2008: Legislative Roundup | PND

Posted on December 30, 2008

2008: Legislative Roundup

PND - 2008: Year in Review - Legislative Round-Up

A year that opened with Congress asking questions about the spending and financial aid practices of colleges and universities ended quietly, as legislators, endowment managers, and investors tallied the damage from a volatile year in the markets and the economic outlook turned gloomy.

Led by Senators Charles Grassley (R-IA) and Max Baucus (D-MT), the Senate Finance Committee in January requested detailed information from the nation's wealthiest colleges and universities on tuition increases over the last decade, their financial aid practices, and how they manage and spend their endowments. "Tuition has gone up, college presidents' salaries have gone up, and endowments continue to go up and up," Grassley, the ranking Republican on the committee, told the New York Times. "We need to start seeing tuition relief for families go up just as fast." If universities failed to move, Grassley suggested, Congress might require them to spend 5 percent of their endowments — in line with the mandated payout rate for foundations — annually on financial aid.

Members of Congress revisited the issue with university presidents and policy experts at a meeting in September. At the meeting, Grassley cited a survey which found that universities, on average, had earned a return of 17.2 percent on their assets in 2007 but spent only 4.6 percent of that income — and urged them to do more. In response, education leaders explained that many universities had taken steps to make college more affordable and that mandated spending of endowment income would hamper their ability to manage during economic downturns — a warning that seemed prophetic a month or so later as elite universities such as Harvard (22 percent) and Yale (13.4 percent) began to report double-digit declines in the value of their endowments. The year drew to a close with no specific legislation on the horizon.

The Internal Revenue Service's 2008 list of "Dirty Dozen" Tax Scams was reduced by one when the agency announced in March that it had removed donor-advised funds from the list. The decision was praised by the Council on Foundations, which had asked the agency to remove DAFs from the list after the passage of the Pension Protection Act of 2006. The action by the IRS, said CoF president and CEO Steve Gunderson, "is an important step that validates the need for and legitimacy of donor-advised funds. At a time when society is increasingly relying on philanthropy to find innovative solutions to our challenges, donor-advised funds allow individuals of more modest means to become philanthropists. And donor-advised funds ensure donors are well-informed about need, so their generosity can have maximum impact in the community."

Congress, at the urging of Independent Sector, the Association of Fundraising Professionals, and other groups, also took up the question of the IRA Charitable Rollover tax provision, which had been enacted as part of the Pension Protection Act and expired at the end of 2007. An expansion of the provision making it possible for individuals 70� years of age or older to donate up to $100,000 from their Individual Retirement Accounts or Roth IRAs without penalty was passed by Congress and signed into law in October as part of the Emergency Economic Stabilization Act of 2008.

In September, the American Red Cross, its disaster relief fund depleted by a succession of hurricanes, tornados, and wildfires, went to Capitol Hill to ask Congress for $150 million in emergency funding — a move that more than a few people viewed as misguided. "I understand it, and I think it may be the only way to deal with the current crisis," said Paul C. Light, the Paulette Goddard Professor of Public Service at New York University. But "it's a risky gamble....It's a particularly difficult time to go to Congress for money because it sounds like a bailout. They don't want to become the Bear Stearns of national charities." In October, Congress authorized $100 million in emergency funding for the relief organization.

Change was in the air throughout this historic election season, and many in the nonprofit sector hoped it would be the operative dynamic in relations between Congress and the sector after a new administration took office in January. Moving at its usual deliberate pace, the Senate created a Philanthropy Caucus in August — more than a year after the House established its own 44-member philanthropy caucus — and, in a letter issued by caucus co-creators Charles Schumer (D-NY) and Richard Burr (R-NC), sang the sector's praises. "The work done by private foundations, nonprofit groups, and individual philanthropists plays an essential role in each of our states," said the senators, "and it is increasingly important for members of Congress to be informed about developments in the philanthropic sector."

Others, convinced that problems of poverty, climate change, and unequal access to quality health care and education must be addressed sooner rather than later by the new administration, argued that a more coordinated approach was needed. Jane Wales, a veteran of the Carter and Clinton administrations and founder of the Global Philanthropy Forum, said government would be smart to leverage the "core capacities" of the nonprofit and corporate worlds. "Look at what's in the inbox of the next president," Wales told the Washington Post. "These are crises that cannot be solved by the public sector alone."

Independent Sector, Nonprofits Ask Congress for Pension Plan Funding Relief (12/10/08)

Congress Approves $100 Million for Red Cross (10/9/08)

Red Cross Asks Congress for Millions to Replenish Disaster Relief Fund (9/17/08)

University Leaders, Lawmakers Convene to Discuss Rising Tuition, Endowment Spending (9/10/08)

Nonprofit Law Pioneer and Philanthropy Monthly Founder Dies (9/07/08)

Universities Facing More Pressure to Use Endowment Funds (9/06/08)

Senate Creates Philanthropy Caucus (8/24/08)

Nonprofit Leaders Call for Greater Government Involvement in Charitable Sector (8/20/08)

Senate Finance Committee Close to Deal on 'Partial Gift' Art Donations (7/14/08)

IRS Removes Donor-Advised Funds from 'Dirty Dozen' List of Tax Scams (3/18/08)

Association of Fundraising Professionals Urges Expansion of IRA Rollover Provision (2/16/08)

Congress Continues to Scrutinize Nonprofit Boards (2/02/08)