The country’s first settlement house is closing. The story is still opaque, but is the meaning of the institution still strong?

January 27, 2012; Source: NPR | NPQ is sad to note the closing of the historic Jane Addams Hull House, the first settlement house in the country and a model for thousands of community-building organizations to follow.

This is a link to an NPR story on the topic, but the story is still quite incomplete. Watch NPQ for more on this, and we would love to hear your reactions. What does Hull House mean to you? –Ruth McCambridge

Former Second Mile board member Lance Shaner has filed a lawsuit to have his donations to the charity associated with Jerry Sandusky returned.

January 26, 2012; Source: Fox News | Last week, NPQ reported that Second Mile, the organization rocked by the sex abuse scandal associated with Jerry Sandusky, had made the decision to sell a property on which it was to have built a “Center for Excellence.”

This move prompted businessman Lance Shaner, a former member of the Second Mile board of trustees, to ask the charity for his money back. New Second Mile CEO David Woodle responded with a letter indicating that Shaner was not the only one to have made such a request/demand. Woodle replied by writing that Second Mile would return Shaner’s funds “just as soon as it can obtain the necessary approvals from the Pennsylvania Attorney General and the appropriate court.”

Perhaps in an effort to move that process along, Shaner has file suit to have $250,000 in donations towards the “Center for Excellence” project returned to him, also naming the office of the Pennsylvania attorney general in the lawsuit (the state has put a $3 million grant for the proposed facility on hiatus).At this point, Second Mile is apparently trying to figure out whether it should change its name and continue operating, move all of its programs to another group, or call it quits. –Ruth McCambridge

In unwelcome news to low-income Americans, the Legal Services Corporation has released a report projecting major layoffs of legal aid personnel in 2012.

January 26, 2012; Source: Wall Street Journal Law Blog | NPQ has published a number of articles and newswires (see here, here, here and here) on reductions in legal services funding throughout the recession. The flow of money from the interest on Lawyers Trust Fund accounts was decreased precipitously by the housing crisis, so when Congress slashed funding for legal aid groups by 14 percent last year on top of state funding reductions, it did not bode well for the representation of the poor. So it was no surprise when the Legal Services Corporation (LSC) released a report, after askinggrantees to project staff reductions for the year, that the findings from 2010 to 2012 include:

* A 13.3 percent cut in attorneys, from 4,351 to 3,769

* A 15.4 percent cut in paralegals, from 1,614 to 1,364

* A 12.7 percent cut in support staff, from 3,094 to 2,700

Jim Sandman, LSC’s president, comments, “We are experiencing the consequences of a wholesale reduction in so-called discretionary spending, but access to justice is not a discretionary issue in America. We think funding for legal services should be correlated to the increase in the size of the poverty population.” LSC provides 43.6 percent of the funding for legal aid groups nationwide. –Ruth McCambridge

Bill Moyers’ how-to video on citizen action to nullify the Supreme Court’s controversial Citizens United decision.

January 26, 2012; Source: Truthout | In a video posted on Truthout, an independent nonprofit news site, Bill Moyers does a nice job of talking about how ordinary individuals can get involved in overturning the Supreme Court’s controversial Citizens United decision, which paved the way for unlimited campaign spending by corporations, unions and qualified nonprofit corporations. We note it here for two reasons:

Moyers does a nice job of challenging people to see themselves as potentially effective political operatives, noting, “First, take yourself seriously as an agent of change. The Office of Citizen remains the most important in the country.” In addition, Moyers readies these change agents for the skepticism they may face, saying, “Don’t worry if you’re called naíve. Don't worry about cynics who mock you or fatalists who declare that a constitutional amendment is impossible. That’s nonsense. We’ve amended the Constitution 27 times in our history. Back in 1971, the amendment to lower the voting age to 18 was the quickest to be ratified in U.S history, four months following its passage by Congress. And after 13 years without a drink, in 1933, Americans okayed the amendment to repeal prohibition faster than a saloon’s swinging door.”

What’s more, Moyers clearly explains the process for getting involved. “So look around for organizations you can join or contact for information,” he says. “There’s a national coalition already at work named Move to Amend…and a group leading the fight called FreeSpeechforPeople.org. And see you here next time.”

Moyers’ calm presentation of people’s potential to make change is bolstered by his credibility as a thoughtful journalist and documentarian of our times. It is one of many videos you can access at BillMoyers.com. –Ruth McCambridge

The Covington and Burling law firm offers an easy-to-grasp introduction to the controversial world of super PACs, which are evolving to respond to shifts in the dynamics of political advertising.

January 25, 2012; Source: Covington and Burling LLP | There’s a tax-exempt super PAC out there for every current major presidential candidate, all of the Republicans and the one incumbent Democrat. Everyone is fretting about what they are, what special interests are behind them, how much of their purported independence from the politicians’ own campaigns is smoke and mirrors, and what regulations and rules apply to them. 

The very big and powerful law firm Covington and Burling LLP has published a short, readable, but “high level review of the legal basis for Super PACs, how they operate and some of the legal issues Super PACs are confronting.”

The topics it covers should interest all NPQ Newswire readers:

• What is a super PAC?
• How much can a super PAC raise and from whom?
• Can candidates and officeholders help raise money for super PACs?
• What can a super PAC do with its money?
• What must a super PAC disclose about its operations?
• What is an independent expenditure and how is it different from coordinated spending?
• Can super PACs work with other groups?
• What about social media?

The last item is discussed only briefly, but it should start to get more coverage soon. Just recently, we noted press commentary on the Endorse Liberty Super PAC, which is devoted to the election of libertarian Republican Ron Paul. Although identified as the fourth-largest Super PAC in the Republican presidential scrum by the Washington Post, Endorse Liberty doesn’t even have a full-time staff person. The group does almost all of its pro-Paul advertising on the Internet, as opposed to television spots or direct mail. The group’s treasurer, 28-year-old Abe Niederhauser, explains, “We’re big believers in online marketing.” 

While it seems logical that the Super PACs would discover the Internet, most haven’t gone there yet, and political campaigns have, according to the Post, been slower than other kinds of advertisers in using online tactics. Endorse Liberty suggests that relying on the Internet will keep its operations “lean.”

Capitalized by high-tech investors, Endorse Liberty’s initial forays were targeted to college towns in Iowa, a younger demographic that might be more likely to respond to online messages rather than traditional media approaches. It should be no surprise, then, to learn that Ron Paul did much better in the Iowa caucuses in 2012 than he did in 2008. 

We still have much to learn about Super PACs, but it’s clear that they are changing quickly to adapt to the dynamics of the political and digital times. —Rick Cohen

Pew Internet’s Lee Rainie has an impressive slideshow on how messaging, communications, and organizing have changed in the digital revolution. Is your nonprofit addressing Rainie’s “ten new realities?”

January 17, 2012; Source: Pew Internet (Pew Research Center Internet and American Life Project) | A slideshow prepared by Lee Rainie, director of the Pew Internet Project, on ten “fresh realities of the digital age” is getting a lot of buzz in the nonprofit advocacy world. According to Rainie, these realities add up to a “new environment for advocates and NGOs” (Rainie’s use of “NGOs” instead of “nonprofits” appears to be due to the original audience for the presentation, the State Department Visitors Program).

Rainie identified five dimensions of the digital revolution:

1. Two-thirds of homes have broadband connections, whereas almost all Internet homes had dial-up access only a dozen years ago, and 83 percent of homes have Internet access of some sort.
2. More than half of baby-boomers aged 50-64 use the Internet, as do 71 percent of people aged 30-49 and 85 percent of young people aged 18-29. Even 35 percent of seniors 65 or older use social media.
3. There are 327.6 million mobile subscribers in the U.S.—though the population is only 315.5 million. As 84 percent of the population has cell phones, the amount of mobile subscribers obviously reflects people with more than one mobile account.
4. Nearly two-thirds (63 percent) of adults are mobile Internet connectors.
5. More than one-third (35 percent) own smart phones.

Rainie’s ten new realities:

1. “The world is full of networked people using networked information.”
2. “Giant changes in the civic culture and mediasphere have created new opportunities for NGOs and activists.” As a corollary, Rainie adds, the “do-it-yourself/hacker ethic of networked individuals can be tapped to fill gaps.”
3. “There is no high-tech secret sauce for effective message making.”
4. New messaging opportunities have emerged in addition to traditional mass media.
5. He cites “The Engagement Pyramid” to suggest that there are different stages in engaging different audiences.
6. Like NPQ has often noted, “influence is migrating from organizations to networks and new ‘experts,’” suggesting the importance of social media networks.
7. Rainie says that the flow of news has changed, and offers as examples “continuous partial attention to media streams,” “immersion in deep dives,” and “info-snacking in free moments.”
8. He says “all organizations are under more scrutiny and transparency is a new marker of trust.”
9. The “age of big data” will give “new power to analytics.”

There are still “critical uncertainties” concerning information policies, social norms, and other dimensions of these new digital age realities.

If nonprofits cannot find ideas in Rainie’s slides to stimulate new thinking about how they address messaging and communications, those nonprofits are missing the boat. —Rick Cohen

A first-of-its-kind class-action lawsuit claims that overuse sheltered workshops for people with intellectual and developmental disabilities are discriminatory.

January 25, 2012; Source: Chicago Tribune | In a first-of-its-kind class-action case filed in federal court, the Oregon chapter of the Cerebral Palsy Association and eight individuals with intellectual and developmental disabilities claimed that sheltered workshops violate protections against discrimination under the federal Americans with Disabilities Act and the Rehabilitation Act. The suit charges that the workshops unnecessarily segregate the plaintiffs in work environments where they are paid less than minimum wage. The suit also claims that the workshops perpetuate a stereotype about the inability of people with disabilities to function in mainstream work environments.

Ironically, the suit was filed in Oregon because it has a history of “doing it right.” In 1988, a full half of those receiving state support to move into mainstream jobs with reasonable wages did so, but now the proportion is about a quarter. The lawsuit claims that, since the 1990’s, “Oregon has reversed course, increasing its reliance on segregated workshops while simultaneously decreasing its development and use of supported employment services.”

The class the lawsuit will represent is made up of “several thousand individuals with various mental and physical disabilities who are qualified for integrated employment or programs to move them into mainstream jobs.”

More than 2,300 people work in sheltered workshops in Oregon—many of them, according to the suit, in settings “that offer virtually no interaction with non-disabled peers, that do not provide any real pathway to integrated employment and that provide compensation that is well below minimum wage.”

The lawsuit comes a year after the National Disability Rights Network published “Segregated and Exploited: The Failure of the Disability System to Provide Quality Work.”

The report states that the workshops “have replaced institutions in many states as the new warehousing system and are the new favored locations where people with disabilities are sent to occupy their days.” –Ruth McCambridge

The Wallace Foundation of New York, a practitioner of evidence based philanthropy, recently invited Bill Schambra of the Hudson Institute to challenge its own practices. Below are Schambra's comments reflecting that he is not a big fan of philanthropy overdesigning over-rational interventions for communities. Wallace president Will Miller responds. Where do you stand?

The following are Bill Schambra's remarks to the Wallace Foundation on January 12, 2012:

You’ve taken a step this evening—having a notorious critic of one of your core values appear before you to present his case—that is extraordinarily rare in philanthropy, and you’re to be commended for that. 

My meager commendation, you may find, is your only reward for having me here this evening, but I hope that’s not the case.

I take my bearings this evening from a quote from your Chairman’s Letter from 2004.  As she put it, “The [Wallace] Foundation came to see its key resource as knowledge rather than dollars. Developing and sharing effective ideas and practices in our chosen fields is our most important stock in trade—far more than just giving away money.”

This desire to be loved for your mind rather than just your money is in fact the central characteristic of modern American institutional philanthropy, beginning with the Rockefeller, Carnegie, and Russell Sage foundations over a century ago. 

Its distinctive characteristic would be to harness the new physical and social sciences to get to the root causes of problems, as opposed to decrepit, feeble charity, which merely put band-aids on problems.

This focus on the development and dispersion of knowledge was evident in their grantmaking.

It focused on building up the modern research university, with its emphasis on the physical and social sciences; on the modernization of professions like medicine, public heath, and social work, through the introduction of science into their work and building codes of professional conduct based on it; and on constructing new institutions like think tanks and civic research bureaus, to begin to reshape public policy on the basis of science.

It’s difficult to overstate the role that measurement was to play in philanthropy’s plans for America. Statistics, numbers, metrics were to be gathered en masse as the best way to probe social problems to their roots. 

The virtue of numbers is that they seem to be unassailably objective, neutral, nonpartisan.  Figures don’t lie, they believed, only later coming to realize that liars sure can figure. 

Objective, nonpartisan numbers provided the political leaders of the time—the progressives especially—with an ideal way to dampen the raging political conflicts of the early twentieth century.  

The politics of the day seemed to be hopelessly distorted by the narrow, parochial claims of political factions or by dangerously divisive and seemingly irreconcilable ideologies.

But everyone, they believed, could rally around measurements, which were to be gathered without regard to partisan preference, and which transcended interests and ideologies, pointing toward solutions that were indisputably in the objective public interest. 

As the prominent Progressive (and founder of the New Republic) Herbert Croly put it, in modern, complex society, the "cohesive element" would be "the completest social record," which could be assembled only by social science experts "using social knowledge in the interest of valid social purposes." 

We were assured by the Progressives that numbers could be gathered in a way that everyone agreed upon, and that over time, they would add up to real knowledge about society, that is, accurate descriptions of the way people predictably behave under specified circumstances.

A widely accepted metric web would spread over the face of society, guiding social research into root causes, enabling ready statistical comparisons of outcomes from a variety of conditions, pulling together agents of social welfare in unified, comprehensive approaches to problems, and, most important, deflating and defeating the groundless, unscientific snake-oil remedies peddled by mere partisan politicians.

Now, the first several decades of the twentieth century provided an ideal institutional setting for the development of this metric paradise. A closely knit cadre of massive progressive foundations dominated the landscape of public policy, dictating and coordinating the scope of policy research at universities and think tanks, unchallenged by other significant actors, this being well before the emergence of large governments.

But it’s clear today that we have come nowhere near the ideal of “Metric Nation,” and institutional circumstances are such that we are, if anything, moving ever farther away from it.

Instead of a handful of large foundations calling the shots for American philanthropy, we have tens of thousands of foundations. Notwithstanding incessant calls for collaboration and coordination, these countless foundations pursue an endless variety of purposes, very few of them related to the development of social knowledge.

Where once the nation’s leading universities and research institutions were critically dependent on foundations for funding and so for guidance, today some of them possess endowments that dwarf those of most foundations, and pursue academic programs without heed to philanthropy’s concerns. 

Where once philanthropy was the leading player in national social policy, today government at all levels has grown enormously and dominates the landscape of virtually every public policy issue.

Government in turn provides substantial support for the social service nonprofits and cultural and arts institutions that once depended on foundations. Most non-government funding comes not from foundations, but from fees for service or individual contributors.

Finally, and perhaps most important, few today have faith in a unified, coherent, rational, scientific approach to public policy capable of producing universally measurable and comparable outcomes.  

It’s not that measurement has become any less prevalent. Indeed, numbers saturate our news reporting, policy recommendations, and political speeches. 

It’s just that no one believes any more that the numbers will of themselves resolve or dampen down our political disagreements, or settle policy questions.

We now know that liars indeed sure can figure—that both sides of any political dispute are able to generate reams of social science evidence, proving indisputably that a given proposal will either rescue or ruin the republic. 

Policy research institutions are now understood to be not neutral arbiters of abstract metrics but highly partisan numbers factories for diverse political agendas. Numbers don’t settle political disputes—they have just become potent weapons in their prosecution. 

Indeed, ironically, if measurement was valued initially precisely because it would settle the most important and divisive policy questions before us, today we know that those are exactly the questions it is least able to settle. The more salient and controversial an issue the less likely it is to generate a set of widely accepted metrics. 

We may be able to conclude empirically that, say, serving wine at the Isabella Steward Gardner Museum will attract more young adults than if you don’t, though I suspect one could have deduced that without too much study.

But how about the larger issues that constitute much of our social welfare politics today and upon which definitive data would be incredibly useful?

Does school choice work? Is Teach for America a good way to recruit teachers? How is welfare reform doing? Does Head Start produce lasting gains? What’s up with global climate change? What caused the recent great recession? 

All of these questions, once thought imminently amenable to measureable answers, and urgently in need of such, given their divisiveness, instead generate furious storms of diametrically opposed but metrics based answers. 

Measurement hasn’t tamed politics. Politics has seduced measurement.

A foundation like Wallace must then pursue its knowledge agenda under circumstances that are severely constraining and delimiting. 

Given the collapse of any hope for an all-embracing, widely accepted social science metric, Wallace and other “knowledge-generating foundations” can no longer trust that their findings will fit neatly into larger frameworks containing widely accepted findings, because these simply haven’t emerged.

There are, rather, hundreds of different frameworks for collecting outcomes data, with thousands of consultants, each able to prove empirically that his or her approach is the best way to generate accurate readings.

There are tens of thousands of foundations selecting issues to study and measure based not on a shared, coherent, or encompassing research agenda but rather on factors ranging from careful investigation to a donor’s quirky and ill-considered intentions to whatever cause a board member may have discovered at last week’s cocktail party.

Measurements galore may emerge from this state of affairs, but only rarely and accidentally will they add up to a useful general proposition about public affairs applicable to more than a severely limited set of circumstances. 

And even if measurable propositions are generated, they no longer bear the authority that science and objectivity once bestowed on metrics. 

Published reports of measureable results might once have commanded respectful attention from and possibly replication by other social agencies.

But today, such numbers are likely to be viewed not as objective or neutral guides to social policy but rather as metric-tipped political missiles, to be regarded with suspicion and immediately countered by numbers proving the diametrically opposed case.

Conservatives, for instance, have not failed to notice that most foundation studies tend to follow a certain well-trodden path. 

No matter the problem, the solution is inevitably a larger dose of the appropriate social services applied at ever earlier points and covering ever wider areas of human development; delivered by an expanded cadre of credentialed providers, who themselves urgently require ever more sophisticated professional training; and rewarded subsequently by ever better pay and benefits—all of which, of course, add up to more encompassing and expensive government. 

However accurate by some arcane statistical standard such studies may be, their utter predictability and uniformity cannot fail to arouse skepticism among those opposed to expansion of the welfare state, and hence a certain cynicism about measurement itself.

Meanwhile, consider the daunting obstacle course to be run by nonprofit groups that seek funding from the “knowledge-generating” foundations under such bewildering circumstances.

Most nonprofits have developed programs based on the immediate, day-to-day encounter with the specific, idiosyncratic communities they serve, hence exhibiting the almost infinite variety of those communities. 

But to win funding from a knowledge-generating foundation, the nonprofit must shoehorn its real-world work into the abstract, unfamiliar professional jargon to which data accumulators resort when they wish to generalize across (that is, to make disappear) the varieties of particular experiences.  

The ability of a nonprofit to attract funding from multiple sources is, of course, an essential ingredient for a successful grant request. So that means it must recast its programs into as many different languages and metric frameworks as the foundations from which it seeks funding.

And this vast tangle appears before you add in the very substantial burden of measuring and reporting imposed by government funding.  

Under such circumstances, only the largest and most established nonprofits—that is, those that are already deeply enmeshed within the unsatisfactory status quo—are likely to have the ability to deal with metrics-based funders.

Why have foundations persisted in their metrics mania in the face of these problems?  Well, that splendid philanthropic independence, that detachment from the pushes and pulls of the real world that allegedly enable boldness and creativity, also permit foundations to evade the evidence of their own failures.

They are surrounded by consultants, academics, and professional experts whose livelihoods depend on selling and applying measurement tools, and by grantees who cannot afford to complain that the reporting requirements of a grant are unreasonably burdensome. 

Occasionally, reality unmistakably intrudes—a much-courted district superintendent resigns, a supportive mayor is defeated, budgets are ruthlessly slashed across the board—and suddenly the project that was generating such encouraging numbers vanishes in an instant. 

This should be the moment when foundations realize that metrics, no matter how promising, do very little to sway policy decisions. Instead, they tell themselves that were it not for this one little election or unfavorable school board vote or budget crisis, the project would have worked wonderfully.

Foundations simply cannot face that fact that the old politics of interest and ideology—which numbers were meant to tame—in fact still rages beyond the tiny, fragile metric oases so painstakingly and evanescently carved out of the howling political wilderness.

Most foundations will never hear the voice you’ve heard tonight—a voice introduced to you courageously and generously by your own evaluation staff. 

Ed Pauly and his colleagues have thereby suggested for us the best way to judge the progress of one’s programs. 

It is by inviting and cultivating robust and open discussion and disagreement among a variety of points of view, whether armed with numbers or not. 

Because this is challenging, uncomfortable, and, given their insulation, unnecessary, most foundations will simply stay within their comfort zone and avoid, if not discourage, such debate. Congratulations to you all for choosing otherwise.

Will Miller, President of the Wallace Foundation, responds to Schambra's remarks:

Table Talk: The Other Half of the Conversation

Bill Schambra is a sharp and eloquent critic of The Wallace Foundation’s approach to philanthropy. So when we invited him to our January board dinner, we knew that while we’d set the table, Bill would serve the food for thought. 

Let’s start by conceding that we savored some of Bill’s observations.  We’ll come back to the portions we left on the plate.

To understand Bill’s critique, you have to understand how Wallace, with a number of other foundations, “does” philanthropy.  We use our money to test ideas with potential for driving widespread, beneficial change.  One example: We believe if principals receive the right training and support, they could help turn around the nation’s failing schools. Therefore, we fund efforts to develop ways to improve school leadership. We then study those efforts to see what works and what doesn’t, and share widely what we’ve learned.

We readily concede that this “evidence-based approach,” as we call it, has risks.  Bill correctly notes, for example, that think tanks, which foundations like ours regularly rely on to conduct research, are often seen “as highly partisan number factories.” He is correct that the power imbalance between grantor and grantee means “grantees can ill afford to complain.” We agree, too, that foundation emphasis on “metrics” can force potential grantees to “shoehorn their work into metrics buckets.”

Bill fails to note, however, that these risks can be mitigated. Skepticism about think tanks? Wallace goes out of its way to work with researchers known for independence, objectivity and credibility, and we publish all evaluations, no matter what they find. Grantees afraid to speak truth to power? We join hundreds of foundations in asking our grantees to take part in a biennial, anonymity-guaranteed survey (by the respected Center for Effective Philanthropy) that gives us candid feedback on how our behavior stacks up against that of our peers – which enables us to work on fixing problems. Metrics mania distorting nonprofit endeavors? We select grantees already committed to the areas we are funding, so our grants do not torque them off mission.

I could go on, but there’s a bigger point to be made: Our approach can accomplish a lot of good. Just ask the scholars who have documented an American history replete with examples of the key role foundations played in building the evidence that inspired the spread of innovations such as:

• The Green Revolution (Rockefeller Foundation),
• The 911 emergency response system (Robert Wood Johnson Foundation),
• Sesame Street (Carnegie Corporation and the Ford Foundation).

In the world of policy, there are many other cases – early childhood education and welfare reform, to name two – where foundation-funded evidence was crucial.

Bill suggests that foundation-generated “evidence” leads invariably to government expansion. Really? In our work at Wallace, we’ve seen how evidence helped prompt the reallocation of tax dollars from lower- to higher-quality after-school programs for disadvantaged children. Moreover, evidence can put the brakes on overconfident claims of effectiveness that Bill rightly criticizes – and give foundations and grantees a better chance of helping society identify workable solutions as well as what falls short.

In the public sphere, we know evidence alone is insufficient.  Politics, local experience, and solid evidence work together – raising new questions, uncovering unnoticed problems, highlighting failures and successes, and taking into account community context and needs. Throwing up our hands in frustration that measurement is messy could lead to the dangerous conclusion that facts don’t matter in democratic deliberation. They should and do.

There’s another issue. If strategy and metrics are futile, how is a foundation like Wallace, with  its original donors long gone, to decide what grants to make?  It’s one thing to back an initiative that seems to make sense, but for which there is little or no evidence, when you’re spending your own money or, at least, acting on clear instructions from the founders. It’s another when you are entrusted with other people’s money and asked to exercise judgment. We believe good stewardship compels us to act with clear strategic logic, ensure our work is aligned with our goals, and measure whether or not we are achieving them.

Breaking bread with a self-described “notorious” critic of your approach is an act of faith – that both sides can listen and learn from each other, that debate sharpens thinking. In my experience, civil conversation almost always bears this fruit. One small example: The day after our dinner, the board reviewed a draft values statement and replaced the word “metrics” with the word “evidence.” Why? Bill’s comments had reminded us not all evidence comes from measurement. At the same time, our dinner dialogue reaffirmed our belief that one of the most potent ways a foundation can contribute to progress is to help forge new ideas in the crucible of real-world experience.  

(Will Miller is president of The Wallace Foundation in New York City.)

© The Wallace Foundation, 2012

You can read more about the Wallace Foundation’s evidence based grantmaking at wallacefoundation.org.

A White House official tells NPQ that the president’s proposal to eliminate tax deductions for people earning over $1 million would specifically not include charitable donations.

In yesterday’s Cohen Report, we covered President Obama’s State of the Union address, mining the more than 7,000-word text for items that spoke reasonably directly to the nonprofit sector. We suggested that it looked to us that the president had taken discussion of capping the charitable tax deduction—a policy the administration had proposed for the past few years to help pay for health care reform or job creation initiatives—off the table, at least for 2012. This was in spite of the president’s call for a “Buffett Rule” tax that would promise that no millionaire or billionaire would pay taxes at a rate of less than 30 percent (nearly doubling Republican presidential contender Mitt Romney’s self-estimated tax rate of 15 percent on his 2011 taxes). 

NPQquickly received an unsolicited comment from the a White House official who noted on background that while the president’s “Blueprint for an America Built to Last” does contain a provision eliminating tax deductions for taxpayers making over $1 million, the proposal would not apply to charitable deductions. 

The White House target appears to be the rules on “carried interest,” which apply to the monstrous incomes of private equity moguls and the low capital gains rates overall (which helped Romney lower his effective tax rate to half that of middle class families whose income depends on work rather than passive investment dividends). These targets might have been successfully challenged during the first two years of the Obama administration, when the Democrats held majorities in both houses of Congress, but that didn’t happen. 

Will it happen now? A senior official told the New York Times that the Buffett Rule and other tax changes for the wealthy would occur not as quick legislation, but as parts of more comprehensive tax code overhauls. The official suggested that these changes wouldn’t even be a line item in President Obama’s next budget.

Whether now or later, whether broad-based or specific, the president’s proposed changes to raise the taxes on the wealthy will not affect charitable deductions. The White House told us so. So all the nonprofits that made the charitable deduction the center of their public policy advocacy agenda in 2011 can now focus on something different in 2012—like whether, after serial deficit reduction actions, there will be much or any discretionary federal spending available for nonprofits to serve their communities.

President Obama’s 2012 State of the Union speech has received plaudits for taking on the nation’s class and wealth inequities and criticism for fomenting “class warfare.” We might also have liked to see the president foment the important role of the nonprofit sector.

Did President Obama tuck any messages of import for the nonprofit sector into his 7,160-word 2012 State of the Union address on Tuesday?

Nowhere in the president’s text was there a mention of charity, charitable giving, philanthropy, or philanthropic grant making. If listeners looked for hints that the president would revive his proposal to cap itemized deductions—the charitable deduction and the terribly regressive mortgage interest and state and local tax deductions—to pay for social programs such as health care or job creation, they would have to look to this small segment of his speech: “Washington should stop subsidizing millionaires. In fact, if you're earning a million dollars a year, you shouldn't get special tax subsidies or deductions.” 

That contention was embedded in the president’s discussion of the so-called Buffett Rule, which argues that taxpayers earning a least $1 million should not pay taxes at a lower rate than their secretaries. The president proposed a minimum tax rate of 30 percent for millionaires, roughly twice the estimated amount that Republican presidential candidate Mitt Romney says he will pay this year.

The president did take on tax deductions, but they were deductions for corporations. He proposed eliminating deductions for corporations moving jobs overseas (“outsourcing”) while doubling the tax deductions available to high tech firms that make their products in the U.S. (a timely response to the much-discussed New York Times article on the loss of high tech manufacturing jobs). It would appear that capping charitable tax deductions, the bellwether issue that preoccupied the nation’s nonprofit leadership organizations for much of 2011, has been taken off the table—at least during the 2012 election year.

The same may be said of the mortgage interest deduction. If the president wants to help homeowners refinance those “underwater” mortgages, as he proposed in the address, it is impossible to imagine that he would kill the mortgage interest deduction at the same time.

What about social programs, the domestic federal spending needed to alleviate the hardship and suffering of families in this troubled economy? Like the narrative behind Occupy Wall Street, the president juxtaposed the 98 percent of Americans with annual household incomes below $250,000 and the sliver of America with higher incomes. The domestic programs the president addressed were those that crossed the socio-economic class distinctions within the bottom 98 or 99 percent, the programs that could resonate with everyone in that group—primarily education and jobs. It seems the president’s new narrative is to weld a group identity among the 98 percent, rather than acknowledging differences of class within that segment of the population. In fact, there was an implicit presumption of social mobility within 98 or 99 percent despite the nation’s increasingly encrusted and rigid social class structure. The one mention of “poverty” in the President Obama’s address concerned education: “A great teacher can offer an escape from poverty to the child who dreams beyond his circumstance,” a presumption of Horatio Alger self-improvement jump-started by an inspirational, role model teacher. But there are huge economic and social hurdles among families in that bottom 98 or 99 percent, and they are rarely overcome in our increasingly stratified society simply by hard work, ingenuity, and access to personal nonpareils.

The 2012 State of the Union was a jobs and class speech, touting a mix of incentives and disincentives to stimulate U.S. job growth and retention, but the social programs needed and relied upon by the bulk of working class and lower income Americans were all but invisible in the president’s talk and the nonprofit sector was also missing in action.

At one point in the speech, the president veered close to the geography of 501(c) organizations by calling for actions to fix “the corrosive influence of money in politics.” Was he going to say something—as he did in his 2010 address—about the Citizens United case that unleashed unfettered corporate money into shady SuperPACs and all-but-secret 501(c)(4) tax-exempt organizations? Close, but no cigar. Instead, he called for members of Congress to divest themselves of stock in the industries they impact (but don’t they actually impact all industries in one way or another?). He also suggested prohibiting campaign “bundlers” from lobbying Congress, but it was hardly a frontal assault on the main corruption in the campaign finance system, which would require changes to (c)(4)s. 

Maybe the nonprofit sector was built in to the president’s allusion to a peace dividend from the wind-down of military operations in Iraq and the planned withdrawal of troops from Afghanistan. “Take the money we’re no longer spending at war, use half of it to pay down our debt,” the president said, “and use the rest to do some nation-building right here at home.” But he said that in the context of infrastructure projectssuch as rebuilding roads and bridges.And one might have thought that the president would have touched on the crucial role of nonprofits in health care reform, as nonprofit health insurance cooperatives are designed to fill the gap left by the demise of the public option. Instead, he only touted that his “health care law [that] relies on a reformed private market, not a government program.”

Nonetheless, there was a lot of strong, positive content in President Obama’s speech, including pledges that he will hopefully act upon such as approving something like the DREAM Act to put young undocumented immigrants on a path to citizenship. He also discussed pursuing the payroll tax holiday extension for 160 million workers, funding community colleges to turn them into community career centers, stopping the planned doubling of college loan interest rates, clamping down on the deceptive practices of payday lenders and credit card companies, and prosecuting the bankers and brokers whose abusive mortgage lending policies brought the nation and the world into an intractable economic crisis. 

In closing, President Obama asserted that, “this nation is great because we get each other’s backs.” The nonprofit sector is a prime mover in the nation’s mechanisms for people taking care of one other, though the sector needs resources such as government grants and contracts to fulfill that role. The president might have explicitly named and credited the charitable sector for its role in the dream of a better, more caring, more civil America. Instead, charities, foundations, donors, and philanthropic grant-makers went unnoticed in the State of the Union speech. 

If the nonprofit sector is truly a partner, a third sector, with government and business, it has to be treated seriously by our nation’s political and thought leaders. When the nonprofit sector seems to cross into invisibility, something needs to be fixed.

Poetry magazine is celebrating its 100th birthday, a party made by possible, in part, by a $100 million gift from Ruth Lilly.

January 25, 2012; Source: WBEZ   |   In 1912, philanthropist Harriet Monroe founded Poetry magazine with a little lovely prose that is as resonant today as it was then:

“In the huge democracy of our age,” said Monroe, “no interest is too slight to have an organ. Every sport, every little industry requires its own corner, its own voice that it may find friends, greet them, welcome them.”

In 2002, Ruth Lilly, then 87, gave $100 million over 30 years to establish The Poetry Foundation which has since published the magazine, a gift that made many gasp since the magazine had often teetered on the edge of a financial cliff. Among other things, the gift was spent on the erection of a $21.5 million building that some have called the “poetry palace.”

Lilly had submitted her own poetry to the magazine and been rejected on a number of occasions but apparently did not take it personally. Of course, she was up against some serious competition, since the magazine has published T. S. Eliot, Carl Sandburg, Dylan Thomas, Robert Frost, Ezra Pound, William Carlos Williams, John Ashbery and Wallace Stevens, among others. Lilly had made a number of previous donations, including providing an endowment for a prize named for her.

In this interview, listen to a radio discussion of some of the ways in which the money was spent, the effect on the organization, and the current place of poetry in our lives. –Ruth McCambridge

Ryan Reedy isn’t suggesting bingo games or Monte Carlo nights; he is planning to open three “mini-casinos” in Kalamazoo, Mich., offering nonprofits venues for conducting Las Vegas-style charitable fundraisers.

January 25, 2012; Source: Kalamazoo Gazette | This isn’t church bingo. In Kalamazoo, Mich., local entrepreneur Ryan Reedy had plans to open up three “mini-casinos.” Reedy’s corporate name is Charity Events, Inc. and his first planned casino, Black Jacks Casino & Sports Bar, was set to operate in the patio bar of the Wild Bull Saloon and Steak House.

Reedy planned to get nonprofits to serve as hosts or sponsors of the Las Vegas-style gaming for charity fundraising events. The plan was that nonprofits licensed by the Michigan Lottery would be able to put on up to 16 days of gaming a year, and Reedy would provide the mini-casino location, the gambling equipment, and staff (while the nonprofit would provide a person or two to sell the chips and collect the cash). Reedy and the nonprofit would then split the proceeds 50-50. 

The licenses required to hold such events are called “Millionaire Party Licenses,” which nonprofits obtain to run Monte Carlo nights and other somewhat more typical nonprofit gambling-oriented fundraisers. As Reedy sees it, he is giving nonprofits a different, more attractive, more glitzy approach to gaming. 

Although Reedy was ready to get going and says that he had 30 nonprofits lined up, the Michigan Lottery’s charitable gaming division stepped in to call a halt. Reedy had announced early in January that he had the state’s approval, but the gaming division says that was a misunderstanding. Reedy has taken his delayed opening in stride, indicating that the state’s intervention was simply part of the governor’s desire to take a look at new casino licenses. 

Reedy’s firm may be named “Charity,” but he is looking at the non-charitable part of the 50-50 split to keep himself going and profitable. How do nonprofits feel about the emergence of Las Vegas-style casinos sponsored by nonprofits? No worse than bingo for charitable fundraising or a contributing factor to the disease of gambling? –Rick Cohen

Country singer Garth Brooks has been awarded $1 million in his suit against a hospital that the jury found had agreed to name a building after his mother.

January 25, 2012; Source: Albany Times Union | NPQ has been following the lawsuit of country singer Garth Brooks, who made a half-million dollar donation to the Integris Canadian Valley Regional Hospital of Yukon, Okla. in 2005. Brooks won the suit against the hospital on Tuesday.

Brooks alleged that the hospital had promised to name a new women’s center after his mother Colleen and then had failed to do so. The women’s center was never built and apparently Brooks felt he had been lured into the gift.

The jury not only ordered the original grant returned, but also found that the hospital should pay punitive damages equal to the grant, bringing the total award to $1 million.

Awarded to the hospital? Probably a long-lasting bad taste in the mouth of other potential donors. –Ruth McCambridge

Until her recent resignation, a woman affiliated with a firm promoting open-pit asbestos mining sat on the board of the Canadian Red Cross—and, shockingly, the board stood by her.

January 17, 2012; Source: Montreal Gazette | Sometimes, nonprofit boards can be a bit obtuse. In Montreal, former Canadian Red Cross board member Roshi Chadha recently resigned. Chadha is an executive of a subsidiary of Balcorp, and the president of Balcorp is Chadha’s husband. Balcorp has been reviving Quebec’s asbestos industry by exporting asbestos, mined from an open pit in Quebec, to India.

Most readers are aware of the health impacts of asbestos, which include lung cancer and mesothelioma. Not surprisingly, given the health and humanitarian image of the Red Cross in Canada and internationally, health advocates have protested the presence of an asbestos promoter on the Red Cross board.

Prior to her resignation, the Red Cross board stood by Chadha, and the Red Cross’s national director for public affairs and government relations, Pam Aung Thin, defended her as a “valued member” of the organization’s governing body, while saying that Chadha would remain but would not stand for reelection to the board when her term expired in June. The board previously expressed its need for Chadha’s board organization skills.

The board’s display of an organizational tin ear provoked at least one board member, Peter Robinson from the David Suzuki Foundation, to quit. The Montreal Gazette quoted one Red Cross volunteer who said she wouldn’t return to the organization, given that her father died of mesothelioma. Finally, Chadha has decided to resign from the board immediately even though her term still had months to go. 

Explain the Red Cross’s behavior, please. Asbestos is a fully documented danger to people’s health. Balcorp is doing open-pit mining in Quebec, which Americans know is a life- and community-destroying activity from the tragedy of Libby, Mont. Balcorp is exporting the asbestos for use in developing nations, which seems likely to expose the people in those countries to the carcinogenic effect of asbestos fibers. But an asbestos promoter sat on the Red Cross board, which then defended her when challenged by anti-asbestos campaigners? Why would a health/humanitarian organization maintain someone who is associated with promoting a documented health danger on its board? –Rick Cohen

The story behind the death of Opera Boston is important reading for boards, executives fundraisers and philanthropy.

January 15, 2012; Source: The Boston Globe | This newswire will be short in an effort to encourage you to read this fabulous novelette- or case study-type article for yourself.

So, in short, this is the story of an opera company that failed. Not just any opera company, but Opera Boston, which had recently commissioned and produced the Pulitzer Prize-winning “Madam White Snake.” You could potentially pin the failure on any combination of the many challenges the organization faced: a lack of local audience, a bad season financially, or perhaps too few donors. But maybe the tipping point was the large donor who loved opera—and expected to be listened to—taking a dislike to the executive and demanding her ouster.

The story is interesting in any number of ways. Good reading for boards and executives alike. We’d love your take on what happened in this painful situation. What are its lessons? –Ruth McCambridge

A new report by the Foundation for Child Development reveals connections between children’s overall well-being and public investments in state education and health programs.

January 23, 2012; Source: New York Times Economix Blog | The Foundation for Child Development,with support from the Annie E. Casey Foundation, recently released a new report, “Investing in Public Programs Matters: How State Policies Impact Children’s Lives”. The report uses results from a 2007 study of children’s well-being that includes 25 separate indicators and seven domains. As key findings, the report highlights the benefits of higher tax rates for children, public investments in education and health programming, and the strong link between children’s well-being and the state in which they live.

As a way to illustrate the range of findings from the most recent Child Well-Being Index (CWI), the report contrasts the highest-ranking state, New Jersey, with a CWI value of .85, with New Mexico, the lowest-ranking state, with a value of negative .96. Massachusetts, New Hampshire, Utah, Connecticut and Minnesota were also among the highest-ranking states, while Arizona, Nevada, Arkansas, Louisiana and Mississippi were among the lowest.

The report emphasizes the correlation between states with high CWI rankings and high state taxes. It also links CWI rankings to the investments these same states make in education programs (from the Pre-K to secondary level) as well as their less restrictive Medicaid programs and higher Temporary Assistance for Needy Families (TANF) benefits. Stressing the importance of this funding variability between states, the report notes that, unlike funding for other sectors of the population, “now more than ever, the well-being of children lies in the hands of state policy makers.”

Providing broad analysis on findings from the report in a recent post on the New York Times’ Economix blog, University of Massachusetts at Amherst Professor Nancy Folbre points out that, “The higher the percentage of children in a state who are minorities, the lower the state’s index of child well-being.” Folbre adds that there is a need for more success stories from states promoting child well-being, which in her view “might reveal strategic innovations in efforts to overcome differences and build strong political coalitions.”

As a concluding note for policy makers, the study emphasizes that now is “exactly the wrong time to reduce taxes,” and argues that government should increase investments in education and health programs. –Anne Eigeman

In one of the first sessions at the World Economic Forum, panelists presented evidence of a dystopian world. Let’s hope the corporate and government power brokers gathered in Davos are capable of doing something about it.

January 24, 2012; Source: The National | Not many NPQ Newswire readers and certainly no one from the NPQ staff gets invited to the annual World Economic Forum (WEF) meeting in Davos, Switzerland. The annual meeting of this global nonprofit organization is a time for what the press calls a gathering of “the world’s elite politicians, businessmen, economists and intellectuals...representing what some have called ‘Davos man’” to discuss the world’s economic concerns. 

This year, the topic in Davos is the future of capitalism. The 73-year-old founder of the WEF, Klaus Schwab, is clear on that subject. “Capitalism in its current form has no place in the world around us,” he says. “A global transformation needs to take place urgently and it must begin by restoring a form of social responsibility.” 

Not surprisingly, “Occupy WEF” protesters are building igloos in the small Alpine town, and some, according to the National, are “planning to disrupt the five-day event.” There are 5,000 security personnel deployed in the Davos-Klosters region to protect the more than 2,600 official participants, who include heavy hitters like Bill Gates, George Soros, Muhammad Yunus (Grameen), Niall Ferguson, Vikram Pandit (Citibank), and politicians such as Germany’s Angela Merkel, the UK’s David Camerson, Russian’s Dmitry Medvedyev, and U.S. Treasury Secretary Timothy Geithner. 

One of the official WEF documents for this annual meeting addresses—not unsympathetically, mind you—the issues that Occupy Wall Street (OWS) has put on the international agenda, expressing concerns for trends leading the world toward dystopia. 

Consequently, one of the first WEF panels apparently addressed the “seeds of dystopia,” with the discussion led by New York University economist Nouriel Roubini (known for having predicted the collapse of the housing markets). The corporate and political executives who fund WEF had to have been shaken by some of the conclusions reached by Roubini and his co-panelists, particularly Roubini’s belief that the term dystopia “accurately describes today’s world”. The evidence presented sounds like it could have come from an international version of the OWS playbook: 225 million people across the globe unemployed (or one out of every three people on earth poor or unemployed) and one percent of the world’s population owning 40 percent of the wealth. The dytopia panel summary, according to the National? “In the perpetual tug of war between labor and capital, capital is running away with the game.” —Rick Cohen

Former President Bill Clinton’s daughter, Chelsea Clinton, recently urged youth in Ukraine to engage in civic activism and philanthropy.

January 23, 2012; Source: Associated Press   |   Chelsea Clinton, former President Bill Clinton’s daughter and philanthropist with the Clinton Foundation, has been reaching out to youth in Ukraine to encourage their engagement in civic activism.

Clinton made an appearance in Kiev on Tuesday, January 24, where she urged college students to give back, informing the youth that being engaged in the world is “part of being a good person.”

Clinton also said there is always a gap between what the government and the private sector can provide, and that the gap must be filled by the work of charity and non-governmental organizations. During the trip, Clinton also visited the National Children’s Hospital, where she learned of the plight of some of Kiev’s sick infants.

Clinton is currently pursuing a doctorate at Oxford. As NPQ recently covered the philanthropic vision of fundraising powerhouse Bill Clinton, we look forward to seeing if the younger Clinton can continue to build upon her father’s momentum in the years ahead. –Aine Creedon

The real digital divide is the widening gap between how U.S. schools and U.S. companies view investing in technology.

January 25, 2012; Source: Chicago Tribune | Technology spending in K-12 education varies widely across the country, as some districts reap the benefits of grants and parental donations, while others tap local, state and federal funding. This lack of consistent and adequate technology spending not only increases the digital divide between students, but also exacerbates a potentially epic failure in training the next generation of U.S. workers.

At the Bronzeville Scholastic Institute in Chicago, nearly a thousand students from the three schools that occupy DuSable High School’s campus on the South Side share 24 computers. Many students cannot afford computers at home and don’t get enough time to use them at school. As a result, Bronzeville Scholastic students born into a digital era struggle with basic skills, such as saving work to a flash drive and setting margins in Microsoft Word.

But the real culprit behind this digital divide is not just a disparity in funding between schools, but a lack of overall investment in technology across the board. This lack of funding isn’t exclusive to Chicago. It’s occurring throughout school districts across the country, but let’s take Chicago as our case study.

Chicago public schools have a budget of $6.6 billion. According to the school system’s annual report, this is comparable to Fortune 500 companies Visa, Yahoo!, and Mattel. The district spends $40 million (or .08 percent) of its annual budget on technology.

If Chicago public schools operated like a Fortune 500 company, then, according to Gartner Research, the school district would spend about 3.5 percent of its annual budget on IT. Were that the case, the school district’s technology budget would increase to $231 million. In a district that serves 400,000 students, this increase represents an annual boost in spending from $100 per student to $577 per student.

Still probably not enough to do the job. But for K-12 schools, whose primary business is training the next generation of tech-savvy workers, the argument for increased technology funding in the education sector could hardly be more straightforward.

Rather than lamenting the costs associated with new technology aimed at schools, those concerned with the welfare of young people should be taking a hard look at how and how much we invest in technology-focused education. –John Hoffman

Canadian taxpayers caught up in a charitable tax write-off scam offer a reminder of the old lesson: when something sounds too good to be true, it probably is.

January 23, 2012; Source: National Post | Even in friendly Canada, charitable donors have to be very careful about who’s pitching what.  Tens of thousands of Canadians were lured by the Donations for Canada Gift Program, a complex little investment scheme hatched by financial software honcho Edward Furtak that is now the subject of a major class-action lawsuit.

For Furtak’s plan to work, he needed charitable donors who thought that if they made a donation to (and through) Furtak for $2,500, they could somehow receive a $10,000 charitable tax credit—getting something for nothing.

He also needed charities that might have been so desperate for new funding that they signed up to be “beneficiaries” of some of the charitable giving that might ensue, even though the notion of offering donors $10,000 for $2,500 might have raised some eyebrows. In Furtak’s case, charities could only retain one percent of what they received; those who agreed to these terms may have been compelled by the promise that they would somehow benefit from Furtak’s software programs more substantially in the future. 

Once he had donors and charities lined up, Furtak’s financial wizardry began. The National Post explained it this way: “When a donor gave $2,500, he would also become the beneficiary of a private charitable trust created by Mr. Furtak, which would then ‘prime the pump,’ as the judge put it, by acquiring units of this trust for $7,500. The ultimate result would be that $10,000 would remain in the possession of a charity for a ‘scintilla juris,’ a legal term meaning a mere instant, and the donor received two tax receipts: one for $2,500 in cash, and one for a $7,500 donation-in-kind, for the trust units.”

The end result is that donors thought they had received $10,000 charitable tax credits for their $2,500 donations, but they ended up with a letter from the Canada Revenue Agency to repay their erroneous tax deductions with interest. Say it with us: if it’s too good to be true… –Rick Cohen