Archive for the ‘Insurance’ Category

Eliminating the charitable deduction: It’s the end of the world as we know it, and I feel fine

May 19, 2011

As governments at all levels scramble for resources, the idea of eliminating the charitable deduction from the income tax code has begun to attract support.  Many people who work in nonprofits say this would damage the sector, because people would be less inclined to give and those who did give would give less.  Let’s assume this is true (though Americans’ passion for voluntary organizations long predates the tax code; Tocqueville, anyone?).  Is the health of “the sector” really the relevant concern?

It may be that people will give less to their churches or alma maters or prestige arts organizations if deprived of a tax benefit for doing so.  But that money will be in the public treasury, where it will go for health care and education and environmental protection (and even a pittance for the arts).  So wouldn’t the goals of nonprofit hospitals and nonprofit schools and environmental nonprofits and arts nonprofits actually be advanced if the government had more to spend on these essential services?

In other words, as with health care, the question isn’t whether people pay; it’s how.  You either pay for health care by giving money to an insurance company, or by paying taxes and letting the government insure you. (The latter model, in use in this country only for the aged, produces the greatest efficiencies and greatest satisfaction among patients, families and caregivers; but of course extending it to the rest of the population would set us on the road to serfdom.  Hayek himself endorsed public provision of health care, so what are we arguing about, again?)

Likewise, you pay either way for education and schools and environmental protection and so on; it’s just a matter of which pot you’re anteing up in: the private nonprofit or the public.

So there’s a real discussion to be had about whether the charitable deduction is a good idea for the entire sector, or whether in fact social service and social justice nonprofits–-the ones that struggle the most for philanthropic support–-would be better off without deductions but with a bigger public fisc.

(Yes, the money might go for defense, or subsidies for oil companies, or some other boondoggle.  It’s our responsibility as citizens to prevent this; tax deductions were not designed to protect us from self-government.)

This is another version of the argument the Nonprofiteer has made elsewhere about the generosity of billionaires versus the reinstatement of a significant inheritance tax.  (We Democrats should make a point of calling it “the inheritance tax,” because that’s the whole point: at the moment, people who work for their money pay income taxes on it while people who inherit their money don’t.  Or we could call it “the windfall profits tax,” which is what it is: a tax on the windfall profits of people whose only contribution to society is having picked the right parents.  And the Nonprofiteer speaks as a windfall recipient.)

When the government collects inheritance taxes it can spend the money on things we as a democratic society think important: health and education and social services and, yes, roads and weapons systems and a bunch of other things about which the Nonprofiteer’s opinions are in the minority.  If the government doesn’t collect, billionaires’ offspring can spend the money on the things they as potentates think are important, which might be eradicating malaria and endowing charter schools but which might, yes, be paying scholars to produce support for the elimination of public education or the abolition of all regulation, or even paying legislators directly for said elimination and abolition.

The tax code is designed to provide the government with resources to do its job.  Its job, among other things, is to provide essential services to citizens who cannot provide those services for themselves; and the more money it collects, the more services it can provide.  What’s important is that those services get provided, not that they get provided by the sector that happens to employ the Nonprofiteer.

So the question here is not, “Is it good for the sector?” but “Is it good for social welfare and social justice?”  The answer is not clear-–crunching the numbers would be a huge job for which the Nonprofiteer is totally unqualified-–but let’s make sure we’re asking the right question.

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Not exactly about nonprofits: children’s health care

October 8, 2007

Has everyone seen Barbara Ehrenreich’s wonderful article advocating access to veterinary care for children?  It’s not quite Swift’s A Modest Proposal, but it sure does put the Bush veto of the State Children’s Health Insurance Program in perspective.  Fortunately, there’s still a chance for an override.

Going without insurance a good idea?

June 25, 2007

Another valuable tip from nonprofit lawyer Kathryn Vanden Berk for those of you located in Illinois (other states may offer a similar option; Kathryn would know):

Nonprofits may elect to be “reimbursable employers” for unemployment compensation purposes. If you become a reimbursable employer, you will not pay monthly contributions to the Illinois Department of Employment Security (IDES). Instead, you reimburse IDES only when a former employee qualifies for and receives unemployment benefits. This is a wonderful option if you have a stable workforce, or if you have the kind of workforce whose members, for a number of reasons, rarely qualify for unemployment benefits. Conversely, it is a terrible option if you have a large turnover and numerous UC payouts. The option is not available to for-profit employers.

Unfortunately, the sort of nonprofit most likely to benefit by reducing recurring expenses such as unemployment insurance contributions–that is, a small one–is also the sort least likely to have a "stable workforce" (many of you may be asking, "What’s that?"). 

But perhaps those selfsame small nonprofits are likely to have workers who rarely qualify for unemployment–because they don’t work long enough; because their employers make them so miserable that they quit, instead of firing them outright; because they’re classic nonprofit sector overcompensators who don’t apply for something to which they’re entitled because it might cost the agency money.

As the national museum goes, so goes the nation–and vice-versa

June 20, 2007

The Smithsonian Institution’s self-study report, summarized in yesterday’s New York Times, sounds like an effort to compile a comprehensive list of failures in nonprofit governance and management.  Clueless Board?  Check.

"…[T]he Board of Regents was largely in the dark about the terms of [the CEO’s] executive compensation, which included a housing allowance and enabled him to use institution money for personal expenses, the report said. The board was also inadequately apprised of negative reaction to some of [his] initiatives, it said, like a deal he made with Showtime Networks in 2006 to set up an on-demand cable station whose programming would feature Smithsonian programs and collections.

“The Regents did not routinely receive, nor did they demand, the information necessary to support vigorous deliberation and well-reasoned decision making,” the document said.

Inadequate communication between leadership and staff, producting competition instead of cooperation among departments, a lack of consensus on programming and a blurred vision?  Check.

The report paints a picture of an organization out of touch with itself because of poor internal communications and a concentration of power at the top . . . . the nonuniform application of policies and procedures, objections to some practices of Smithsonian Business Ventures, morale issues identified through employee surveys and increasing tensions between the Smithsonian’s individual units and the central administration.

Omission of elementary safeguards and procedures to prevent fraud and conflict of interest?  Check.

Nor did the board heed several efforts to sound the alarm. “The general counsel, the chief financial officer and the inspector general were without the necessary direct access to the board to be able to raise concerns or serve as effective resources,” the report said.

This spring [the CEO and the COO] came under tough Congressional scrutiny for serving as highly paid directors of the Chubb Group of Insurance Companies even as the Smithsonian renewed a contract last year giving Chubb more than $500,000 in business annually.

The good news seems to be that people are being held accountable–and what a remarkable phenomenon that is in George W. Bush’s Washington!  The COO is following the CEO out the door, though the pleasant clubby atmosphere remains relatively undisturbed: a new policy prohibiting Smithsonian staff from serving on for-profit boards won’t take effect until after she leaves.

But before anyone decides that this constitutes an argument for the unique dishonesty and incompetence of the nonprofit sector, remember that a highly paid Board of Directors failed just as spectacularly in keeping executives from looting the Hollinger newspapers chain, and during the erstwhile chief’s trial the chair of its Board audit committee, a former U.S. Attorney and Illinois Governor, excused himself by saying he hadn’t really read the financial reports.

Still, when nonprofits look to Washington for leadership, leadership in corruption isn’t what we had in mind.  And let’s get this straight once and for all: when we say the Board is responsible for oversight, we don’t mean that it should neglect its responsibilities and then say, "It was an oversight!" 

Who’s the boss?

April 23, 2007

The Nonprofiteer met an embittered teacher once who said, "You think principals and teachers and school boards decide what happens in schools, but it’s really bus companies and insurers."  An overstatement, no doubt, but it came to mind at the news reported in the Chicago Tribune that Chicago’s Catholic Charities will stop providing foster care after 90-plus years because it can no longer secure liability insurance for the program.  The agency settled an abuse lawsuit, the insurer had to pay (although not the full amount, and not promptly) and then when it came time to renew, the insurer didn’t. 

[Asides: first, the abuse lawsuit had nothing to do with the clergy sex scandals in the Catholic Church; it alleged and proved failure of oversight by the agency when foster parents abused three children placed with them by the Charities.  Second, the polite folks at Catholic Charities have refused to name the insurer.]

Catholic Charities serves 900 children each year, and has operated foster care in Illinois since before the state a Department of Children and Family Services.  That is, it actually did what many charities hope to do: create a program, demonstrate its value and persuade the government to take it over.  But government support doesn’t eliminate the need for foster placement agencies, or for the fundraising efforts they make on behalf of their wards.  Catholic Charities supplemented public funds to the tune of $1.7 million a year.  If an established agency of this magnitude can be taken down by an underwriter’s ruling, it’s time for intervention.

The Federal government was forced to become an insurer of last resort for floods because private insurers simply wouldn’t sell flood insurance.  And the Feds likewise insure student loans (through Sallie Mae) and mortgages (through Fannie Mae and Ginnie Mae), because if they didn’t there would be no such loans.  What insurer would want to take those bets?

We can debate the wisdom of the Feds’ offering flood insurance–does it merely encourage people to move back to areas that are subject to flooding?–and even wonder whether student loan guarantees merely serve to push tuition higher.  But it’s hard to imagine what perverse incentives would be created by the government’s offering liability insurance of last resort to agencies that care for children–it’s not like people will have and abandon more children as a result. 

Perhaps a legislator near you should propose this idea–now, before more agencies follow in the footsteps of Catholic Charities.