Monday, July 20, 2020

Bankrupt Universities

COVID-19 pushed institutions of higher education into increasingly dire financial conditions, as exemplified by the recent mass layoffs of tenured faculty at the University of Akron. Although some of the worst hit have been state universities, who have seen the state funding levels drop overnight, nonprofit universities are hardly immune. As we enter a rocky period for universities and colleges, the research of Matthew Brucker (Howard) into university bankruptcy has become urgently (if unfortunately) relevant:

Bankrupt Public Colleges, forthcoming

Terminating Tenure: Rejecting Tenure Contracts in Bankruptcy, 92 AM. BANKR.L.J. 255(2018)

Bankrupting Higher Education, 91 AM.BANKR.L.J. 697 (2017)

July 20, 2020 in Current Affairs, Publications – Articles | Permalink | Comments (0)

Wednesday, July 8, 2020

Robin Hood Launches Fund for Nonprofits Led by People of Color

Philanthropy News Digest reports that New York City-based Robin Hood Foundation is launching a new initiative dedicated to supporting nonprofits led by people of color. 

According to the Digest, Robin Hood CEO Wes Moore told CNBC that this new initiative -- termed the Power Fund -- will work to catalyze a shift among business and philanthropic leaders, encouraging them to support smaller nonprofits working to address poverty and racial injustice and not just the mainstream organizations already in their portfolios. The Digest reports that

Data show that only 10 percent of philanthropic dollars currently go to organizations led by people of color. In the wake of the COVID-19 pandemic — which has disproportionately impacted people of color and the poor — and the nationwide protests following the killing of George Floyd, the new fund aims to support more such nonprofits.

According to Moore, Robin Hood already has committed $10 million in seed capital for the fund, which has attracted support from at least two financial institutions, Goldman Sachs and J.P. Morgan. The fund's board members include Blue Ridge Capital founder, John Griffin (chair), former Goldman Sachs Foundation president, Dina Powell McCormick (vice-chair), and Goldman Sachs CEO, David Solomon. 

Goldman Sachs recently created a Fund for Racial Equity with an initial commitment of $10 million to "support the vital work of leading organizations addressing racial injustice, structural inequity, and economic disparity." 

Commenting on this new initiative, Moore stated: "We are going to put a real focus [on identifying] organizations that could be in our portfolio, they just haven't been on our radar screen. How do we expand our horizon? How do we expand our thinking when it comes to what makes an organization ready to be part of our portfolio?"

In a statement shared with CNBC, Powell McCormick said that the new fund will assist leaders who are looking to make an impact in underserved communities. "We are very proud to launch the Power Fund, which will invest in a generation of leaders of color who affect change in underserved communities. The data is clear that organizations led by diverse leaders are underresourced and yet they more deeply and effectively understand the needs of the communities they serve."

I totally agree with Mr. McCormick. What is your opinion?

Vaughn E. James

July 8, 2020 in Current Affairs, In the News | Permalink | Comments (0)

Thursday, July 2, 2020

Espinoza and Scholarship Tax Credits

On Tuesday, the Supreme Court released a second opinion of interest to the nonprofit world. In Espinoza, the Court looked at the constitutionality of excluding private religious schools from a scholarship program.

Broadly speaking, the scholarship program worked like this: the state created a tax credit for donations to “student scholarship organizations.” A to qualify as a student scholarship organization, an organization must be exempt under section 501(c)(3) of the Code, must allocate 90% of its annual revenue to scholarships, and those scholarships couldn’t be limited to a single school. Student scholarship organizations also have to comply with certain reporting and audit requirements. The scholarships are meant to help pay for grade school—they can only be given to students who are at least 5, but not older than 18.

Scholarship money must be paid directly to the school; it’s the school’s job to inform parents that their child received a scholarship.

So far, so good, right? This is a scholarship program administered by private nonprofit entities, so there’s no state action to invoke the Constitution. But it’s the next step that implicates constitutional questions: the state provided a dollar-for-dollar tax credit to Montanans who donated to student scholarship organizations, for a credit of up to $150. (Note that, to get the tax credit, the donor can’t designate the parent or private school that will receive scholarship assistance.)

And that intersected with Montana’s Blaine Amendment. The Montana constitution prohibits “any direct or indirect appropriation or payment from any public fund or monies… to aid any church, school, academy, seminary, college, university, or other literary or scientific institution, controlled in whole or in part by any church, sect, or denomination.” Believing that a tax credit represented indirect aid to schools that received scholarship money, the Montana Department of Revenue promulgated a rule that religious schools were not “qualified education providers,” eligible to receive these scholarship funds. The Montana Supreme Court ultimately agreed that the scholarship program violated the state constitution and invalidated the whole scholarship program.

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July 2, 2020 in Federal – Judicial | Permalink | Comments (0)

Wednesday, July 1, 2020

Agency for International Development and Corporate Separateness

This week, the Supreme Court released a couple opinions of interest in the nonprofit world. The first was Agency for International Development. 

Background on the case: in 2003, Congress allocated billions of dollars to U.S. and foreign NGOs to combat HIV/AIDS abroad. That money was conditioned, however, on an organization having an explicit policy opposing prostitution and sex trafficking.

Some organizations that would otherwise qualify for these grants have found that a neutral stance toward prostitution is more helpful in their work, and oppose the policy requirement. Some U.S. NGOs filed suit and, in 2013, the Supreme Court held that the requiring that an organization have an explicit policy against prostitution to qualify for grant money violated the First Amendment. As a result, U.S. NGOs do not have to have an explicit policy opposing prostitution and sex trafficking.

But that left foreign NGOs. And it's worth noting that at least some of the foreign NGOs pursing this grant money are affiliated with U.S. NGOs that aren't subject to the policy requirement

In Agency for International Development, the Supreme Court held that the policy requirement is valid with respect to non-U.S. organizations. It based that conclusion on two grounds:

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July 1, 2020 in Current Affairs, Federal – Judicial | Permalink | Comments (0)