Vol. II, No. 5
November 1994
The New Powers That Be: The Congress
The election of November 8, 1994
dramatically changed the Congress, the state legislatures,
and the political challenges facing nonprofit organizations.
Republican majorities in both houses of Congress will bring
new chairs to every committee, and many committees will have
their jurisdiction modified. In view of anticipated
committee restructuring, it is far too early to know how the
104th Congress will shape up, but since everyone is
speculating, we will too. For those committees which
currently have jurisdiction over matters of importance to
nonprofits, we set out some thoughts on the outgoing
Democrat, and the incoming Republican, congressional
leadership.
Committee: Senate Government Affairs
Subcommittee on Federal Services, Post Office and Civil
Service
Chair: Ted Stevens (AK) in; David Pryor
(AR) out
Comments: Senator Stevens has, in one
very important way, threatened the ability of nonprofits to
communicate with their members through the mails. He has, in
the past, proposed barring advocacy organizations from using
third-class nonprofit mail. There is nothing to indicate he
has had a change of mind on this issue. However, considering
Senator Pryor's attitude toward nonprofits which use the
mail, this is probably a net gain.
Committee: Senate Governmental Affairs
Subcommittee on Oversight of Government Management
Likely Chair: Bill Cohen (ME) in; Carl
Levin (MI) out
Comments: This Subcommittee produced the
Senate's version of the Lobby Disclosure Act, and Senator
Cohen supported the bill with the list disclosure and double
bookkeeping provisions.
Committee: Senate Appropriations
Subcommittee on Treasury, Postal Service and General
Government
Likely Chair: Kit Bond (MO) in; Dennis
DeConcini (AZ) out
Comments: This panel has cooperated with
the Authorizing Post Office subcommittee to impose various
restrictions on third-class mail, and may likely do so in
the future.
Committee: House Ways and Means
Committee
Likely Chair: Bill Archer (TX) in; Dan
Rostenkowski (IL) out
Comments: Congressman Archer will likely
focus on mega-tax issues, but he may support limitations on
IRS regulations, which would be of benefit to nonprofits.
The Oversight Subcommittee will get a new chair (with former
chairman J. J. Pickle (TX) having resigned), but the current
ranking Republican (Amory Houghton (NY)) is relatively
junior, and he may be "bumped" by a more senior member for
that important panel.
Committee: House Judiciary Subcommittee
on Administrative Law
Likely Chair: George Gekas (PA) in; John
Bryant (TX) out
Comments: This Committee produced the
House version of the Lobby Disclosure Act of 1993.
Congressman Gekas has been an important ally in the fight to
trim the burdens that bill imposed on nonprofit
organizations.
Committee: House Committee on House
Administration
Likely Chair: Bill Thomas (CA) in;
Charlie Rose (NC) out
Comments: In November 1993, the committee
reported out a bill that would have required all nonprofits
which took a public policy position to disclose their donors
to the Federal Election Commission in the full manner and
extent as political committees. Nevertheless, there is
reason to believe the trend here will be toward
deregulation.
Committee: House Post Office and Civil
Service Committee
Likely Chair: John Myers (IN) in; William
Clay (MO) out
Comments: If this committee is not
abolished, the important Subcommittee on Postal Operations
and Services may be taken over by Don Young (AK), replacing
Barbara Rose Collins (MI).
Committee: House Appropriations
Subcommittee on Treasury and Postal Service
Likely Chair: Jim Lightfoot (IA) in;
Steny Hoyer (MD) out
Comments: If Bob Livingston (LA) becomes
chairman of the committee, advocacy organizations will have
a powerful ally who understands the excesses of government
power.
The most senior, and thus the most
knowledgeable, Democrat staffers will likely stay on key
committee staff rolls. Many committees have a large number
of "professional" staff members who are considered (by some)
to be nonpartisan. New committee chairs and Congressional
leaders will rely on those staff members, at least in the
short term. This is particularly true of the hundred-plus
staffers of the Joint Committee on Taxation. Even the House
Ways and Means Committee's subcommittees theoretically had
no "partisan" staff. This may not work to the benefit of
nonprofits, however, given the recent legislative agenda
proposed by a predominantly Democrat Congress.
Behind the new committee and subcommittee
heads and members are dozens of staffers. FSC has worked
with many of them already, and some will take on more
important roles. Due to pledged reductions in overall
congressional employment, the number of Democrat staffers
forced out will be high. Still other new staffers will be
hired. In the House of Representatives alone, an estimated
2,400 new GOP staffers will be added. These new staffers
will have a very steep learning curve, and the opportunity
to educate them in the issues facing FSC is upon us.
Our goal in communicating with the new
Congress and its staff is simple: to make sure that the
rapid legislative changes that have been promised do not
overlook the rights and needs of the nonprofit community,
particularly the needs of nonprofits engaged in
advocacy.
The New Powers That Be: The States
Nonprofits also face new challenges and
opportunities at the state level. The new governors,
attorneys general, and legislatures need to be made aware of
the importance of nonprofit organizations and their
legitimate concerns.
Republicans gained control in the
following 17 state chambers which were previously controlled
by Democrats or controlled evenly by the two
parties:
Alaska Senate, 12-8 (previously
10-10)
Alaska House, 22-17 (previously 18-21)
Connecticut Senate, 19-17 (previously 17-19)
Florida Senate, 21-19 (previously 20-20)
Illinois House, 64-54 (previously 51-67)
Indiana House, 56-44 (previously 45-55)
Michigan House, 56-54 (previously 55-55)
Montana Senate, 31-19 (previously 20-30)
North Carolina House, 67-53 (previously 42-78)
North Dakota Senate, 29-20 (previously 24-25)
Ohio House, 55-43-1 (previously 46-53)
Oregon Senate, 19-11 (previously 14-16)
Pennsylvania House, 102-101 (previously 98-105)
South Carolina House, 61-60-3 (previously 52-71-1)
South Dakota Senate, 19-16 (previously 15-20)
Washington House, 58-38 (previously 33-63)
Wisconsin Assembly, 51-48 (previously 47-52)
In the following chambers, the Republicans gained split
control:
California Assembly, 40-40
(previously 33-47)
Maine Senate, 17-17-1 (previously 15-20)
Nevada Assembly, 21-21 (previously 12-26 and 4
vacancies)
As compiled by the National Conference of State
Legislatures, the Republicans now control 48 state
legislative chambers (previously 31), and they control both
chambers in 19 states. The Democrats, who controlled 64
chambers prior to November 8, now control 47, and they
control both chambers in 18 states. In 12 states, control of
the legislature is split.
In the state gubernatorial elections, the
Republicans also won 24 races, compared with 11 for the
Democrats, one going to an independent, and one still in
dispute.
FSC 1994 Leadership Conference
The 1994 FSC Leadership Conference was
held on October 6, 1994 at the Freedom Forum in Rosslyn,
Virginia. At nine-thirty, a.m. on October 6th, The Freedom
Forum's Vice-President for Public Affairs, Jerry Friedheim,
formally opened the Free Speech Coalition's Second Annual
Leadership Conference and welcomed the approximately eighty
attendees who arrived for the opening sessions. Over 125
people attended at least one session. Senator Paul Coverdell
(R-GA) was to give the opening address at the conference,
but we learned late the previous evening that the Senate
would convene not at noon, but at 9:00 a.m., and vote on a
motion relating to the Lobby Disclosure Act.
FSC leaders Eleanor Smeal (President,
Feminist Majority and FSC Co-Chair), Dick Dingman (Vice
President, Free Congress Foundation), and David Keene
(Resident Fellow, First Amendment Center of the Freedom
Forum at Vanderbilt University, and Chairman, American
Conservative Union) combined to stand in for Senator
Coverdell, giving outstanding overviews of the problems
affecting nonprofits and the goals of the conference. At the
conclusion of their remarks, we were pleased to announce
that our scheduled speaker, Senator Coverdell, had, that
morning, successfully voted to effectively kill the Lobby
Disclosure Act for this Congress.
The remainder of the morning was given to
two sessions: The first "Where Are the Battles Being
Fought," was moderated by Edythe Ledbetter (Vice President
for Administration, Center for Marine Conservation).
Speakers included Henry Suhrke (Editor, Philanthropy
Monthly) and John McIlquham (President, Nonprofit Times).
Laura Murphy Lee (Washington Office Director of the American
Civil Liberties Union) spoke forcefully about the dangers of
the Lobby Disclosure Act and the restrictions it would
impose on the exercise of First Amendment freedoms. Dr.
Thomas DiLorenzo, co-author of Unhealthy Charities, spoke
about the uses of regulation as a competitive device against
small nonprofits.
The last morning session was moderated by
Harriet Trudell (Feminist Majority) on public perceptions of
nonprofits as "special interest groups." John McLaughlin
(partner in the polling firm of Fabrizio-McLaughlin) joined
Dr. Frank Luntz (Luntz Research) in analyzing certain public
opinion trends. Charles Orasin (Vice President of Craver,
Mathews, Smith and Company and past President of Handgun
Control, Inc.) shared observations on the problems facing
nonprofit advocacy groups.
The Luncheon was moderated by Larry Pratt
(Executive Director of Gun Owners of America, and FSC
Co-Chair). Ralph Reed (Executive Director of the Christian
Coalition) outlined his organization's methods of mobilizing
grassroots to fight for their issues and to fight against
the Lobby Disclosure Act. Anthony P. Griffin, Esquire
(Adjunct Professor at the University of Houston Law Center)
talked about defending the rights of the unpopular in
society and the crucial importance of making sure that the
rights of these groups and individuals are preserved.
The afternoon sessions were divided into
three "policy report" panels. At the first, Sierra Club
Chairman Mike McCloskey spoke about the attacks an unpopular
organization might suffer from government. David Keene
described the attempt to use the Postal Service to
intimidate the organization which he chairs. Tom Schatz
(Executive Director of Citizens Against Government Waste)
talked about what he learned from FSC regarding the
provisions of the new Social Security law amendments which
established a list of "prohibited practices" restricting the
ability of citizens to mail items that, to any extent, may
resemble federal documents. Howard Segermark (FSC
Legislative Director) moderated that session.
Michael Beard (Executive Director of the
Coalition to Stop Gun Violence) moderated the session on
state actions. Attorney Thomas Hart spoke on the
jurisdiction of states to regulate out-of-state nonprofits,
and Attorney Mack Canter talked on current tests of the
constitutionality of various states' regulations. Professor
Richard Steinberg, Ph.D. (Indiana University's Center on
Philanthropy) detailed the underlying economics of
nonprofits which depend on federal grants to hold down
apparent fundraising costs.
The final afternoon policy panel on
federal regulations was chaired by Attorney William J. Olson
(FSC Co-Counsel) who outlined efforts of the American
Institute of Certified Public Accountants and the Council of
the Better Business Bureaus to regulate nonprofit
organizations. Attorney Mark Weinberg (FSC Co-Counsel)
discussed the latest IRS regulations affecting nonprofits.
U. S. Chamber of Commerce Assistant General Counsel, Judy
Richmond, announced a new suit about to be filed by the
Chamber against the Federal Election Commission because of
its regulation narrowing the definition of "members."
Attorney James Bopp Jr. spoke on advocacy groups' right to
make independent campaign expenditures. Finally, Dick
Larkins (Technical Director, Price Waterhouse) defended the
AICPA's role in setting standards.
The conference was concluded with
comments by Richard Viguerie (Chairman, American Target
Advertising), who addressed the issue of the successes of
the Free Speech Coalition, and Joe Levin (President of the
Southern Poverty Law Center), who talked about the work
ahead facing nonprofits and the need for nonprofit groups to
mobilize to meet the threats facing them.
Typical of a conference with over thirty
speakers and moderators, there were last-minute crises and
substitutions. Until the day before the conference, staff
was busy speaking with attendees, faxing materials, and
reconfirming arrangements. There were press contacts as
well. FSC's role in defeating the Lobby Disclosure Act was
discussed in articles in the New York Times and in Human
Events. In addition, FSC member David Keene was interviewed
on NET cable television, and FSC Legislative Director Howard
Segermark spoke on over ten radio call-in talk shows.
FSC Amicus Brief Accepted by Second Circuit
FSC's Amicus Curiae (friend of the
court) Brief was filed and accepted by the United States
Court of Appeals for the Second Circuit in the case of
National Awareness Foundation, et al v. Abrams, et al.
Attorneys for New York State defendants had opposed the
Court's consideration of FSC's Brief.
The FSC litigation committee may also
file another amicus brief, this one in support of a petition
for certiorari to the U. S. Supreme Court in the case of
Center for Auto Safety v. Maryland. The Center for Auto
Safety argues that registration fees are set so high by
Maryland as to constitute a tax, and are unconstitutional.
It had presented its case in Federal District Court and to
the United States Court of Appeals for the Fourth Circuit.
Both courts ruled in favor of the State of Maryland and the
Center seems determined to seek review in the U. S. Supreme
Court.
FSC Shares its Views with Virginia
On October 3, 1994, the Virginia
Department on Agriculture and Consumer Services ("DACS")
notified its "Patrons" that the agencies of the state
government were reviewing their regulations. Included under
this review is VR 115-06-01, Rules governing the
Solicitation of Contributions, which implements Virginia's
state charitable solicitation laws.
FSC faxed its members and friends a
heads-up on this and asked them to voice their opinions on
this subject. An opportunity such as this comes along
infrequently and it is important that we take advantage of
it when it does. FSC wrote the DACS to add its voice to
yours. In addition to specific points on the regulations, we
made the following policy arguments attacking the very
concept of state charitable solicitation statutes:
Most nonprofits are well run, in
compliance with the law, and use their funds for the stated
purpose of the nonprofit's mission. The states are
over-regulating a large industry in order to punish a very
small number of abusers.
The nonprofits which are most
likely to abuse the public trust are least likely to comply
with the registration requirements.
Other statutes and regulations
provide sufficient police and punishment powers to the
appropriate authorities. Among them are the fraud statutes
of the various states, the non-profit regulations of the
IRS, the Postal Reorganization Act, and the regulations of
the Federal Communications Commission.
The accumulations of current
regulations of the various states and counties, and the
potential for regulation from over 6,000 political
jurisdictions in the United States, has the effect of
placing an undue burden on the nonprofits. As this burden
increases, the resources devoted to maintaining valid
registration increase, and the resources available to
accomplish the nonprofit's mission decrease. This erodes the
public trust and creates a climate in which public giving to
important, useful nonprofits is likely to decline.
It is important to realize that the nonprofits most affected
by these regulations are those which can least afford the
additional burden: new and small organizations which rely on
direct mail and telemarketing as their primary means of
fundraising. Older, established groups which receive
government grants, have endowments, or receive private
foundation money are not as significantly harmed. It is
important to continue to have new groups, particularly
advocacy groups, come into the public domain so that new
messages are presented and new constituencies are
represented.
NAAG/NASCO's Foot-in-Mouth Disease
The National Association of Attorneys
General (NAAG) and the National Association of State
Charitable Officers (NASCO) held their "Charitable Trust and
Solicitation Seminar" in Savannah, Georgia the weekend of
October 29 - 31, 1994. Many nonprofits and their vendors
were represented, including several members of FSC. While
the conference was intended primarily to update the status
of current and pending legislation and for discussion of
those issues, it also provided some unique insights into the
agendas of regulators who enforce state charitable
fundraising laws.
Steve Arter, of the Pennsylvania Attorney
General's office and the President of NASCO, was asked how
he responds to citizens' questions about charities. Arter
responded that he answers that generally people should not
give donations to nonprofits that use direct mail or
telemarketing appeals. Members of the audience were stunned
by this statement. Incredible as it seems, the President of
NASCO was saying that the use of proven and legitimate
fundraising approaches is inherently suspect.
Participants pointed out that most
out-of-state nonprofits cannot effectively use personal or
door-to-door solicitations, methods which apparently still
meet Mr. Arter's standards, and therefore they are
effectively limited to contact with Pennsylvania residents
by mail or telephone.
Such representations by state officials,
said one participant, do a "great disservice to the members
of the public who wish to give, as well as the nonprofits
that expend the thousands of dollars and hundreds of hours
annually to comply with the state registration laws. The
regulators have gone too far."
Paul Luehr, an attorney representing the
Federal Trade Commission (FTC) at the seminar, told
conference attendees that the FTC has jurisdiction over
nonprofit fundraising activities which employ for-profit
professional fundraisers. However, smaller charities must
use professional fundraisers because hiring in-house
fundraisers is prohibitively expensive, as one small
nonprofit's representative later pointed out. The FTC, which
has very little experience dealing with nonprofits, is
expanding its enforcement activities to deal with the
nonprofits. FSC will take advantage of every opportunity to
voice its objection to this latest incursion into
unnecessary and arbitrary regulation. There can be no
logical explanation for indirectly bringing the non-profit
community under the FTC's jurisdiction, simply on the basis
of whether or not a particular nonprofit employs an outside
fundraiser.
The chance of state regulators
recognizing the rights of nonprofits, or adopting a
cooperative spirit towards them, unfortunately appears
unlikely. Pamela Mann, Assistant Attorney General of New
York, and the President-Elect of NASCO, said that state
officers are "not accountable to the nonprofits that they
regulate." Nonprofit representatives tried to explain that
the cost of compliance with these onerous state laws is
borne by the donors -- citizens of the state the regulators
are serving. One person attending the conference pointed out
that the U. S. Supreme Court ruled that if states plan to
regulate charitable solicitation at all, the state must use
the least restrictive means because the regulations restrict
First Amendment rights.
The good news is that not all of the
state regulators ignored the pleas of the nonprofits. One
state official asked to receive the recommendations of the
nonprofits, and FSC has had contact with a few states which
seem prepared to take such input seriously.
Cumulative and Compounded: The Problem of
Over-Regulation
Each of these statutes, requirements,
and regulations, taken by itself, may not be overly
burdensome to the nonprofit, but the cumulative effect is
overwhelming. Beyond that, each action required by one
statute has a secondary adverse impact on the status of the
nonprofit under one or more of the other statutes. Here is
how it works.
As the states impose even more
registration and reporting requirements, require bonds,
require background checks, and dictate contractual language,
fundraisers and solicitors will pass those costs on to
nonprofits either directly or through increased fees. As
costs and fundraiser and solicitor fees increase, the
percentage of money available for a nonprofit's program
decreases.
The increase in fundraiser and solicitor
fees, and the declining funds available for programs, alter
fundraising/general/administrative expense ratios
dramatically. However, many nonprofits, especially new and
small groups, can only afford to raise funds through direct
mail, and they do not have the expertise in-house to conduct
effective direct mail campaigns. Those small and new
organizations are the most susceptible to being rated poorly
by the watchdogs and are finding it ever more difficult to
reach donors.
As the nonprofits attempt to comply with
the multitude of charitable regulations and their ratios
worsen with every new burden imposed, their ability to find
new or exploit existing sources of funds disappears. The
Combined Federal Campaign (CFC), through which thousands of
federal employees make charitable contributions by payroll
deduction, has arbitrary standards for fundraising ratios
similar to those used by the National Charities Information
Board (NCIB) and the Council of Better Business Bureaus
(CBBB). When a charity exceeds the CFC limits, it is usually
removed from the CFC list. Here, the impact is most
dramatic. As the CFC funds, which have minimal associated
costs, are eliminated, the percentage of money available for
a nonprofit's program decreases and its fundraising expense
ratios increase even more.
What does all of this mean? It means that
every nonprofit is operating in an ever-increasing climate
of mistrust and suspicion, not due to the work that it
performs, not due to the way that it raises funds to perform
that work, and not due to any fraudulent practices. That
hostile climate is created by elected officials and various
watchdog organizations attempting to justify their own
existence, by suppressing, inhibiting, and smothering the
right of all Americans to be able to freely associate,
discuss ideas and issues, and then be able to freely
petition their government for the redress of grievances.
This is a dangerous trend that we all should be aware of. It
is inherently un-American and we should speak out against it
while we still have the right.
Each nonprofit and its advisors should
take every opportunity available to let the regulators know
that the burden they create is unacceptable. Many of the
watchdog agencies circulate drafts of their proposals before
they implement them. It is important that they hear from the
groups they are trying to control during this exposure
period. Take the opportunity to write to Congress and to
state legislators and regulators to explain effects of these
laws and regulations on nonprofits. Let's hope someone will
listen.
(Our thanks to Bill Cook and
Philanthropy Monthly for the use of this updated version of
an article previously published there.)
|