chicago Architecture Foundation, both expressed confidence that the organizations they represent are secure in their exemptions.  “They’ll keep going after the hospitals because it’s easy, and because that’s where the money is,” Mr. Ratner said.

But there’s also money in, or rather under, many other nonprofits.  The Chicago retirement development sits on prime Gold Coast real estate.  Can YMCAs in gentrifying neighborhoods withstand challenges to their exemptions when they look and feel—and charge—so much like for-profit health clubs?  Can settlement houses be considered charities if they get paid, by government or clients, for all the services they provide?  Can arts organizations be considered “charitable” just by offering art, or do they have to give out a certain number of free admissions?  (Churches and schools are immune from this calculus because the Illinois constitution separately exempts them; but the educational programs of arts groups aren’t considered “schools.”)

Perhaps the charities will organize and persuade the Illinois legislature to clarify the amount of “charity” necessary to retain tax exemption.  But Professor Phillip Hablutzel of IIT Chicago-Kent College of Law, co-author of the Illinois Not-for-Profit Corporation Act, doubts it.  Though he predicted Illinois nonprofits other than hospitals will soon find themselves battling efforts to withdraw their exemptions, “In the twenty years I’ve been involved, there hasn’t been a coherent front among charities in facing the legislature.  It’s hard to get these people to make common cause–the museum people don’t see what they have in common with the churches.”  Nor, apparently, do many human services agencies or arts groups see what they have in common with the hospitals.

If and when a Provena-style loss of exemption hits another nonprofit, the impact on its operation will be substantial.  “In the current economy,” said Professor Hablutzel, “it would be hard to do fundraising for another one-third of your budget so the taxes could be paid.”

Maybe there’s something to be said for making adult films after all.

Dear Nonprofiteer, What to do when foundations slam the door?

July 21, 2010

Dear Nonprofiteer:

We are a small non-profit music school. We have been running into a problem with grants strategy–as in, we aren’t getting any.

I am consistently getting feedback:

1.    “Lovely program but we are only funding projects that can promise to reach 500-1000.”  We are small with 350 students and while I can conceive of a program that would reach a larger audience, I don’t feel I can creditably offer that in a proposal.


2.    “Great ideas but we only fund people who we funded before.”

Previous executive directors in more generous times had decided that grant seeking was not worth the effort. I  think we need to make a big push but I am starting to wonder if they were right.

We have a subsistence existence with only earned income and I feel we are desperately in need of a more diverse income stream if we are ever going to grow or prosper. Operating at less than break-even is not an option with my board.

What’s the small non-profit to do?

Signed, Stymied at Every Turn

Dear Stymied,

The Nonprofiteer suspects, as you’re starting to, that your predecessors were right when they gave up seeking foundation support.  At the best of times, foundations have the attention span of fruit-flies, which means even agencies receiving support spend the whole grant term sweating blood over whether they can get it next time–nonsensical program-officer-speak  to the contrary notwithstanding.  (What kind of response is, “We only fund those we’ve funded before,” anyway?  It’s barely lucid, let alone reasonable–unless it’s just a bald-faced lie.)

And these aren’t the best of times.  (Like you hadn’t noticed.)  Some foundations are stepping up and spending a larger percentage of their income on grant-making to make up for a loss in their portfolios; others can’t, or won’t.  And as aggravating as it is to have a foundation ask you to provide services on a scale beyond your capacity, the Nonprofiteer will defend that point of view: foundations are in the business of trying to have broad impact with narrow means, and your program simply doesn’t meet their needs.

So you have to seek funds from another source.  Earned income is all very well, but of course you’re required to raise one-third of your budget in contributions simply to maintain your 501(c)(3) status.  How?

Well, as the Reverend Mother did not say, “When a foundation closes a door, somewhere an individual donor opens a window.” Stop pounding your head against the foundations’ doors and get thee to an individual gifts program.  This may be your only option; it’s certainly your best one.  Seek small gifts through an annual campaign, and big ones through individual appeals made by you and members of your no-deficit Board.  (They made the rules, now they have to play the game.)

The annual campaign: Ask your students and their families, as well as any alumni you may have, to help you make up the difference between what it costs to provide this first-rate music education and what you charge in tuition.  (If you don’t know that number, figure it out: it’s magic.  Not only does it encourage contributions, it makes future tuition increases easier to swallow.  Why do you think colleges keep repeating, “Tuition covers only a fraction of the cost of educating a student”?  Though at $40,000-plus a year, one might begin to wonder what fraction, exactly.)

Ask at “Back to School” time, and again around Christmas, and again before or during recital/graduation season.  Also, ask at performances.  Don’t be shy: remember that most people say they give because “Someone asked me.”  Your school is just as deserving as any other charity, and with 350 people in the program someone connected to you should be willing to cough up some dough.

Major gifts: Identify anyone who’s already been giving you money and take him/her out to lunch and ask for more.  If your Board members aren’t already giving, conspire with your Board president to get them to do so–and once they’ve given, ask each of them for the name of one person who could be asked.  Remember the Nonprofiteer’s rule: Board members don’t ask their friends for money–they ask each other’s friends for money!

Individual gifts come in smaller chunks than foundation gifts (though not in your case, actually).  Moreover, they’re infinitely renewable and will sustain your school for years to come.  Good luck, and let us know how you do.


April 29, 2009

Low on inspiration this morning, but the Nonprofiteer assures her readers that nothing she could think of to say about the sector is nearly as important as the news that Senator Arlen Specter has joined the Democratic party.  Once Al Franken is seated–maybe before the summer solstice, maybe just after, but it will occur–the Democrats will have free rein, and that means health care reform and education funding and appropriate attention to energy use and climate change and a shot at the Employee Free Choice Act.

Good news for all of us in the business of helping people.

Where’s the beef?: Why are women getting all the gravy?

April 27, 2009

Hey, Nonprofiteer, here’s my beef:

All of a sudden a number of colleges have received completely anonymous donations in the millions of dollars, which is great–but it turns out all the colleges in question are run by women.  Now, why should something as irrelevant as the gender of the CEO determine who gets support for education?  Aren’t other colleges entitled to the same help?

Signed, Concerned With Merit

Hey, Concerned,

First of all, no one is “entitled” to a gift, as my law professors used to point out when we studied battles over wills and estates: the daughter may be a better person, but that doesn’t mean she “deserves” anything; if the giver intended to benefit the son, that’s the end of the conversation.

Second, and more important, what makes you think the anonymous college donor isn’t concerned about merit?  Maybe s/he thinks women are better stewards of resources than men (per this suggestion in the New York Times’ coverage of the same issue), which certainly is a reasonable posture given that the only sane things being said about the banking crisis are coming from the woman who oversees the TARP program and the woman who runs the FDIC.  (Meanwhile their male counterparts are busy making sure no squash partners or prep-school roommates are discomfited by inconvenient regulation.)

Or maybe s/he thinks colleges which act on their rhetoric about equality for women by hiring one as CEO are more likely to act on their rhetoric about equality for women in treatment of students and faculty.  (As opposed, say, to colleges whose presidents announce that women aren’t any good at science.)

In other words, this gift is all about merit, and about rewarding virtue.  If you find it hard to recognize as such, because the virtue in question is “acknowledging people who are often marginalized, even if we’re the majority,” that just makes the anonymous donor’s point: people still have a hard time with the idea that women matter.

But as it is written, women hold up [more than] half the sky; why shouldn’t good treatment of us be considered important enough to be worth millions?

Charter schools and unions: good ideas in conflict?

April 21, 2009

The on-line ChiTownDailyNews reports a whole lotta shakin’ goin’ on at a charter school where teachers are talking–and preparing to do more than talk–about organizing a union.

The Nonprofiteer doesn’t know the rights and wrongs of this particular engagement, but she firmly believes that charter schools–like other nonprofits–are the most fertile territory for union organizing, and she’s not surprised to see that organizing professionals have figured that fact out as well.  Combine the relative immobility of most nonprofits–the Art Institute of Chicago won’t pick up stakes and move to Singapore–with their routine underpayment and general exploitation of their employees, and it shouldn’t be a surprise when the union comes to call.

Nonprofits sustained themselves for many years on the unwaged labor of women, and for many years after that by skimping on financial capital and trying to make up the difference in human capital.  Everyone who works in the sector is familiar with poor salaries, no benefits, routine demands for unpaid overtime and other violations of the labor laws, and a resistance to improved working conditions based on the “let’s you and him fight” argument that decent salaries for nonprofit workers can only come out of the pockets of nonprofit clients–instead of the pockets of nonprofit Board members, whose job it is to provide resources for their beloved agencies.

It’s not clear that the tactic in this particular organizing battle–to point out that charter schools get public money and thus should treat their teachers the same as those in public schools–is especially on point.  (And, to reiterate: the Nonprofiteer is not making any assertions about this particular school, its particular Board of Directors, or its particular employment policies.)  Rather, it seems to the Nonprofiteer, teachers at nonprofit charter schools should range themselves on the side of all nonprofit employees, and note that the people who do society’s hardest and most important work should probably be paid reasonably for the privilege.

Nonprofits must economize, sure, and more now than ever; but they don’t get to do it on the backs of their workers.