Friday, October 24, 2008
The Chronicle of Higher Education reprted on October 24, 2008, that academics overwhelmingly favor Barack Obama over John McCain for U.S. President. Here is an excerpt from the article:
Professors, college administrators, and other educators have donated eight times as much to Barack Obama as they have to John McCain, the widest gulf in giving to presidential candidates by academics in the past five presidential elections, according to data from the Center for Responsive Politics.
Through the end of last month, donors from academe had contributed just over $12.2-million to Mr. Obama, compared with just over $1.5-million to Mr. McCain, according to the center, a nonprofit research group whose data on giving to presidential candidates date to the 1992 election.
It is no surprise that the Democratic candidate for the White House has received more cash from people in higher education than the Republican, given that studies and polls have shown that faculty members and college presidents are more likely to be registered Democrats.
For the entire article, see "Donors from Academe Favor Obama by a Wide Margin" in the October 24, 2008, issue of the Chronicle of Higher Education.
The October 24, 2008, issue of the Chronicle of Higher Education reports that corporate giving to colleges and universities will likely fall in the near future, especially for matching fund programs and corporations that file for bankruptcy. Here is an excerpt from the article:
Kettering University isn't the only institution seeing changes — including some declines — in corporate giving. As the economy enters a recession, those who follow philanthropic trends expect such giving to drop, especially among companies that are filing for bankruptcy or are being acquired.
The question is, By how much will donations fall? Data gathered by GivingUSA Foundation data for the past 40 years show an average 1.6-percent decline in donations by corporations to all charities during years with recessions that last eight months or more (and an average 1.9-percent drop in total giving for education during these years). One expert expects worse, predicting this economic decline will cause corporate giving to all nonprofit groups to go down at least 10 percent.
At the same time, philanthropy experts say, companies weathering the turmoil will most likely continue their philanthropic giving, including the donation-match programs, which are seen as an employee benefit that raises workplace morale. Although General Motors, which gave $657,000 to degree-granting institutions and libraries through matching gifts last year, discontinued its matching program on October 1, two dozen companies contacted by The Chronicle said they were continuing to match employee donations. General Motors says it will continue giving to education through its foundation.
For the entire article, see "Colleges Brace for Drop in Corporate Giving" in the October 24, 2008, issue of the Chronicle of Higher Education.
On October 25, 2008, the Washington Post reported that congressional leaders are considering a possible new tax credit for homebuyers as a way to head off a more severe housing crisis. Here is an excerpt from the article:
Though House and Senate leaders have not agreed on whether to hold a session immediately after the election, national housing industry trade groups are pressing hard for a second round of emergency economic stimulus legislation, ideally before the end of December.
The rationale: The housing debacle was the trigger for the current economic mess, and until the housing market is put back on track -- and the huge backlog of unsold new and existing homes is reduced -- a serious recession may be unavoidable.
The National Association of Home Builders is working on a plan for a new, more generous tax credit for home buyers, possibly as high as $10,000 to $12,000. According to Jerry M. Howard, president and chief executive, the association also wants to create a mechanism to "monetize" the new tax credit -- turn it into immediately spendable cash for a down payment. This might be achieved through credit-anticipation loans from private lenders that would be repaid by buyers following receipt of the credit on their next federal income tax return.
For the entire article, see "Trying for a Bigger Tax Credit" in the October 25, 2008, issue of the Washington Post.
On October 10, 2008, the New York Times campaign blogposts published an interesting aticle about taxing health insurance. This is an issue that McCain and Obama have been debating - should the tax-exemption for health insurance be eliminated? Here is an excerpt from the article:
This tax deduction is not free. Tax deductions are subsidies. This one costs more than $210 billion per year. It is the single largest tax break in the United States and dwarfs the mortgage interest deduction. Make no mistake, when the Treasury collects less taxes in one area, it must make up for it either in higher taxes somewhere else or in more debt on our children and grandchildren.
Thus, John McCain’s proposal to eliminate the tax exemption for health insurance is good policy. (About a year ago, President Bush made the same proposal.) The problem is having built the whole health care system around tax exemption, we simply can’t get rid of it without combining it with some other policies. And, as Mr. Butler acknowledges, this is where John McCain’s reform proposals — and President Bush’s proposal earlier — gets it very, very wrong.
First, every dollar collected from capping or eliminating the tax exemption on health insurance must be directly linked to providing health coverage for the 47 million uninsured Americans. I propose beginning with uninsured children and their families. The Congressional Budget Office recently estimated that if we limit the tax exemption to the average cost of a family health insurance plan, about $12,000 per year, (so anyone with insurance worth say $20,000 would pay taxes on the extra $8,000) the federal government could reap more than $25 billion. This is a great and equitable financing mechanism. A lot better than payroll taxes for instance. Mr. McCain does not propose such a mechanism.
For the entire story, see "The Problem with Tax-exempt Health Insurance" in the October 10, 2008, issue of the New York Times campaign blogposts.
Thursday, October 23, 2008
Professor Anup Malani (Chicago) has published "Does Nonprofit Status Signal Quality?," 37 J. Legal Stud. 551 (2008). Here is the abstract:
A popular theory for why firms take nonprofit status is that it is a signal of quality. This paper offers a simple, empirical test of this theory. If nonprofit status signals quality, surely nonprofit firms would want to ensure that consumers are aware of this. A natural way for firms to do this is to indicate their nonprofit status in their advertising. Taking this cue, we conducted a survey of over 2,800 firms in the hospital, nursing home, or child care industries in order to determine whether nonprofit firms communicate their status to consumers on their Web sites or yellow pages listings. We find that fewer than 7.5 percent of nonprofit firms signal their status in yellow pages listings, only 25 percent do so on their home pages, and 30 percent do so on their about-us pages. Indeed, over 35 percent never signal their nonprofit status on their Web sites. Our evidence does not support the hypothesis that nonprofit status is a signal of quality.
The ABA Journal News reported on its website on October 22, 2008, that the new law school opening at University of California at Irvine is expected to offer free tuition to its 60 student First Year entering class. The article explains that "UC Irvine hopes to attract high-quality students with the offer" at a cost of "about $6 million." For the entire article, see "Law School Free for UC Irvine's 2009 Entering Class" on the ABA Journal News website.
On October 10, 2008, the Washington Post reported that colleges are struggling due to reductions in three major sources of revenues - government funding, donations and tuition. here is an excerpt from the article:
In many ways, colleges have an enviable position. They can afford to invest for the very long term. Many have endowments to cushion the blow of downturns, and demand for higher education holds up or even grows when the economy goes south. That's why you hardly ever hear of an accredited college going under.
But the financial events of recent weeks have been momentous enough to shake even sturdy ivory towers. Giant Boston University and tiny (but wealthy) Grinnell College in Iowa are among those delaying big projects, while numerous schools will postpone fundraising campaigns.
"I'm not going to press people now for a lot of funding. The time just wouldn't be right," said John Fry, president of Franklin & Marshall College in Pennsylvania, who moved about $1 million from other programs to bolster aid this year. Fry says a fundraising campaign will likely be delayed and scaled back, and it will likely focus more on financial aid.
Generally, Fry says F&M is in good shape, but he's glad it recently finished several big projects. Now isn't the time to start one. And asking parents to pay substantially more next year would be "unseemly," he said, echoing the thoughts of several presidents interviewed this week.
For the entire article, see "Financial Meltdown Hits Ivory Tower" in the October 10, 2008, issue of the Washington Post.
Wednesday, October 22, 2008
On October 23, 2008, the Washington Post published as interesting take by George Will on the connection between the government bailout of private companies and Senator Grassley's call for colleges with huge endowments to be required to pay out 5% of those endowments annually. Here is a telling excerpt from the article:
Hundreds of billions of dollars that the political class would have liked to direct for its own social and political purposes have been otherwise allocated. That allocation, by government fiat rather than by market forces, must reduce the efficiency of the nation's stock of capital. Which in turn will reduce economic growth, and government revenue, just as the welfare state -- primarily pensions and medical care for the elderly -- becomes burdened by the retirement of 78 million baby boomers.
As government searches with increasing desperation for money with which it can work its will, Willie Sutton Moments will multiply. Government has an incentive to weaken the belief that the nation needs a vigorous and clearly demarcated sector of private educational and philanthropic institutions exercising discretion over their own resources.
So the frequently cited $700 billion sum is but a small fraction of the cost, over coming decades, of today's financial crisis. The desire of governments to extend their control over endowments and foundations is a manifestation of the metastasizing statism driven by the crisis. For now, its costs, monetary and moral, are, strictly speaking, incalculable.
For the entire article, see "Willie Sutton Goes to Harvard" in the October 23, 2008, issue of the Washington Post.
On October 22, 2008, the Washington Post reported that the demand for services offered by traditional charities that offer food, clothing, shelter and other basic necessities is so strong and unexpected that grant foundations are offering emergency grants to some of these basic needs organizations. Here is an excerpt from the article:
With the financial crisis increasing pressure on the Washington area's social safety net, the Community Foundation for the National Capital Region has decided to award $526,000 in emergency grants to shore up charities that provide food, clothing, shelter and other vital services to vulnerable residents.
The grants, to be announced today, will help more than 40 nonprofit organizations across the region. The funding comes at a perilous time for many service charities, which have reported a rise in demand for their assistance during the past year. They say they are bracing for a shortfall in donations during the holidays, when they normally raise as much as half of their annual operating revenue.
"Everybody is like a cat on a hot tin roof waiting to see what it's going to look like," Terri Lee Freeman, president of the Community Foundation, said of nonprofit leaders. "All of them say that demand is going up, cost of doing business is going up and they're very nervous that funding is decreasing."
For the entire story, see "With Coffers Low, Charities to Get Emergency Grants" in the October 22, 2008, issue of the Washington Post.
A number of news outlets reported on October 22 about Govenore Sarah Palin's use of clothing purchased by the Republican National Committee. The Washington Post reports that clothes are to be donated to charity after the campaign ends:
The episode naturally raised questions about the propriety of using party money for such expenses. The Republican National Committee said the clothes belong to the committee, while John McCain's campaign said the clothing would go to a "charitable purpose" after the campaign. It also sought to deflect the issue by criticizing the media attention.
"With all of the important issues facing the country right now, it's remarkable that we're spending time talking about pantsuits and blouses," said McCain spokeswoman Tracey Schmitt.
For the entire story, see "Shop, baby, shop? GOP spent $150K on Palin Clothes" in the October 22, 2008, issue of the Washington Post.
Tuesday, October 21, 2008
We blogged a number of times about Pulpit Tax Freedom Day, held on September 28, 2008, which involved churches from across the country purposely violating the Tax Code's 501(c)(3) ban on churches endorsing or opposing candidates for elected office. See prior blog postings here, here, here, here, here, here, and here. The ADF, a chief proponent of this event, has posted a list of pastors who it believes participated in this event. To see the ADF list of participants, go to http://www.telladf.org/UserDocs/PFSparticipants.pdf In addition, American United for Church and State apparently turned in names to the IRS of churches that violated the no political campaigning prohibition. To see its list of six churches, go to http://www.au.org/site/News2?abbr=pr&page=NewsArticle&id=10055&security=1002&news_iv_ctrl=1241
Professor Roger Groves (Florida Coastal) has published "The De-Gentrification of New Markets Tax Credits," 8 Fla. Tax Rev. 213 (2007). Here is an excerpt:
Urban America is in a state of crisis. A huge pool of America's resources is increasingly disconnected from mainstream society. That pool is within the core of major cities and particularly includes African American and Hispanic male youth. By way of illustration, more than half of all core city African American men do not finish high school. The correlation between drop-out rates, unemployment, and incarceration is profound. As of 2004, 72% of African American dropouts who are in their 20's are unemployed, up from 65% in 2000. Incarceration levels are at historic highs and increasing, where by their mid-30's, 6 in 10 of these high school drop outs have spent time in prison. That rate is four times higher than that of Black men in South Africa under the apartheid regime. Seventy-five percent of African American males incarcerated in Baltimore Maryland did not graduate from high school. The infant mortality rate among all African Americans is more than twice the national average, and is much worse among the poor in the core of urban America. After the Katrina floodwaters have receded, some see an opportunity to buy low and sell high. But the muted voices of the poor cry to keep what they had. For them it was a Katrina moment. For the urban core poor across the nation, it has been a Katrina erosion over the decades from a series of unnatural disasters.
Despite this crisis in urban America, could it be that over $ 2 billion of US taxpayer dollars designed to alleviate that problem are being co-opted for the financially well-healed? With the aid of federal subsidies, are the wealthy gentrifying the low-income areas and marginalizing the low-income residents in the process? A long-time Portland Oregon resident observed: "The heart of the black community is gone." Seattle's first and only African American mayor in the 1990's observed the transition of well-educated and mostly white newcomers into the city's Central District and said: "I am concerned and I am frustrated because I don't know what the alternates are. It clearly isn't racist; its economics. The real question you have to ask yourself is: Is this good or bad?" More to the point of this article, is the federal law, through the new markets tax credit program actually subsidizing the gentrification?
The answer to the later question appears to be either an unequivocally "yes," or adding a drop of vacillation: "It certainly appears that way." Metaphorically speaking, the proof is in the plumbing. As will be detailed below the NMTC program has been used to subsidize the development of performing arts centers for opera, ballet, symphony orchestras, hotels, high priced condominiums, theatres, mixed use commercial developments, and even convention centers. This author opines that as a matter of tax credit policy, the needs of the desperate should trump the wants of financially well-healed, and that the NMTC funds were not misappropriated, just misapplied in many significant respects - a correctable error nonetheless.
Monday, October 20, 2008
On October 16, 2008, the IRS announced the inflation adjusted pension plan limitations for 2009. The announcement is on the IRS website at http://www.irs.gov/newsroom/article/0,,id=187833,00.html.
NYC Mayor Bloomberg Asks Charities to Which He Has Donated to Lobby for His Term Limit Extension Legislation
The October 18, 2008, issue of the New York Times reports that New York City Mayor, Michael Bllomberg, is contacting charities to which he has donated to ask that they speak in favor of legislation that would allow the Mayor to run for an unprecedented third term in office. Here is an excerpt from the article:
An official at a social service group that receives tens of thousands of dollars from Mr. Bloomberg and has a contract with the city was startled to receive a call in the past few days from Linda I. Gibbs, the deputy mayor for health and human services. Ms. Gibbs asked whether the organization’s leaders would be willing to call wavering council members to argue for Mr. Bloomberg’s term limits legislation.
“It’s pretty hard to say no,” the official said, speaking on condition of anonymity for fear of upsetting the mayor. “They can take away a lot of resources.”
A spokesman for the mayor, Stu Loeser, said that many of the organizations that have publicly supported the extension “are groups that we have been working with over the last seven years to move New York forward, and the reason we are asking for the opportunity for another four years is to keep New York moving forward.”
Mr. Loeser said Mr. Bloomberg took pains to separate his charitable giving from his day-to-day management of the city.
Nevertheless, public hearings on Thursday and Friday and interviews with council members revealed the extent to which the mayor is relying on those who have received donations from him as he pushes for the legislation, which would permit officials elected citywide and council members to serve 12 years rather than 8. Several administration officials confirmed that top mayoral aides, including Deputy Mayors Edward Skyler and Kevin Sheekey, have encouraged groups to join the effort.
Piccard Posts "Faith-Based and Community Initiatives: Unconstitutional Delegations of Executive Power"
Professor Ann Piccard (Stetson) posted "Faith-Based and Community Initiatives: Unconstitutional Delegations of Executive Power" on SSRN's Nonprofit and Philanthropy Law Abstracting Journal, an abstract of her working paper. Here is the abstract:
Federal payments to religious groups that provide social services amount to an improper delegation of the executive power in violation of the non-delegation doctrine. It is proper for the executive branch to involve itself in the provision of social services to needy Americans, but delegating that task to private religious organizations is a misuse of power. The executive would do much better to centralize the administration of federal funds rather than disbursing money to hundreds of small service providers, many of whom require recipients to accept the group's evangelizing in exchange for social services.
Sunday, October 19, 2008
On October 19, 2008, the New York Times published an interesting article about the influence that donors (mostly corporate) have as a result of donating to lawmakers' charitable causes. The article highlights donations to a Pennsylvania charity that supports an opera house that is a favorite of Pennsylvania Congressman John P. Murtha's wife, Joyce Murtha. Here is an excerpt from the article:
They do not seem the most likely classical music patrons: Northrop Grumman, General Dynamics, Boeing and Lockheed Martin.
But together, these defense contractors are donating hundreds of thousands of dollars to the symphony orchestra in Johnstown, Pa., underwriting performances of Mozart and Wagner in this struggling former steel town. A defense lobbying firm, the PMA Group, even sprang for a Champagne reception at the symphony’s opera festival last month.
Company representatives say they are being generous corporate citizens. But the orchestra is also a beloved charity of Representative John P.Murtha, Democrat of Pennsylvania, whose Congressional committee hands out lucrative defense contracts, and whose wife, Joyce, is a major booster of the symphony.
“She just loves knowing that we have an orchestra that is the quality of a larger city orchestra,” the symphony executive director, Patricia Hofscher, said of Mrs. Murtha. “Her friends have come here and been impressed by the quality of the orchestra in a geographic and economic region that, let’s face it, are not on the beaten path.”
For the entire article, see "Gifts to Pet Charities Keep Lawmakers Happy" in the October 19, 2008, issue of the New York Times.