There’s a bit of OMG humor flying around the internet right now that’s gone viral because it resonates so well. 

With apologies to the anonymous original author, here’s the gist: “There’s probably not a single person back in 2015 who got ‘what do you think you’ll be doing in five years?’ right.”

Fresh out of the gate after New Year’s Day 2020, we took a crack at predicting the next twelve months. At the conclusion of What’s Up For Nonprofits In 2020? (January 3, 2020), we promised to “check back” at the “end of 2020 to see how well these predictions for nonprofits stand up.”  

It’s not quite December 31st yet, but we can safely report back to you already that our thoughts on “what [will be] up for nonprofits in 2020” were a bit … off. 

But not entirely …. 

       Nonprofit Predictions

Our fortune-telling efforts were not compiled into the usual “Top 10 or Top 5” format because that’s “surprisingly difficult.” The decision about framing our prognostications came after we took a look at the already-published lists of many experts in the philanthropy sector – (thank you very much) – as well as the topics we had covered in this blog during 2019. 

We abandoned the idea of compiling a definitive “Top Whatever” list in favor of discussing “thoughts and observations for 2020 that tend[ed] to settle into two major categories: Funding Challenges & Opportunities and Technology & Data.” 

           Funding Challenges & Opportunities

“Nonprofits,” we wrote, “are facing potential crises and unknowns in the year ahead on a critical issue: funding.” It was eerily prescient but – as events unfolded beginning in March – greatly understated because of the scale of the economic carnage caused by COVID-19. We pointed to several elements that would likely combine to keep “funding” as a top-of-the-list challenge for the nonprofit sector at large in the coming year.

Among these factors was the continuing fallout from the disastrous Tax Cuts and Jobs Act of 2017; in particular the “unexpected broadening of the standard deduction range.” That legislation was “like a bomb going off in the nonprofit sector” because of “fears of a drop-off in individual donations.” Actual data from the Internal Revenue Service for 2018 and 2019 firmly validated these concerns about the TCJA ’17. 

Of course, there’s nothing like a major catastrophe to turn a trend on its head. Since the beginning of the COVID-19 pandemic in March, there’s been a generous outpouring by donors in all income categories in response to emergency appeals. We’ve also seen a significant uptick in foundation funding and DAF payouts.  But the sad reality is that no amount of private philanthropy will meet the scope and breadth of the need of our nation’s (and the world’s) nonprofit organizations and their clients and beneficiaries. Only the United States government has the capacity to undertake a response on this scale. While the early and bipartisan legislative action was impressive, any additional aid has been blocked for many months in the Senate.  When or if it eventually happens, it may be too late for some nonprofits.

The second element underpinning the “Funding Challenges & Opportunities” section of our 2020 predictions was the combination of “the politics of federal funding as well as the accelerating demands on nonprofits to provide help and assistance to beneficiaries.” Back on January 3rd, we wrote that these factors are “at levels of almost existential uncertainty.”  Suffice it to say, now these twin hurdles have combined to create a scenario exponentially worse in magnitude than our gravest fears last New Year’s Day.

Our recommendation back then was: “[N]onprofits must continue broadening their funding sources by identifying and embracing a wider variety of prospective donors (individuals, families, corporations and foundations)” and reducing “over-reliance on federal funding sources.” We cited the example of a Los Angeles nonprofit presented last fall as a warning in Implosion of $47M Nonprofit Highlights Risks of Government Dependency (October 2019), The Nonprofit Quarterly. Now, there are many more casualties of funding shortfalls at all levels of government.

The third element of the predicted “Funding” challenge was the widespread lack of cash reserves of over half the nation’s nonprofits. The specific dangers we cited at the beginning of 2020 could include government funding cuts “or, more generally, if there’s a significant downturn in the economy.”  Even before the pandemic, we were already likely to face some trouble. 

The fourth aspect of the “Funding Challenges & Opportunities” analysis was, unlike the first three points, a mixed bag. We noted that “the traditional fundraising pyramid has been turned upside down based largely on the rapid-fire growth of technology.” In particular, we wrote back on January 3, 2020, “[c]rowdfunding has emerged as a major new force in the way nonprofits can raise money either on an emergency basis or as a more permanent part of the financing plans.”

We’ve been living through an unprecedented emergency for most of 2020, and the crowdfunding capability has certainly kicked in as a force for good. 

But – we cautioned – “questions remain especially how governments may step in to regulate” any new online money-raising techniques. The California Legislature took a first crack at new crowdfunding regulation during this year’s session, but any action on it was preempted by more pressing legislatively priorities. It will likely be reintroduced early next year for the 2021 term. There’s an excellent law review article on point by Lloyd H. Mayer, Esq., Professor of Law at Notre Dame University: Charitable Crowdfunding (September 22, 2020) Notre Dame Legal Studies Paper No. 200904. There, at the conclusion of the exhaustive study of this topic, Professor Mayer recommends that government regulation be kept minimal so that the benefits of this new fundraising vehicle are not unduly stifled. 

           Technology & Data

“As in all other areas of our society,” we wrote in the first days of 2020, “technology has invaded as a major force – sometimes for good and sometimes not. It’s here to stay and advancing at a lightning-speed pace that will be challenging for all.”

A key issue for the nonprofit sector in recent years has been that, while “most nonprofit executives understand – to one degree or another – the importance of investing in technology,” there are, nevertheless, obstacles to embracing and using it fully.  Among these are the complexity of the subject as well the lack of “the technical staff in-house or the funds to buy it elsewhere.” These twin challenges are exacerbated by the hurdle of “making the board of directors understand the need and benefit of this category of substantial financial investment.” Needless to say, there are few nonprofit directors in late 2020 that continue to doubt the importance of major investments in technology. Among the “abundant opportunities” from technology is expansion of a nonprofit’s fundraising operation. And, of course, the all-important capability of operating remotely due to COVID-19 would be impossible without it.

We mentioned “data collection” as a specific capability that will be critical for nonprofits of all sizes in 2020 and beyond. But it “requires specialized staff training and expertise, all of which costs money….” So we circle back to the “Funding” challenge.

And along with the clear benefits of an efficient data-collection system are the burdens of data privacy and security. Many nonprofit institutions – especially the large “eds and meds” – collect enormous amounts of personal data. As we’ve seen, they are regular targets of cyber criminals. Many smaller organizations erroneously believe they aren’t big enough to be targets, but that has been disproved repeatedly in recent years. The catastrophic hack this year of Blackbaud, a major provider of data storage for nonprofits in the U.S. and the U.K., underscores the seriousness of cyber security threats for organizations of all sizes.

Our “Technology” portion of the 2020 predictions post also mentioned artificial intelligence: “perhaps the technology that is the scariest and most exciting at the same time.” This field, still in its infancy, had already been embraced by many nonprofits who could see its advantages to support their missions and activities. See Artificial Intelligence & Nonprofits: A Primer (September 24, 2019). As the field of A.I. continues to develop, our sector should explore and lean into it to cope with the many challenges ahead.

       Conclusion

The year 2020 went off the rails early, but our key predictions back on January 3, 2020 – that funding issues and technology would likely be at the forefront of our concerns all year – have held up, albeit much more dramatically and in ways none of us could realistically have foreseen.

In 5 Things That Nonprofit Orgs Wish They Knew Three Months Ago (May 29, 2020) Stephanie Kanak of Donor Perfect, a fundraising-software firm, poses a provocative question to the nation’s nonprofit executives and fundraisers. “If you had a time machine,” she asks, “and could go back to before coronavirus (COVID-19) impacted the world, how would you prepare? What would you do differently?” Now, almost six months later, consider that as a continuing challenge for intriguing discussions at upcoming board meetings.

The post Revisiting Nonprofit Predictions for 2020 appeared first on For Purpose Law Group.

In 1636, a group of fishermen working on an island off the coast of the Massachusetts Bay Colony went on strike. It was reportedly the first collective bargaining action in the New World. 

Contrary to what most of us think we know about labor disputes in our nation, that “history …  substantially precedes the revolutionary period.” Of course, the peak of organized labor’s power was in the mid-1950’s, when “unions had successfully organized approximately one out of every three non-farm workers.”  Although the United States labor movement was “once the core institution fighting for average workers,” over the decades since that heyday “its ranks have been decimated.” The union movement – organizing against business-sector employers – retrenched in large part because of relentless pushback by the business community and its political allies that helpfully enacted union-crushing legislation. See The rise and fall of US labor unions, and why they still matter (March 27, 2015) Jake Rosenfeld, University of Washington Associate Professor, The Conversation.

Public-sector unions have been on a different track than counterparts in the for-profit world; it wasn’t until the 1960s and 1970s that they formed and grew rapidly due to new enabling legislation. By 2009, the total membership in U.S. public-service unions surpassed that of private-sector unions for the first time. But they, too, have been beaten back, primarily by hostile state legislatures and conservative groups.

Aside from well-established unions at large healthcare and educational institutions, the nonprofit sector has not been the focus of much serious or successful union organizing – until recently. See Workers are forming unions at nonprofits and think tanks. Their bosses aren’t always happy (February 4, 2020) Eli Rosenberg, The Washington Post; also, Nonprofit Workers Join the Movement to Unionize (November 19, 2019), Sarah Jaffee, The Progressive [“The past few years have seen a rash of union victories in supposedly white-collar workplaces, from prestige publications to art museums to nonprofit think tanks and service organizations.”] 

Then the pandemic struck.

Conventional wisdom might lead to a conclusion that the extreme disruption and chaos would necessarily curtail this nascent union organizing. But – as is the case so often with conventional wisdom – that hasn’t happened. 

It’s apparently full-steam-ahead in 2020 for the labor movement among nonprofit-organization workers in the United States.

       Nonprofit Workers & Unions

By way of a bit of background, experts and observers from the nonprofit sector have wondered for more than a little while about the historical absence of the labor movement in rank-and-file organizations. See for instance Nonprofit Groups Turn to Unions to Organize Workers and Collaborate on Common Causes (November 21, 2002) Jennifer C. Berkshire, The Chronicle of Philanthropy (paywall); Unions and the Nonprofit Workforce: A Few Considerations (August 8, 2013) Rick Cohen, The Nonprofit Quarterly [“There are few topics in the nonprofit sector likely to create as much discomfort as the idea that nonprofits should be unionized.”]

In Unions help address the unique needs of nonprofit workers (September 16, 2018), The Hill, authors Kayla Blado and John Schmitt make the case for the expansion of union presence in a period of serious government pullback of funding for the services that many nonprofits are called upon, more and more, to provide. Ms. Blado and Mr. Schmitt speak for the Nonprofit Professional Employees Union (npeu.org), an organization that is having substantial success in current organizing drives. 

According to Bloomberg Law’s Andrew Wallendar, in Nonprofit Workers Turn to Unions During Pandemic Uncertainty (May 11, 2020), in the course of a sixteen-day span in April 2020,  seven workplaces announced organizing campaigns with the Nonprofit Professional Employees Union. That local’s total of bargaining units grew 35% in less than a month.

“There has been a legit­i­mate boom in non­prof­it union cam­paigns. All of those that have gone pub­lic have been suc­cess­ful,” according to Hamilton Nolan in A Quiet Frenzy of Union Organizing Has Gripped the Nonprofit World (May 19, 2020). “Along­side the recent rise in union­iza­tion at media out­lets, muse­ums and cul­tur­al insti­tu­tions, non­prof­it work­ers are part of an unprece­dent­ed upris­ing of labor orga­niz­ing in white col­lar professions.”

In Mission-driven and worker-driven: Inside the wave of nonprofit organizing (May 28, 2020), journalist Rachel Cohen writing in Strikewave quotes the organizing director of NPEU’s parent organization, Paul Thurston: “A lot of these campaigns were going on before this whole pandemic, but I think the uncertainty has really brought into clear relief the need for a collective voice in both things like safety and PPE when we eventually come back to the workplace, and how funding cuts and all that is going to be dealt with.” Mr. Thurston adds: “It’s just getting people to the realization that you’re better off in an uncertain situation when you have the ability to advocate for yourself as opposed to whatever your boss dictates.”

        Conclusion

We’ll revisit this important topic again – soon – including what nonprofit employers need to know about union drives as well as updates on examples of ongoing union actions. 

So far, there’s no word on how that 1636 fishermen’s strike turned out. 

The post Nonprofits: Unions & The Pandemic appeared first on For Purpose Law Group.

The pandemic has “inspired us to be more agile, to pivot and approach issues more innovatively, and challenged us to look at our work differently going forward.” 

That was the observation of one of the respondents to a survey late last spring on how COVID-19 was affecting nonprofits. Another executive noted that “…it’s been very difficult in many ways but also very positive in adapting our culture to be more fluid, nimble, and paperless.”  

In Nonprofits in Crisis: Alternatives to Closing (Part One) (February 16, 2021), we continued our early-2021 discussions of how nonprofits might approach navigating the next few months. The COVID-19 chaos and disruption have continued far longer than we all had hoped last March. It’s not necessarily going to be a smooth or even ride to a finish line. 

And we will not – and should not – be returning to “normal.”  Normal wasn’t that great for many people, and it’s not sustainable. The pandemic has not only highlighted the problem of economic inequality, it’s made it worse. See On the Need for Thorough Restructuring after COVID (December 4, 2020) Martin Levine, The Nonprofit Quarterly.

“Given the current circumstances faced with the pandemic,” wrote Deirdre Osei late last summer in The Nonprofit Quarterly, “organizations need to find new ways to work together—both to survive and deliver on their mission.” See Spontaneous Collaboration a Go-to Move in the Midst of Disaster August 21, 2020.)  

The pandemic has been “… a worrying time. But it’s also a time of opportunity,” according to Steve Zimmerman, Principal of Spectrum Nonprofit Services, specializing in nonprofit sustainability and strategy. “It might well be the time to reimagine who you are and what you do and to make your organization better in the process.” See Reimagine Your Nonprofit to Survive the Crisis (June 1, 2020), Harvard Business Review.

But before we reimagine and get ready to spontaneously collaborate, let’s first take a quick look at the myriad options traditionally open to nonprofits looking for a change, whether because of financial troubles or the desire to move forward on a solid footing. 

        Traditional Arrangements

David La Piana has been in the nonprofit field for decades. He heads a consulting firm bearing his name that helps the “social sector navigate change.”   

In 2010, just after the worst of the Great Recession a decade ago, Mr. La Piana wrote Merging Wisely, a long but well-written (in plain English) article published in the prestigious Stanford Social Innovation Review. A “merger,” he explained, “is the fusion of separate boards, management, and legal entities into a new, single organization. While it’s the most well-known and popular way that organizations can combine, it’s “just one choice on a continuum of strategic restructuring options.” He added: “Instead of reflexively pulling out the biggest gun in the partnership arsenal, nonprofits should consider a variety of ways of working together.” 

In this helpful essay, Mr. La Piana discussed the broader strategic-restructuring menu. 

In addition to formal mergers, there are “three other forms of corporate integration” that “change parties’ legal structures so that they can share their strengths”:

1. Management services organizations: combine only administrative functions of partners;
2. Joint venture corporations: combine a subset of nonprofits’ programmatic functions; and
3. Parent-subsidiary partnerships: blend both administration and programs (usually when a merger is desired but is not technically possible).   

Next up are “strategic alliances.” Under this approach, organizations can “unite programs and cut costs while remaining somewhat independent.” There is no new corporation formed; instead, the arrangement is made by contract. There are two distinct categories. First is an “administrative consolidation,” comprising two or more organizations that want to reduce costs. Second is “joint programming,” which is “quite common in the nonprofit sector” and that combines programs instead of administrative functions while remaining separate entities.

“Collaborations” are the “least intense form of partnership among nonprofits” but the most common. They are informal and “appropriate when the need that brings the parties together is either narrowly defined, time limited, or … both.”  

Mr. La Piana offers specific examples of actual cases in the nonprofit sector that illustrate each of these categories. Of course, since all of them occurred on or before 2010, none are equivalent to our current once-in-a-century circumstances. Nevertheless, each illustrates the details and purposes of the particular strategic restructuring model described. 

       More Options

There are a number of other ways – not specifically mentioned in David La Piana’s  Merging Wisely article – that a nonprofit organization can ally itself for a specific purpose with another nonprofit or with a for-profit business.  

For instance, the “fiscal sponsorship” option may be available in certain circumstances. It’s an arrangement for saving a program even when a financially distressed group that has been operating the program cannot itself be kept going. See Nonprofits in Trouble: The Fiscal Sponsorship Option (August 30, 2020) Gene Takagi, Esq., NEO Blog. There is no specific definition in law and it can be set up in a variety of ways. “In a comprehensive fiscal sponsorship arrangement, an experienced fiscal sponsor typically delegates management to the program leadership and very rarely intervenes in the programmatic activities so long as they are compliant with law, the fiscal sponsorship agreement, and the fiscal sponsor’s policies.”

Another option involves a collaboration between a nonprofit and a for-profit business. Often referred to as “cause-related marketing” it is more formally referred to as a “commercial co-venture,” particularly in state laws that regulate these arrangements.  “A commercial co-venture typically features a charity teaming up with a for-profit company to promote a product in conjunction with a charitable cause.” A typical example is a promotion by the business that for every [product name] a customer buys, the business will donate $X to a designated charity.  

       Conclusion

Under normal circumstances, there may be time and money to do the research and due diligence to determine whether a proposed strategic-restructuring option is workable and will succeed.

But as the COVID-19 pandemic swept rapidly across the United States (and around the world), there was no time for the usual and prudent thinking and planning. 

As we’ll see in Part Three, many nonprofit organizations have been remarkably adept at emergency pivots and informal collaborations.

            — Linda J. Rosenthal, J.D., FPLG Information & Research Director  

The post Nonprofits in Crisis: Alternatives to Closing (Part Two) appeared first on For Purpose Law Group.

Within weeks of COVID-19 sweeping through the United States, nonprofits like Philadelphia’s SEAMAAC, an immigrant-assistance organization, had to make decisive pivots for new circumstances and challenges. Unlike the groups we featured in Part Three of this series that largely shut down on-site operations because of the pandemic restrictions, SEAMAAC was classified as an essential-services agency to provide front-line aid to the community. 

“Nonprofits have had to respond to probably an unprecedented rate of change and magnitude of change, particularly those nonprofits that are providing front-line services,” said Pedro Ramos, head of the Philadelphia Foundation. “Many had to adapt very quickly ….”

The SEAMAAC experience in March and April of 2020 was replicated many times around the nation, particularly in connection with providing food and housing assistance.

       Emergency Pivots

Before COVID-19 slammed into the United States, SEAMAAC was already a well-established nonprofit providing a wide variety of services primarily, but not exclusively, to the Southeast Asia refugee community. It was quickly deluged with the most pressing need of the newly furloughed and unemployed: requests for food assistance. The board and executive staff put major projects, like building a new health center, on hold. SEAMAAC’s headquarters building became a city-sponsored food distribution hub that included delivery services to seniors. 

The organization was soon joined in a spontaneous “partnership” with a popular for-profit restaurant, South Philly Barbacoa, that itself was pivoting to the provision of delivered meals to people newly in need. There was also support from Broad Street Ministries, a faith-based group that describes itself as practicing “radical hospitality.”  Project HOME, an organization that provides housing and related services to the homeless and low-income people, and Prevention Point, a public health organization, also joined in this effort.  

Key factors in the success of this effort (and many similar ad hoc projects around the nation) were the leadership and support of the area’s community foundation, other major philanthropic agencies, and civic officials. The Philadelphia Foundation, the local United Way, and city leaders teamed up to launch the rapid-response PHL COVID-19 Fund to collect and distribute emergency financial support to nonprofits staying open during the pandemic. Even the grantmaking process was a team effort; 33 grantmakers from different organizations reviewed applications.   

       Adding More Expertise 

In an example from a different community, another social services group that regularly offers a wide range of programs to families made a similar pivot early in the pandemic. Its clients, newly laid off or furloughed and also under mandatory stay-at-home orders, suddenly had neither the money for, nor access to, food. This group like SEAMAAC in Philadelphia scrambled to create an emergency food-delivery service and to get it up and running quickly.

But it was clear to this organization’s leaders that a crisis-based program was one thing but continuing to sponsor and operate it for longer than a temporary period was entirely outside its normal expertise or capability. So the nonprofit sought and found a suitable partner to take over the operation; one whose usual focus is “food insecurity and that has the infrastructure to operate the program on an ongoing basis and mechanisms to provide the service safely.”

This is not only a good COVID-19 strategy but also a way for “nonprofits that are likely to survive but are struggling” to “find new efficiencies by creating joint programs or sharing back office services….” According to Lester Olmstead-Rose in Active Partnership: A Sound Strategic Choice (July 29, 2020) La Piana Consulting Blog, this “option entails actively thinking, moving, and changing to take advantage of the moment versus biding time until the pandemic passes.”

       Housing Collaborations

“As nonprofits face community threats of joblessness and eviction in droves …, even as the pandemic lingers and many schools and childcare facilities remain shut, nonprofits must find ways of making every potential resource count.” That’s the observation and advice by Deirdre Osei in Spontaneous Collaboration a Go-to Move in the Midst of Disaster (August 21, 2020), The Nonprofit Quarterly. “Some of those come from the spontaneous partnerships that arise when nonprofits work across organizational boundaries at the intersections of things.”

For instance, in Minnesota, the Salvation Army and Connections Shelter collaborated to provide around-the-clock homeless shelters as well as casework activities to help find more permanent housing for people in need in the coming months. “…By working together, both organizations [would] be able to fill gaps for individuals and families who would otherwise have no place to go ….”  

“Collaborations can also expand to local companies and business networks, according to Ms. Osei, “especially if they have deep roots within the community or the social problem directly impacts their operations.” In the metropolitan Atlanta area, the MARTA transit system has partnered with local organization HOPE Atlanta to launch a program for homeless individuals who have taken refuge on the transit system. They are “…met with trained street case managers” who are looking for “stable and supportive housing solutions.” 

In another housing-collaboration effort during the pandemic, two Michigan, organizations that had previously considered a merger decided to go forward with it. In years past, the Grand Rapids groups had partnered through shared grants, referrals, and large projects.  The HQ Runaway & Homeless Youth Drop-In Center is a daytime community and resource center for 14-24 year-olds who are facing “unsafe or unstable housing.” The other nonprofit, 3:11 Youth Housing, provides shelter to 18-24 year-olds. Each will continue current programming while they search for a new brand for the consolidated organizations. 

The new leadership team will include staff and board members from both organizations. “The timing was right,” according to Lauren VanKeulen, who had created 3:11 Youth Housing and who will head up the new entity. “It made sense for the youth in the community and made sense for both organizations — two very strong organizations coming together.” 

       Conclusion

“New times call for creative solutions,” wrote Ruth McCambridge in Not Quite a Merger: An Odd Nonprofit Theater Partnership Blooms in St. Paul (August 13, 2020) “While we have been urged to think about organizational partnerships in little boxes, they really exist along a continuum spanning from relationships between autonomous actors unguided by legal parameters to formal marriages.” 

And for interesting insights about how organizations can prepare to collaborate, see Relational Capacity: Why Does Working Together Feel So Damn Hard? (October 7, 2020) Erin Britton, Julie Simpson, & Tim Hausmann, TCC Group. “Collaboration is a nice idea—but not ‘a given.’ And in the social sector, capacity is not born, but built—through coaching, patience acquisition, shifting one’s natural tendencies to control—plus countless other interventions.”

            — Linda J. Rosenthal, J.D., FPLG Information & Research Director

The post Nonprofits In Crisis: Alternatives to Closing (Part Four) appeared first on For Purpose Law Group.

“Deaccessioning” – that is, selling off artwork for any purpose other than to acquire more artwork – is the “cardinal sin” of the museum world. 

Before the pandemic, this was official policy of The Association of Art Museum Directors (AAMD), the professional group that “… serves as the industry’s referee and moral watchdog.”  For the last decade or so, the AAMD has enforced this proscription from time to time with a heavy hand. It slapped costly monetary sanctions on violators. Member institutions did their part as well; they “shunned” the renegades – for instance – by denying them the usual courtesies of inter-museum artwork loans.

One example a few years ago was a long and ugly deaccession battle that played out in the tranquil foothills of the Massachusetts countryside. Leadership of the Berkshire Museum made a surprise announcement of the proposed sale of some 40 artworks including two key Norman Rockwell paintings. The famed artist, with ties to the town, had – himself – donated these important pieces. Opponents within the institution, in the town, and in the wider art and philanthropy worlds were outraged and sprang into action. We reported on this story as it played out over 18 months. There were “heated court battles, numerous protests, and a vigorous debate” locally and nationally. When the sale eventually took place, netting over $53 million, the AAMD took the threatened action and imposed significant penalties. See The End Of The Berkshire Museum Saga: Everyone Loses (May 2, 2018).  See also Association of Art Museum Directors Sanctions Berkshire Museum, La Salle University Art Museum Over Art Sales (May 25, 2018) Andrew Russeth, ArtNews. 

Behind this curtain of orthodoxy, though, lay decades of deaccession sales or auctions here and there.  When this controversial issue pops up within the art-world cocoon or spills over into media headlines, this open secret is largely ignored or at least minimized in the discussions. “Deaccessioning is hardly new in the art world, … and neither are the debates surrounding it.” See The Most Controversial U.S. Museum Deaccessions: Why do Institutions Sell Art? (October 26, 2020) Angelica Villa, ArtNews. 

       Pause in Enforcement

When the COVID-19 pandemic first struck our shores, the AAMD wisely announced a two-year moratorium on enforcing its anti-deaccession rules. This professional association had correctly foreseen that American museums would be hard hit by the lock down orders and live-attendance restrictions. See In Substantial Shift, Museum Industry Group Pushes Directors to Break the Rules to Survive (April 16, 2020) Andrew Russeth, ArtNews. 

Until the fall of 2020 there was an uneasy truce.  The AAMD  reportedly had expected that only those museums in the most dire circumstances would take advantage of this temporary leniency.  But as the months passed, a much broader swath of institutions began dipping their toes into these waters.  We posted a story on that trend, highlighting the smooth and unopposed plan by The Brooklyn Museum to imminently auction twelve of its holdings. “Other American museums,” we noted, were “beginning a similar process of evaluating their collections” for possible sales.  See Museums & Deaccessioning In COVID-19 (October 23, 2020).  

But in the brief window between our drafting of that post and its publication on this blog, the ceasefire in the art world crumbled spectacularly. We were obliged, just 24 hours later, to add this update to our October 23rd entry: “Not everyone is on board with these deaccessioning decisions; see Donors rescind $50 million in gifts over Baltimore museum’s planned sale of Warhol painting, (October 24, 2020) Peggy McGlone, The Washington Post.” 

The rapid-fire events of the next several days are aptly summed up in this headline: Two Museums Tried to Sell Art. Only One Caught Grief About it. (October 30, 2020) Hilarie M. Sheets, The New York Times. 

       Brooklyn and Baltimore Museums 

Now, several months later, we pick up this reporting again.

The combatants continue to skirmish with no clear resolution in sight.  See As Museums Push to Sell Art, Competing Ideas About Deaccessioning Are Playing Out in Public (February 8, 2021) Andrew Russeth, ArtNews.  See also Selling Art to Pay the Bills Divides the Nation’s Museum Directors (March 19, 2021), Robin Pogrebin & Zachary Small, The New York Times [“Bitter debate has ensued as museum leaders around the country discuss whether to permanently embrace a pandemic-spurred policy that allows the sale of art to cover some operating costs.”]

And many in the art and philanthropy sectors continue to be baffled by the diverging reaction to the October 2020 auctions scheduled by the Brooklyn Museum and the Baltimore Museum of Art. 

Why was the Brooklyn Museum permitted to go forward with its scheduled Christie’s auction “without incident” and with the apparent blessing of the American Association of Museum Directors? It was a game-changing event for this institution that had faced financial challenges even before the pandemic crisis struck; just a single item in the catalogue fetched tens of millions of dollars. 

But in that same tiny window of time, why did the much-better financed Baltimore Museum face such a furious backlash that it abruptly “paused” its scheduled and publicized auction and later abandoned it entirely. See US Association of Art Museum Directors sends a warning note to its members on deaccessioning (October 27, 2020) Nancy Kenney, the artnewspaper.com.  A perplexing fact here is that many of the opponents (both within and outside the Museum and the Baltimore community) of the  planned-but-paused October 2020 auction had watched this same institution deaccession holdings in 2018 and 2019 with barely a peep.  

The pre-pandemic disparity in their relative financial strength does not entirely answer how the two events played out so differently. (Eventually, the Baltimore Museum turned to an entirely different financing method; see After Canceling Controversial Deaccessioning, Baltimore Museum Receives Over $1M for Equity Initiative (February 25, 2021), Valentina Du Liscia, hyperallergenic.com.)

       On Not Returning to “Normal”

Beyond the specific news value of these and other stories on deaccessioning in the ongoing COVID-19 crisis, there’s a broader question that’s popped up continually in the last twelve or so traumatic months. That is, should we – (any or all of us) – go back to “normal” when all the restrictions are lifted and the pandemic danger subsides?

First, should the museum world go back to business as usual?  In the pre-pandemic “normal” for this sector, the anti-deaccession hardliners have maintained the upper hand although historically arts institutions struggle to stay afloat. Is this a sustainable model?  It’s no secret that many museums have countless works of art languishing in storerooms because: (1) the donated pieces are not relevant or consistent with their (past or current) visions and missions; and (2) they don’t have enough gallery space or the funds to expand. 

Second, should the arts community proceed after the crisis with the same old policies and practices for artwork acquisition and retention?  There’s a growing awareness that, throughout American society, there are entrenched institutional biases against minority viewpoints and achievements. Before COVID-19, the “deaccessioning” debate had already begun to evolve, at least in some quarters. See, for example, In defence of progressive deaccessioning (October 26, 2020) Glenn Adamson, apollo-magazine.com [explaining a policy of “selling off high-value art, and putting the realised funds towards works by under-represented artists”]. 

Then came the 2020 events in the #blacklivesmatter movement, underlining the urgency of confronting inequality. Consider, for example, the push back by Baltimore Museum curators Asma Naeem and Katy Seigel in an Art News op ed just ahead of its scheduled-but-scrapped auction: “Museums are not mausoleums or treasure houses, they are living organisms, oriented to the present as well as the past.” Baltimore Museum of Art curators respond to deaccessioning criticism (October 13, 2020) [“Equality and diversity make history fairer, more accurate and more meaningful in the present”].

       Conclusion

The debate on the AAMD’s (eased) pandemic deaccessioning rules continues; it has “grown heated in recent weeks, pitting museum against museum, and forcing the association … to postpone talks about extending the change indefinitely.” 

There has been significant support for continuing the flexibility post-pandemic; see, for example, To Keep the Industry Alive, the AAMD Should Permanently Give Museums Freer Rein to Sell Work (April 27, 2020), Donn Zaretsky, Esq., ArtNews.

Then, again, Thomas Campbell, former director of the Metropolitan Museum of Art, more recently warns: “Deaccessioning will be like crack cocaine to the addict—a rapid hit, that becomes a dependency.” 

           — Linda J. Rosenthal, J.D., FPLG Information & Research Director 

The post Deaccession Wars Rage On For American Museums appeared first on For Purpose Law Group.

From time to time, we pass along links to helpful and free-of-charge educational resources for 501(c)(3) organizations. 

For instance, in Foundation Law: Free Online Learning (January 10, 2019) we highlighted the Learn Foundation Law site created several years earlier by the legal staff at four major American foundations. There are engaging animated tutorials starring “Maya,” who is a new foundation program officer needing expert help (from a disembodied voice somewhere offscreen) with the complex laws that apply to funders and grantee organizations. To get an idea of the excellence of this series, take a look – for example – at Advocacy & Lobbying Rules for Private Foundations as well as the companion course titled Advocacy & Lobbying: Rules for Public Charity Grantees of Private Foundations. There, “Alex,” a new 501(c)(3) executive director planning to ask Maya’s foundation for a grant, needs help asap about what his organization can and cannot do. 

Now we turn to Knowledge Base offered recently from Candid Learning. 

       A Mission of Information 

Candid Learning is a special service of the new organization Candid, created from the 2019 merger of two nonprofit powerhouses. 

“For a combined 88 years, Foundation Center and GuideStar each helped the world by giving people the information they needed to do good.” That’s how Candid’s website describes the combined history and missions of its predecessors. Now, the new entity describes itself as the “leading source of information about philanthropy worldwide. Through data, analysis, and training, it connects people who want to change the world to the resources they need to succeed.”  

Candid Learning provides an impressive roster of free or low-cost training and educational resources including “live and on-demand trainings, webinars, and other resources designed to improve” its visitors’ fundraising, overall sustainability, grantmaking, and transparency.”

In the fall of 2020, the organization announced its newest entry: Knowledge Base. What was the catalyst? Simply put, according to Grace Sato, Candid’s Director of Research, they “… get asked all types of questions.” See Answering your questions: What you need to know before you give (October 8, 2020), Candid Blog.  While many have focused on “COVID-19, our democracy, and racial equity in our society,” she wrote, there are “even more out there.”

So Candid Learning decided to create a dedicated website section “to answer the ones” they’re “seeing over and over again.” 

Among the repeat questions are: 

• Where can I find examples of nonprofit budgets?
• Where can I find emergency financial resources to help with COVID-19 hardships? 
• How are nonprofits funded?
• Is there a difference between the terms “nonprofit” and “not-for-profit?”
• Where can I find information about government grants?
• Where can I find an organization’s Form 990 or 990-PF?
• What is cause-related marketing?
• How do I find grants for my nonprofit?
• How do I write a business plan for my organization?
• What is fiscal sponsorship? How do I find a fiscal sponsor?
• What is the “public support” test? How do I calculate it?

Candid’s Knowledge Base aims to let its visitors “…listen, hear, or read advice from funders and nonprofit experts” so they can make confident decisions and achieve excellence in their social sector operations.”  There are already almost 250 results, sorted by popularity and alphabetically. 

And for any organization with additional questions, Candid Learning offers its Online Librarian service to provide fairly quick answers. 

       Conclusion

Knowledge Base covers questions and answers of interest to 501(c)(3) organizations that go well beyond – strictly speaking – the legal ones. But, more often not, all roads lead back eventually to the law. 

For instance, an organization with questions about cause-related marketing needs to know more than just the basics: what it is and whether it can be a useful part of an overall fundraising strategy. The board and senior staff must learn which “i’s to dot and t’s to cross” to keep it legal. Online sources like this one are important pieces of the total information puzzle.  And you can’t beat the price.

            — Linda J. Rosenthal, J.D., FPLG Information & Research Director

The post More Free Learning Resources for Nonprofits appeared first on For Purpose Law Group.

“On Monday, a broad coalition of more than 60 national charitable nonprofit organizations sent a letter to President Biden and congressional leaders calling for “urgently needed pandemic and workforce shortage relief that will enable charitable organizations to fulfill their roles in our nation’s relief, recovery, and rebuilding.” 

That was the important message from the National Council of Nonprofits (NCN) in its “Action Alert” dated February 15, 2022. This is the newest salvo in NCN’s call to action begun last fall after its October 2021 survey yielded troubling responses from across the sector. 

The National Council of Nonprofits wants as many organizations as possible from around the nation to sign onto this letter titled “Pandemic and Workforce Shortage Relief for Charitable Nonprofits,” to share it widely on social media, and to contact their legislators. 

Just a week later on February 22, 2022, the National Council of Nonprofits issued an encouraging update. NCN emphasizes that the already-sent letter is “now open for all charitable organizations to sign and circulate to show Congress and the White House that nonprofits in local communities throughout the country support these priorities.”

And – only yesterday – there were news reports that Congress may be moving toward enacting legislation on at least one important item on the wish list: retroactive reinstatement of the Employee Retention Tax Credit. See Employee Retention Tax Credit For Nonprofits Has A Chance (February 22, 2022) The NonProfit Times.

       The Crisis  

For background on this crisis, see Addressing the Nonprofit Workforce Crisis … the Nonprofit Advocacy Way (November 29, 2021) National Council of Nonprofits. Also see our earlier posts: The “Great Resignation” Problem In The Nonprofit Sector (December 7, 2021) and The “Great Resignation”: Exactly How Bad Is It For Nonprofits? (December 9, 2021). 

In a nutshell, while it was expected in early 2021 that workers would flock back to their old jobs once the pandemic had eased up a bit, that didn’t happen. Instead, across broad swaths of the economy, employers are having trouble filling vacancies, and the nonprofit sector has been particularly hard-hit. 

There were pre-existing factors that have contributed to the severe staffing shortages for our sector. These include the “demographic time bomb” of too many workers, especially in the executive suites, at or near retirement age as well as the long-simmering problem of “burnout” affecting employees from the top to the bottom of the organizational hierarchies. 

But factors special to the nonprofit model put the nation’s tax-exempt organizations at a huge disadvantage compared with the for-profit and government sectors in the ability to retain or lure new workers in this unusual labor market.

First and foremost, “mostly because nonprofits can’t raise wages to attract more workers,” they are “really boxed in because [they] can only raise wages if funding is sufficient, but the funding just isn’t there.” The Scope and Impact of Nonprofit Job Vacancies (November 15, 2021), NCN [updated December 13, 2021].  And, “[a]ll the while, the private sector has been “throwing more” at hiring people including money and other “great incentives….”

Second, “… many organizations are locked into pre-established grant or contract funding rates.  ‘A lot of nonprofits operate with government contracts that pay a certain amount, and those contracts aren’t being renegotiated to allow nonprofits to pay their workers more, and so we can’t really compete when Amazon or Target or Walmart raise their wages,’ said NCN’s Rick Cohen.” 

Meanwhile, the nation’s nonprofits continue to be among the nation’s most critical front-line providers responding to the not-yet-over pandemic. “For the nonprofit sector and the population it serves, the high vacancy rate is ‘a potential tragedy at hand,’” according to Rick Cohen of the National Council of Nonprofits. “When we have a worker shortage,” then people in the community needing services can’t get access to them.  

In January Data Shows Several Warning Signs for Nonprofits and Fundraisers (January 31, 2022), Dan Parks reports in The Chronicle of Philanthropy on the snowballing effects of additional economic problems: “The first month of the new year brought distressing economic news for nonprofits and fundraisers, with several key indicators moving in the wrong direction: … First, the recent declines in stock prices may cause foundations and individual donors to pull back on their giving….” At the same time, “‘rising prices and a tight labor market are hitting nonprofits hard on the expense side of the ledger,… Inflation is playing havoc with most organizations’ salary budgets as they work to retrain and attract competent staff…It has hit food banks especially hard as supply disruptions drive up food prices.”

       “Why Nonprofits, Why Now?”

In its February 15, 2022, Action Alert, the National Council of Nonprofits explains the reason for this major push for help right now: “While all residents and sectors of the economy have been hurt by the pandemic, charitable organizations are now facing the combined challenges of both the harmful financial impact on their operations and chronic staffing shortages that impair the ability of nonprofits to serve their communities.”

Help is needed because of “financial hardships and realities, more particularly described in the letter to President Biden and legislative leaders: “Congress has been generous over the past two years with disaster funding and tax relief.” But “the pandemic continues to disrupt lives and the economy,” and many of the relief packages or benefits have expired. “Yet the need remains as great as charitable organizations struggle to provide pandemic relief in the face of continuing health risks, lost revenues, and the lack of available staff.” In addition, once the crisis is over, the public will continue to look to the nonprofit sector “to help them  recover through education and healthcare, social services designed to help rebuild lives and careers, and cultural and faith engagements dedicated to restoring hope, inspiration, and trust.”

Help is needed as well because of “nonprofit staffing shortages”: “The latest available figures from December 2021 show that there were (then) almost ½ million fewer workers in the nonprofit sector than at the start of the pandemic.” The remaining employees “are carrying a much heavier – and unsustainable – load.” Organizations report “significant difficulties retaining staff and filling vacancies. Recent data confirm that four in five (79%) nonprofits identified salary competition as a major factor preventing them from filling job openings and nearly a quarter (23%) stated that the inability to find child care affected recruitment and retention.” These impacts are seen nationwide “in virtually every local community as nonprofits are forced to restrict needed services, institute waiting lists, or close operations entirely. Because individuals and communities rely so heavily on charitable nonprofits for their wellbeing, the nonprofit workforce shortage impacts everyone.”

       What Are Nonprofits Seeking?

The letter presents the wish-list of the nonprofit sector in three separate categories. “As the pandemic has dragged on beyond all expectations, charitable nonprofits of all types report at least three areas of challenges that policymakers must address.”

• Generating Resources to Meet the Needs of Relief and Recovery: 

Three “disaster relief charitable giving incentives were allowed to expire at the end of 2021” but continue to be urgently needed. The letter calls for:

1. renewing the universal charitable (non-itemizer) deduction at least through 2022;
2. “significantly” increasing the cap on the deduction (as already proposed in the bipartisan Universal Giving Pandemic Response and Recovery Act, S.618 and H.R.1704); and
3. extending the provision permitting individuals who itemize to deduct charitable donations up to 100% of their adjusted gross income and the measure allowing corporations to deduct charitable donations up to 25% of taxable income. 

• Addressing Critical Staffing Shortages: 

“Several policy solutions are readily available to alleviate this workforce crisis.” The letter calls for Congress and the Administration to “retroactively restore the Employee Retention Tax Credit, as proposed in the bipartisan ERTC Reinstatement Act (H.R. 6161/S. 3625), extend this refundable payroll tax credit through 2022, and modify nonprofit eligibility beyond the current“gross receipts” test and definition of eligible payroll expenses to include child care and education subsidies to reflect the increased costs charitable organizations experienced as they struggle to maintain or expand services to meet local needs throughout the health and economic crisis.” 

Also, “any relief package should include core components of the Work Opportunities and Resources to Keep Nonprofit Organizations Well Act, or WORK NOW Act (S. 740/H.R. 1987)….” 

And Congress should “…. adopt essential reforms to the Public Service Loan Forgiveness program to, among other things, waive the full time employment requirement during the pandemic and its immediate aftermath, expand the types of loans that may be forgiven, and overhaul the disqualification rules to reflect the original intent of Congress.”

• Promoting the Return of Volunteers:

Volunteers didn’t return to “pre-pandemic levels…. Organizations lack the resources to manage and marshall volunteers in this changing environment.”  The letter calls for action to alleviate this critical problem by:

1. “investing in capacity building grants for volunteer management, targeted to pandemic related shortages, and in the digital infrastructure needed to connect potential volunteers with opportunities in their communities” and
2. Providing incentives and otherwise eliminating unfair tax disparities; for instance, raising the volunteer mileage rate to match the business rate and eliminating the tax on mileage reimbursement up to the business rate.

       Movement on ERTC?

In Employee Retention Tax Credit For Nonprofits Has A Chance (February 22, 2022) The NonProfit Times, the letter from the nonprofit community is discussed, including key elements of the called-for administrative and legislative action.  

While as of mid-day Friday (February 18th), there had been no official response from any of the addressees, according to David L. Thompson, vice president of public policy at NCN, “there has been movement on the core concerns listed in the letter.” 

“The best indication that we’re making progress is the introduction of the bipartisan Senate companion bill to restore the Employee Retention Tax Credit for the fourth quarter of 2021,” according to an email from Mr. Thompson to the NonProfit Times.  “Four of the five sponsors serve on the Senate Finance Committee, a detail that suggests tacit approval by the leaders of the Committee.”

“Additionally, congressional staff members have told representatives from the national council that the tax items included in the letter might be included in a bill likely to move through Congress, such as the omnibus spending bill scheduled for March. These items would include reinstatement of the Employee Retention Tax Credit and renewal of the giving incentives that expired at the end of 2021, Thompson added.”

       Conclusion 

“Now is the time to join the push to secure urgently needed relief for charitable nonprofits.” The National Council of Nonprofits wants charitable organizations to: read, sign on to the letter, and share it; email their senators and representatives a copy of the letter; and tweet to them: “The pandemic continues to hurt the ability of charitable nonprofits to meet community needs. Enact #Relief4Charities to address financial, workforce, and volunteer shortages https://bit.ly/3gUi5GF” 

            –– Linda J. Rosenthal, J.D., FPLG Information & Research Director  

The post Nonprofit Staffing Crisis: New Call to Action appeared first on For Purpose Law Group.

Amidst the horror of the Russian invasion of Ukraine are side stories that have grabbed media attention. 

Last week, it was the global hunt for the mega-yachts of the oligarchs, newly subject to confiscation under various sanctions schemes. Of course, we all knew that the post-Soviet billionaires appreciate and enjoy the material comforts and lifestyle of the West. In addition to gobbling up luxury residences (floating or on dry land), they jet set around the world, visiting their children at top American and European schools and schmoozing with the capitalist elites.

This week, the “new” story is that Putin’s cronies are deeply enmeshed in the philanthropy of the West. Russian oligarchs have donated millions to U.S. charities, museums and universities, analysis shows (March 7, 2022) Peter Whoriskey, The Washington Post. 

Similarly, see: What 4 Billionaires With Russia Ties Have Donated to American Colleges (March 4, 2022) Nell Gluckman and Dan Bauman, The Chronicle of Higher Education and Mayo Clinic among organizations scrutinized for Russian donations (March 7, 2022) Molly Gamble, Becker’s Hospital Review [“Mayo Clinic is among the organizations named in a new report examining the relationship between U.S. institutions and charitable contributions from Russian oligarchs, The Washington Post reported”].     

Certainly, this is important information, but neither that “report” nor the underlying data are new. It’s from an analysis published about eighteen months ago, in October 2020, by the Anti-Corruption Data Collective, a “group of academics, data analysts and policy advocates working to expose transnational corruption.” 

Titled America’s Cultural Institutions are Quietly Fueled by Russian Corruption, (October 30, 2020), the study by Casey Michel and GWU political science professor David Szakoniy can be found at the group’s website as well as at foreignpolicy.com. 

It’s long been an open secret that, since the fall of the Soviet Union in 1989, the top Russian oligarchs have been sprinkling donations throughout the charitable sector, mostly in the United States, the U.K., and Europe.  Indeed, the Washington Post story on March 7th opens by telling us that “Russian oligarch Vladimir Potanin was a high-profile benefactor of the Solomon R. Guggenheim Museum of Art in New York until last week when he resigned from the board.” 

Potanin is hardly the only billionaire with Kremlin ties with his name on buildings and seats on multiple prestigious charity boards.

So most of the recent protestations of surprise and outrage ring about as true as Casablanca’s Captain Louis Renault declaring: “I’m shocked, shocked to find that gambling is going on in here!”

What is new, however, is how dramatically world events have progressed. Russia is now a pariah, committing war crimes. The oligarchs who hadn’t already been sanctioned by the U.S. or other nations are now – or soon will be – swept up under those bans. 

What’s different is that we are all suddenly paying close attention. Charitable institutions and elites are rushing to disengage and to cut ties altogether. In New York, for instance, Carnegie Hall has halted concerts by conductor Valery Gergiev and pianist Denis Matsuev, and the Metropolitan Opera has said it will “not engage pro-Putin artists.” Its star Russian diva, Anna Netrebko, will likely not ever return.

       Millions of Dollars

In Monday’s article in the Washington Post, journalist Peter Whoriskey writes: “American philanthropies, museums and universities have accepted millions of dollars from tycoons aligned with Russian President Vladimir Putin, including several who are the targets of Western sanctions, according to an analysis by anti-corruption researchers.” 

He  adds: “Among the many beneficiaries are such storied institutions as New York’s Museum of Modern Art, the Massachusetts Institute of Technology, the Mayo Clinic and the Guggenheim Museum, the research shows — a reflection of how deeply money from Russian oligarchs has penetrated American society.”

That’s correct as far as it goes, but the Anti-Corruption Data Collective researchers referenced in that story made clear in their October 2020 findings that the scope and extent of these “philanthropists”’ burrowing into the West’s charitable institutions was more substantial than previously thought or reported. 

And the generosity has come with complications: “By some counts, nearly a dozen oligarchs landed in the crosshairs of Special Counsel Robert Mueller’s investigation into Russia’s interference in the 2016 election, with several more coming under scrutiny during [the] recent impeachment saga.” At least “seven of these post-Soviet oligarchs connected to election-interference efforts have donated between $372 million and $435 million to more than 200 of the most prestigious non-profit institutions in the U.S. over the past two decades.” 

Among those quoted by Peter Whoriskey in the current Washington Post article is Ilya Zaslavskiy, team member of the Anti-Corruption Data Collective. A Russian-born researcher and activist, Mr. Zaslavskiy explains: “As the oligarchs rose to power after the collapse of the Soviet Union in the 1990s, many made these donations to get a foot in the door in American society. The donations were like an entrance ticket to the Western establishment.”

“Stalin,” he adds, “could not dream of getting such influence in broad daylight.” 

Also quoted in the March 7th Washington Post article is GWU political science professor David Szakoniy, co-author of the Data Collective’s report.  Some of the oligarchs “have used extensive philanthropic contributions to “help launder their reputations and integrate themselves socially and financially in the West.”  These “contributions to charity and cultural institutions are done in hopes that Western society will look past questions about where their money comes from.”

       Hair On Fire

While lots of people with serious concerns about this “penetration” were running around with their (collective) hair on fire, too many charitable institutions were falling short in their oversight responsibilities. “In most of these cases,” explains Mr. Zaslovskiy, “the due diligence has been quite superficial and did not take into account the critical articles and findings by Russian journalists and activists.”  

In those same years, the public have been treated to delightful media coverage of this issue with articles like: Oligarchs, as U.S. Arts Patrons, Present a Softer Image of Russia (October 6, 2019) Graham Bowley, The New York Times and the companion piece the same day, Six Russians Whose Money Has Made Art and Friends in the West [“These men, personally or through foundations or companies they control, have given to arts organizations in the West and sponsored events that celebrate Russian culture abroad….”]. 

       Why Now?

So why is the story of the Russian oligarchs’ deep involvement with Western philanthropy this week’s new hot item? 

“As the world condemns the Russian invasion of Ukraine, the data [referenced in the Washington Post March 7th article] “could amplify demands for Americans to disavow donors aligned with Putin.” 

The current upheaval in Ukraine has turned everything upside down. Suddenly, there is new scrutiny and outright hostility towards any and all things Putin, including his oligarch pals. The sanctions schemes are now being taken seriously. Russia is ever more isolated; even Starbucks and Coca-Cola have disengaged in the last 24 hours! 

People around the world, including those connected with the charitable sector, are now starting to understand that a sanctioned (or likely to be sanctioned) oligarch is a hot potato to be tossed aside as quickly as possible. 

       Action Demanded

Just a day or so ahead of the Washington Post article, a coalition of “representatives of Ukrainian, Belarusian, Czech, Slovak, Lithuanian, US, UK and anti-Putin Russian civil society and academia” issued a no-holds-barred petition: Ban Kremlin agents and toxic Russian propaganda (March 5, 2022), ANTAC news (antac.org.ua) 

In this “Appeal to Western Academic and Cultural Institutions,” the signers demand that Western institutions cut ties with Russians aligned with Vladimir Putin. “The West is finally waking up to the fascistic and inhumane nature of Vladimir Putin’s regime. A global effort is now underway to end the Kremlin’s exploitation, under the cover of cultural contacts, of free access to the economic and cultural structures of democratic countries for its own agenda.”

Accordingly, “… the time has come for academic and cultural institutions to do the same, to both support the victim of this aggression and to counter the Putin regime’s pervasive toxic propaganda.” 

The signers “strongly urge all Western institutions to halt all forms of cooperation with [named] Kremlin-connected entities and sponsors. 

What follows are pages of particularized demands related to Western institutions. By way of example, the long list begins:

• New York University to rename the Jordan Center for the Advanced Study of Russia and drop any cooperation with the Kremlin oligarch Boris Jordan who was involved in the suppression of free media in Russia;
• Harvard University, Yale University, the Council on Foreign Relations, the New York Academy of Sciences, Tel Aviv University and other institutions in the US and around the world to rename programs and buildings named after Kremlin oligarch Len Blavatnik who derives massive insider benefits from Putin’s regime, suppresses free speech, cooperates with corrupt Russian officials, and funds Russian entertainment propaganda outlets in Russia and anti-Ukrainian propaganda films worldwide;…”

It’s a compelling road map for action.

       Conclusion

This is a rapidly developing and critically important story that we’ll follow and discuss. 

Of course, the inevitable oligarch-rehabilitation push is already well under way: see, for instance: ‘War can never be the answer’: Russia’s wealthy elite speak out against Putin’s invasion (March 2, 2022) Karen Gilchrist, cnbc.com.

            – Linda J. Rosenthal, J.D., FPLG Information & Research Director 

The post Putin’s Pals & Western Philanthropy appeared first on For Purpose Law Group.

“The annual state budget is – next to the State Constitution – the most important document in California government.” 

That’s how Senate writers in Sacramento open the helpful 20-page PDF booklet titled The Budget Process: A Citizens’ Guide to Participation. And next in the Introduction, they remind us that if “… California were a nation,” it would rank among “the top ten economies in the world.” 

Each year, this “open public process” of approving the budget ahead of the start of the fiscal year on July 1st “gets going with intensity when the governor presents a constitutionally mandated proposed balanced budget on or before each January 10th.” 

The ball is then tossed to the Legislature which has until June 15th to act on it. “This five-month period–a comparatively short time frame for consideration and passage of the state’s multi-billion dollar general fund budget–is the critical period for public comment on the state’s spending priorities.”  

And “so it begins,” wrote Jeremy B. White and his co-authors at Politico on the morning of January 10, 2022, in California begins its budget dance:  “Like the return of migratory birds to rice fields, an annual California politics ritual will occur this morning as Gov. Gavin Newsom unveils his budget proposal for the next fiscal year.” See The 2022-23 Governor’s Budget,  showing a huge surplus. 

Wait. What? There are rice fields in California? 

       A Big Deal 

The Politico reporters continue: “Today California […launches…] back into the perennial debate over how to spread its wealth around – and there are abundant assets to allocate.” 

“Keep in mind,” they add, “that this represents a prelude to a prelude: the truly important negotiations tend to start after Newsom releases” a required May update, reflecting more solid actual numbers. But, however “much the budget plan morphs between [January 10th] and May, it would take an abrupt economic downturn to reverse the state’s trajectory.”

This is “no ordinary year; … the defining fiscal dimension is that we’re in a time of plenty. Months after enacting a record $262 billion budget, California’s coffers are once again overflowing, with a surplus in the tens of billions.” (An interesting point is that most other U.S. jurisdictions are also suddenly experiencing surpluses: a development almost unimaginable until just recently.) 

The $29-billion surplus to allocate “does not include about $13 billion set aside, through a constitutional mandate, for schools and community colleges.” This is “an excess ample enough that California could breach the spending cap known as the Gann limit, which would force the state to return some of that money to taxpayers.” 

The total financial picture in California is also buoyed by California’s largest-in-the-nation share of The Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program, a part of the American Rescue Plan that “delivers $350 billion to state, local, and Tribal governments across the country to support their response to and recovery from the COVID-19 public health emergency.” 

These funds are available to be disbursed over a few years and for a broad range of allowable purposes. For the record, in most if not all U.S. jurisdictions, there’s plenty of money left in that Fund for good reasons; most notably, it’s been predictably challenging for state and local governments to rapidly scale up to accept, process, and disburse such huge cash windfalls.   

       Budget Watching

The California Association of Nonprofits (CalNonprofits) has recently reminded us that springtime is when our community must pay close attention not only to purely legislative developments in the Senate and Assembly but also to budget deliberations in the relevant committees. See CA Nonprofit Legislative Update (April 5, 2022), citing Bills & Budget Asks Supported by CalNonprofits in 2022 (March 2022).   

There are two specific budget proposals that CalNonprofits is supporting as of now: (a) a $10 million outreach and sub-grant program regarding the federal student loan forgiveness program and waivers; and (b) funding for a $100-million annual “community-based approach to health equity and racial justice.”

• PSLF Outreach 

The federal Public Service Loan Forgiveness program has received a great deal of attention in the last year or so in terms of its past dysfunction as well as from significant efforts by the Biden Administration to revamp it so it meets the original intention and purpose to provide a student-loan cancellation program for eligible workers at nonprofits and government entities. 

See our discussion in Public Service Loan Forgiveness: Glitches (April 15, 2019). This program was created in 2007 as an “excellent way to help both struggling college grads as well as the nation’s government agencies and nonprofit organizations to lure needed talent away from the private sector which – generally – pays better than public service jobs….” But at the end of the 10-year-period when the first of the loan cancellations should have occurred, few applicants were granted the statutory relief. 

The program has now been overhauled; see Nonprofits & Student-Loan Forgiveness: Action Needed (August 24, 2021), and Student Loan Forgiveness Program: “Transformational” Fixes (October 7, 2021). 

But it’s still difficult to navigate the new processes. CalNonprofits created the Nonprofit Student Debt Project, an “initiative to educate nonprofit staff and employers, advocate for public policy changes, and engage [the nonprofit] community on the problem of student debt and its impact on the nonprofit workforce – and what we can do about it.” 

And now, CalNonprofits is supporting a $10 million request by the CA Department of Financial Protection and Innovation “to do outreach, and sub-grant funds to nonprofits to do outreach, on the federal PSLF program and waiver.”  CalNonprofits is “part of a coalition of organizations working to bring better information and support to student loan borrowers.” In 2020, the organization supported a bill (AB 376 – Stone) that provides an ombudsperson and other resources for student borrowers in California. 

• Public Health Advocacy

CalNonprofits also supports a request to fund a community-based approach to health equity and racial justice. “A statewide coalition of nonprofit advocates that engage in public health advocacy on behalf of underserved communities is requesting at least $100 million a year to support public-private partnerships to improve a wide range of public health outcomes in communities with less access to resources.” 

The Health Equity and Racial Justice Fund explains its mission: “As the pandemic rages on, California must invest in addressing the root causes of health inequities and racial injustices by directing resources to communities that have long-standing health inequities that have only been exacerbated by COVID-19….”  The Fund would provide money “directly to community-based organizations, clinics, and tribal organizations (CBOs) to identify the most pressing health and racial justice issues in their communities and develop solutions to address them.”  Funding priorities could include “food security, environmental justice, community safety, and more.”                              

CalNonprofits explains that “this broad definition of public health outcomes means that many types of nonprofits can support local efforts ….” 

       A Piece of the Pie

The most intriguing – and little known – aspect of the annual California budget “dance” is how significantly the general public (either individually or collectively through interest groups or as organizational “stakeholders”) is invited and encouraged to participate in the process. 

Between the reveal of the governor’s budget by January 10th and the “release of the May Revision …, the Legislature’s Senate and Assembly Budget Committees and their policy-specific sub-committees will invite the Department of Finance and State Departments to present the Governor’s January Budget to those committees….”

More particularly, they “will also allow for stakeholders to provide public comment on the Governor’s proposals as well as present their own ‘stakeholder proposals’.”

It’s important to understand, though, that “… these committees will not take any action on the Governor’s budget proposals or on the stakeholder proposals and will instead ‘hold them open’ until after the May Revision is released.” That’s why the Politico article made clear that “… the truly important negotiations tend to start after Newsom releases” the required May budget update and “revised fiscal outlook.” 

After that, “the Legislature’s Budget subcommittees and Full Budget committees will meet and either approve or reject the Governor’s and stakeholders’ proposals. The Legislature and the Governor will then negotiate to produce a final budget.”

A simple Google search reveals considerable input already by many California nonprofits. A quick peek at one or more of the following examples shows how much there is for our sector to chew on within the proposed budget: 

• ITUP (Insure the Uninsured Project): Governor’s FY 2022-23 Budget Proposal: Key Highlights (January 20, 2022) [this submission includes valuable links to online resources for understanding Governor Newsom’s budget proposal, including breakdowns into individual topic areas including – for instance –  health care, climate change, and education]
• California State Parks Foundation: Governor Newsom’s proposed 2022-23 budget prioritizes climate resiliency, equal access to state parks 
• Disability Rights California: Disability Rights California’s Summary of The Governor’s Proposed 2022-23 Budget (January 19, 2022)
• United Ways of California: Statement by Peter Manzo, President & CEO of United Ways of California Regarding Governor Newsom’s January 2022 Budget Proposal (January 10, 2022)
• California Housing Partnership: 2022-23 Investments in Housing Affordability and Homelessness (February 4, 2022) 
• Early Edge California: 2022-23 California State Budget Proposal Summary of Early Learning and Care Provisions (January 19, 2022)

       Conclusion

The Legislature must produce a “balanced budget” by majority vote of both the Senate and the Assembly by Wednesday, June 15, 2022. Governor Newsom will then have 15 days to sign it so that it will be law by Friday, July 1, 2022, the start of the new fiscal year.

It should be quite an interesting few months. 

           — Linda J. Rosenthal, J.D., FPLG Information & Research Director 

The post Nonprofits Reaching for Piece of CA Budget Pie appeared first on For Purpose Law Group.

“Student loans were never meant to be a life sentence, but it’s certainly felt that way for borrowers locked out of debt relief they’re eligible for.” 

U.S. Secretary of Education Miguel Cardona made these remarks last week in connection with his recent announcement of the newest fixes for the troubled Public Service Loan Forgiveness (PSLF) program. Department of Education Announces Actions to Fix Longstanding Failures in the Student Loan Programs, (April 19, 2022) Press Release, U.S. Department of Education.

Best of all, they  “… will result in immediate debt cancellation for at least 40,000 borrowers….” See Department of Education forgiving at least 40,000 student loans (April 19, 2022) Simon Druker, UPI.com. And changes to the beleaguered Income-Driven Repayment (IDR) program will have even more impact. See Biden’s latest student debt move will bring 3.6 million borrowers closer to loan forgiveness (April 19, 2022) Katie Lobosco, CNN.

“In its latest attempt to fix widespread breakdowns in the federal student loan payment system, the Education Department said on Tuesday that it would use one-time waivers and adjustments to retroactively credit millions of borrowers with additional payments toward loan forgiveness.” Millions move closer to student loan forgiveness with one-time government waivers. (April 19, 2022) Stacey Cowley, The New York Times.

Additional helpful explanations of these somewhat convoluted but critical changes include: Here’s who is eligible for student loan debt relief after Biden’s latest actions (April 21, 2022) Katie Lobosco, CNN, and Student loan borrowers will get help after an NPR report and years of complaints (April 19, 2022) Cory Turner, NPR. 

       The Program History

Beginning with Public Service Loan Forgiveness: Glitches (April 15, 2019), we’ve covered the saga of the troubled PSLF program. 

The Public Service Loan Forgiveness program is of keen interest to the nonprofit sector, hard-hit by the loss of workers seeking higher paying jobs. “Student loan relief is seen as a vital policy solution to curbing the nonprofit workforce shortage.” See Nonprofit Advocacy Update (April 18, 2022), National Council of Nonprofits. NCN credits “intensive lobbying from the nonprofit and government sectors” for aggressive reforms of the PSLF.  “The COVID-19 pandemic has placed a tremendous strain on public servants, making it even more critical that borrowers are able to access PSLF. Many public servants have been on the front lines of the pandemic, making personal sacrifices to keep the rest of us safe. Nonprofits are still recovering jobs lost in the last year, and some public service workers have reported they are considering leaving public  altogether.”

The federal legislation from 2007 was drafted as a win-win solution for debt-strapped college grads as well as for the nation’s nonprofits and government agencies needing help attracting top-notch talent away from the better-paying private sector. In return for ten years’ work with one or more “qualifying” employers, a borrower can have any remaining student-loan balance canceled. 

The Public Service Loan Forgiveness statute was well-intentioned but badly crafted. It was complex and confusing. Anecdotally, the PSLF program administration was a hassle and a mess. There was inadequate DOE oversight and the outside companies retained to service the loans were overbearing and unhelpful. 

But the extent of the dysfunction became clear only when, in about 2017 and 2018, the first of the borrowers enrolled in the PSLF program became eligible for the 10-year student-loan discharge. A furor erupted when just a tiny percentage of the submitted applications for relief were approved. 

In Nonprofits & Student-Loan Forgiveness: Action Needed (August 24, 2021), we reported on the dramatic turnaround in policy and procedure under the new Administration. The goal has been to: (1) identify and correct deficiencies and problems in the PSLF statute itself or in the interpretation or administration of it, (2) grant relief to borrowers who were treated unfairly, and (3) ensure that the same problems don’t arise in the future. 

And, of course, there is a growing awareness of the crisis of affordability of a college education in the United States. The status quo – namely, saddling students with crippling debt for many decades – is unsustainable long term. 

       Series of Fixes

Over the summer of 2021, the Department of Education invited public input about the student-loan repayment system. The federal agency was swamped with over 48,000 responses.

By early October 2021, the agency published (Archived) Fact Sheet: Public Service Loan Forgiveness (PSLF) Program Overhaul (October 6, 2021), U.S. Department of Education. 

“The Public Service Loan Forgiveness (PSLF) Program,” explained Secretary Cardona, “is an important—but largely unmet—promise to provide debt relief to support the teachers, nurses, firefighters, and others serving their communities through hard work that is essential to our country’s success.”  

He added: “By cancelling loans after 10 years of public service, PSLF removes the burden of student debt on public servants, makes it possible for many borrowers to stay in their jobs, and entices others to work in high-need fields.”  

“Today, the Department of Education is announcing a set of actions that, over the coming months, will restore the promise of PSLF….” to workers who have in good faith complied with requirements for student-loan cancellation. 

The key element of the October announcement is the offer of a “time-limited waiver” of many of the onerous restrictions and limitations of the Program. The effect is to “count all prior payments made by the borrower regardless of the loan program. Previously, many “loan types and payment plans” were ineligible. This waiver period starts in October 2021 and borrower can choose to opt-in until October 31, 2022. 

See “The Forgiveness (PSLF) Form With The PSLF Help Tool” on the DOE website. It “helps determine whether you work for a qualifying employer for the PSLF or the Temporary Expanded Public Service Loan Forgiveness (TEPSLF) programs, suggests actions you can take to become eligible for PSLF, and guides you through the PSLF form and submission process.” 

The Department of Education’s October 6th press release also indicated that the agency “will pursue opportunities to automate PSLF eligibility, give borrowers a way to get errors corrected, and make it easier for members of the military to get credit toward forgiveness while they serve.” It “will pair these changes with an expanded communications campaign to make sure affected borrowers learn about these opportunities and encourage them to apply.”  

The DOE characterized these changes as “important steps toward a better and stronger PSLF program, one that will move away from the current situation in which too few borrowers receive forgiveness, and too many do not receive credit for years of payments they made because of complicated eligibility rules, servicing errors or other technicalities.”

See our update in Student Loan Forgiveness Program: “Transformational” Fixes (October 7, 2021).

       Newest DOE Notice

In Department of Education Announces Actions to Fix Longstanding Failures in the Student Loan Programs (April 19, 2022), the focus expands beyond the Public Service Loan Forgiveness program to include another of the student-loan debt avenues of relief, the Income-Driven Repayment (IDR). 

The notice makes clear that the goal is to “make it easier for federal student loan borrowers to receive forgiveness that they may already be entitled to under existing programs.”

“Today, the Department of Education announced steps that will bring borrowers closer to public service loan and income-driven repayment (IDR) forgiveness by addressing historical failures in the administration of the federal student loan programs.”

In this document, there’s a particular focus on a problem that regularly occurs under both the IDR and the PSLF programs. The DOE is training its sights on improper “forbearance steering.” 

Department regulations emphasize that borrowers who are facing difficulty making their loan payments are entitled to receive clear and accurate information from loan-servicing firms about their options (including an Income-Driven Repayment plan) for staying out of delinquency and about the financial consequences of choosing short-term options like forbearance. 

Forbearance seems, at first blush, to be a reasonable option, except when that borrower’s monthly payment under an IDR plan “could have been as low as zero dollars.” Choosing the IDR option would help the borrower get closer to the statutory debt cancellation date. 

By contrast, a borrower advised to choose forbearance – particularly long-term consecutive or serial uses of forbearance – can see their loan balance and monthly payments grow due to interest capitalization and lead to delinquency or default. Borrowers “steered or inappropriately placed into long-term forbearances miss out on critical progress toward IDR and PSLF forgiveness.” It can “set them back years.”

While there were safeguards in the statute and in the servicer firm contracts, they were routinely violated. For example, there is a 12-month limit for any single use of forbearance, and a 36-month cumulative limit on discretionary forbearance.” But a “review of past forbearance use shows that long-term use of forbearance was remarkably widespread.”

The Department of Education’s April 19, 2022, press release indicates that there will be a one-time account adjustment so that borrowers damaged by these improper activities can receive a credit towards the IDR or PSLF forgiveness calculation. 

“Beyond the immediate corrective actions announced today that will provide relief to borrowers harmed in the past,” there will be “action to ensure that borrowers are treated correctly in the future, including stepped-up oversight of the servicing firms.  

Separately, on April 5, 2022, the President ordered another extension of the student-loan payment freeze. It will be in effect at least up to the end of August 2022. Biden-Harris Administration Extends Student Loan Pause Through August 31 (April 6, 2022) Press Release, U.S. Department of Education.

Of course, that pause in the payment obligation applies to all student-loan borrowers across the board. 

       Conclusion

Taken together – (not just those focusing specifically on PSLF) – the cumulative changes taken by the Administration so far are set to help a broad swath of student-loan borrowers. “The credits will help borrowers seeking to have their loans eliminated under the Public Service Loan Forgiveness program and through the use of income-driven repayment plans. The public service program eliminates the debts of government and nonprofit workers after 10 years of qualifying loan payments, and those who enroll in income-driven plans are entitled to have their remaining debt wiped out after 20 to 25 years.”

And there are hints there may be additional relief either by the Administration or by Congress.

             – Linda J. Rosenthal, J.D., FPLG Information & Research Director 

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