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23 posts categorized "author-Mark Rosenman"

Nonprofits, Partisan Politics, and Tax Policy

April 27, 2017

Tax_cutsCalls for tax reform by the White House, Congress, and others have led to proposals that would have a direct and profound impact on nonprofit organizations and philanthropy. Of those proposals, one from the House Republicans calls for eliminating the tax deduction for charitable donations, one floated by the White House would eliminate an incentive for charitable bequests, and another from a coalition of nonprofit organizations would expand the deduction to more taxpayers. The three proposals couldn't be more different.

But while charities and donors are scrambling to preserve (or expand) their tax advantages, there are other worrisome proposals floating around. Most significantly, President Trump and the Republican leadership on Capitol Hill want to change the tax code to allow charities to engage in partisan electoral activity — while, at the other extreme, some want to disallow tax deductions for support of nonprofit advocacy and policy work.

Certainly, one can understand why most tax-exempt organizations would fight to protect the tax incentives for charitable contributions that support their work, but such efforts raise questions about whether charities and donors are worried more about their own self-interest than the public good.

Nonprofits' efforts to preserve and extend the charitable deduction would be less suspect were the organizations fighting for those policies as engaged in the debates over other government tax, budget, and policy initiatives — debates that profoundly threaten many of the causes and constituencies they exist to serve. When nonprofit and foundation leaders are missing from such debates, it becomes easier to impugn their motives for trying to preserve their own tax advantages. Protecting the charitable deduction is not an adequate surrogate for broader action.

Against this backdrop, the president's pledge to "totally destroy" the so-called Johnson Amendment prohibition on charities' involvement in partisan electoral campaigns needs to be addressed (as do other administration proposals).

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Changing the Political Climate

April 06, 2017

Us-politics_climateThe election of Donald Trump, together with Republican control of the U.S. Senate, the House of Representatives and most statehouses, is both a reflection of and serves to underscore the dramatically altered political climate in America. Many nonprofit and philanthropic leaders are scrambling to figure out how they can best operate in this new environment. Too few of them are thinking about how they might work to change it.

A lot of people would like to see it change. We know that a significant majority of Americans are stressed by the outcome of the election and that fully two-thirds are deeply concerned about what it will mean for the nonprofit sector and the nation. That presents an opportunity for charities and foundations. Instead of trying to make do, nonprofit leaders should try to make change.

Make no mistake: efforts designed to alter the context for the administration's policy agenda will find a sizeable and receptive audience. Sixty percent of Americans are embarrassed by the past actions and rhetoric of the president and do not feel he shares their values; similar percentages feel he is neither temperamentally suited for the job nor honest and that his actions are dividing the country. Given these concerns, an outpouring of donations and willing volunteers are finding their way to charities either directly affected by the Trump agenda or working to resist it.

The question now for many nonprofits is how will they deploy the new support they are receiving. Will it be used to ramp up frontline services made necessary by cutbacks in government funding and regulations? Will they allocate it to policy advocacy and organizing aimed at directly contesting the Trump and Republican agendas? Will they also use it help fuel initiatives aimed at changing the political climate in ways that renders these other activities less necessary?

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Time for Nonprofits to Step Up and Make America Good Again

January 17, 2017

NonprofitsassociationsAlthough many Americans are skeptical of Donald Trump's ability to handle his presidential duties, a majority believe he is competent to be president. Nevertheless, the charitable sector should be concerned about what his presidency could mean for nonprofit organizations — and perhaps democracy itself.

The incoming administration has claimed an electoral mandate based on false assertions of massive voter fraud. In reality, Trump lost the popular vote by more than 2 percent — over 2.9 million votes. And he owes his Electoral College victory to 75,000 votes spread across just three states: Michigan, Pennsylvania, and Wisconsin.

It's important to remember these facts as the country prepares itself for an onslaught of executive orders and regressive policy initiatives likely to come out of the White House and the Republican-controlled Congress. Needless to say, many of those initiatives will belie the core values and progressive goals of the philanthropic community.

We know that a majority of Americans support some of President-elect Trump's proposals, including lower and simpler taxes for the middle class; more spending on infrastructure, the military, and veterans' services; and term limits and new ethics rules for members of Congress (although Congress itself opposes the last two).

We also know that most Americans are opposed to Trump's proposals to lower taxes on high-income Americans, build a wall on the border with Mexico (even before Congress said it would cost taxpayers billions of dollars), and deport illegal immigrants without offering them a pathway to citizenship, as well as his preference for fossil fuels over renewable energy sources.

Furthermore, unlike the president-elect and Congress, most Americans want to see Obamacare improved, not repealed and replaced. They want to see government regulations improved, not weakened or eliminated. And while they believe small businesses pay too much tax, they believe corporations pay too little.

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[Review] 'The Chocolate Trust: Deception, Indenture and Secrets at the $12 Billion Milton Hershey School'

June 02, 2015

Cover_the_chocolate_trustWould you be concerned if you knew there was a charity that served only a couple of thousand children each year even though its asset base was  the same size as the Ford Foundation's? Would you wonder what that charity, three times the size of the largest U.S. community foundation, did with the money it accumulates and doesn't spend each year? Would you wonder who benefits from it? 

Bob Fernandez, a reporter for The Philadelphia Inquirer, wondered all that and more about the $12 billion Hershey School and decided to do some digging. The result is The Chocolate Trust (Camino Books, 256 pages; $24.95/paper, $9.99/ebook).

The book is important not simply for what it reveals about the trust, about those who have profited from its sometimes questionable practices over decades, and about the kids who have been neglected as a result of those practices. The Chocolate Trust also is a cautionary tale for anyone who thinks nonprofits can self-regulate or rely on local and state government authorities who too often are ethically compromised and politically constrained to keep them on the straight and narrow. 

First, a little history. In 1909, Milton Hershey, who had started a chocolate company and set out to build a town for its workers, established the nonprofit Hershey Industrial School, a residential facility to serve young, fatherless, white boys. In 1918, a few years after Hershey's wife, Kitty, died – they never had children and had no heirs – Hershey transferred his land and other assets to his "orphanage," making it a very wealthy entity indeed.

Hershey stipulated that those assets were to be managed by the Hershey Trust, part of a for-profit bank, and he retained a significant measure of control over the school's operations by reserving to the bank the right to appoint its board members. In simple terms, the bank controlled the school's assets and operations, and Hershey owned the bank – the reverse of standard operating procedure in the charity world, where donated assets typically are controlled by the charity to which they have been donated. 

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Calling the Piper’s Tune

April 28, 2015

Headshot_mark_rosenmanNonprofit endorsements for sale? That might be the takeaway when more than thirty charities in the District of Columbia write to government regulators in support of a popularly opposed regulatory action sought by a local funder, with many even lending their logos to full-page newspaper ads.

Pepco, a regional electric utility that serves the District (and mid-Atlantic region) wants to sell itself ­to Exelon, a national energy company with a poor reputation among environmental groups and consumer advocates. The overwhelming majority of the charities endorsing the acquisition in letters to DC's Public Service Commission (DCPSC) have a couple of things in common: they have no environmental mission or apparent expertise on energy issues, and they have received or benefited from Pepco philanthropic funding, which Exelon promises to continue for ten years.

The offered premium of 24 percent over market valuation is enough to convince Pepco to seek approval to sell its electric distribution network to Exelon. The opportunity to become the largest utility company in the country and use Pepco’s significant ratepayer base to dilute its nuclear electric generation investments is motivation enough for Exelon. But what’s in it for local charities?

A big part of the answer was summed up nicely by Meta Williams, the regional development director in the United Negro College Fund's Washington, D.C. Area Office. In a letter to D.C Public Service commissioner Brinda Westbrook-Sedgwick, Ms. Williams noted that Pepco and Exelon are important donors to UNCF, provide a great deal of support to other charities, and are admirable corporate citizens, making their plan worthy of endorsement. Yet, she went on to say in conversation with me that she had not considered environmental, energy, or related issues in deciding to write to the Public Service Commission, that policy was not made in her office, and that she was speaking only for UNCF's fundraising arm and not for the organization itself – none of which is clear from her letter.

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How the Charitable Sector Keeps Us All Afloat

October 14, 2014

Rosenman_headshotAs social and environmental problems grow worse and the resources to address them are stretched thinner, nonprofit organizations and foundations have to make hard strategic choices about where best to intervene. In effect, they need to think about their distinctive societal role when considering their options. While experienced staff, veteran board members, and expert consultants struggle with those decisions, there's an apocryphal tale that many at a recent Alliance of Arizona Nonprofits meeting found useful in terms of framing the problem.

But first, what is the distinctive role of the charitable sector in American society? That question has become more complicated with the emergence of for-profit conversions, social-benefit corporations, social impact bonds, and other types of hybrid organizational structures and market finance schemes that blur the lines between the not-for-profit and for-profit sectors.

Based on years of personal polling from the back seat of taxicabs, I have come to realize that the American public thinks charitable organizations are all about voluntarism, sacrifice, and donated income in service to those in need. Clearly, that's not true these days for large swaths of the charitable sector. What, for instance, makes a nonprofit daycare center different from a for-profit one just across the street?

When I ask them the question, nonprofit leaders most often say their organizations provide services to those who can't afford to buy them. But when you consider the increasing prevalence of third-party payers, subsidies to service users, and contracts and grants to service providers and the preferential tax treatment they often receive, along with the fact that fees-for-service generate the lion’s share of charities' income, this "market failure" rationale doesn't hold up very well.

The nonprofit leaders I've spoken to also say their organizations, as distinct from businesses, do much to improve civil society in the U.S., though they rarely provide specific examples of how their organizations do this. Similarly, nonprofits claim a distinction between sectors with regard to a strengthening of democracy, though few can point to related activities beyond their own governance.

A final distinction seems more significant: nonprofit leaders often point out that for-profit businesses are all about increasing the market for their products, while nonprofits typically work to reduce and eliminate societal need — although, again, most aren't able to say how their organizations actually do this. Still, it points to a compelling difference between the two sectors, especially when linked to nonprofit efforts to strengthen democracy and civil society.

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Charities and the ‘Compassion Gap’

July 09, 2014

Rosenman_headshotAny traces of the "compassionate conservatism" championed by George W. Bush in the early days of his administration has long since evaporated under the heat of Republican extremism. Today, more than three-quarters of American conservatives think the poor "have it easy," while fewer than 10 percent believe the "poor have hard lives" and receive inadequate assistance.

What's more, many conservatives believe the poor have easy lives because "they get government benefits without doing anything," ignoring not only the limits of public aid, but also the obstacles that must be overcome to obtain food stamps, Medicaid, day care, public housing, and other kinds of government assistance. In fact, more than 80 percent of conservatives also say that the government programs on which the poor so desperately depend do more harm than good.

Can four out of five conservatives really be so hard-hearted that they cannot imagine how profoundly difficult life is for people without enough money to feed their children, to fill an essential prescription for an ill parent, or to access a safe place to leave an infant while they try to find a part-time, no-benefits, minimum-wage job that gives them no hope of escaping what in many cases are slum- and crime-ridden neighborhoods? "Have it easy?" Really?

These findings are consistent in that more than half of conservatives believe that people are poor because of "lack of effort," while fewer than 30 percent of conservatives believe poverty results from "circumstances beyond [an individual's] control." Despite all we have learned over the years about the causes of poverty and related ills, conservatives seem bound and determined to reduce the issue to the simple fact of people making bad decisions and doing bad things.

That kind of thinking ought to be greeted with dismay by most charities, even if their missions address problems other than poverty. Blaming the victim does not make the work of nonprofits any easier, does not incline people to support well-meaning interventions, and, at the end of the day, is the opposite of charitable. Indeed, with respect to most problems of concern to nonprofits, there is no path forward if people are seen as the sole source of their own troubles.

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Nonprofits and Oligarchy

April 22, 2014

(Mark Rosenman is emeritus professor at Union Institute & University and a frequent contributor to PhilanTopic. In his previous post, he wrote about the link between corruption and declining trust in our public and private institutions.)

Rosenman_headshotThe Supreme Court's recent campaign finance ruling is fraught with irony for lovers of democracy, underscoring as it does the fact that the United States is becoming more and more like Russia, where wealthy oligarchs dominate the political system as well as the marketplace.

Equating money with speech, and refusing to limit its influence in elections, as the Court has done in recent rulings, is a problem for society – and especially for charities and foundations that work to help the least advantaged among us. They know that government programs are critical to the well-being of millions and millions of Americans and that government plays an essential role in protecting the environment and promoting the health, safety, and security of all of us.

They also know that when the super-rich intervene in politics to promote their own interests over the public interest, it can be profoundly problematic.

Unfortunately, that's exactly what is happening. While we live in a democracy where each of us has an equal vote, most of us have become aware that the outcome of many elections, especially at the congressional, state and national levels, is determined before we get to the voting booth – in part as a result of increasingly negative campaigns funded by deep-pocketed donors. Nor are we under any illusions as to our ability to compete with wealthy corporations or their lobbyists when it comes to influencing politicians' decisions once they've been elected to office.

In the last election cycle, for example, a total of more than $6 billion in campaign contributions was raised for various candidates. More than a quarter of that money came from the top one percent of the top one percent of all Americans. In fact, the money of the super-rich was so important that not a single politician running for a Senate or House seat was elected without their campaign contributions. Although more than half the members of Congress are themselves millionaires, they depend on the wealthy to win and hold on to their seats.

The wealthy are willing to provide stunning sums to political campaigns for a simple reason: it's good business. Take the financial/insurance/real estate (FIRE) sector, which accounted for more than 20 percent of the top 31,000 (0.01%) of donors to political campaigns in 2012 and over 34 percent of the top 1,000 donors.

Needless to say, they get a very good return on that investment. The share of GDP claimed by just a portion of the FIRE sector has almost doubled since 1980 – a period, as Nobel Prize-winning economist Paul Krugman points out, in which elected officials acted to deregulate the financial industry. It should come as no surprise that the FIRE sector significantly increased its campaign contributions and lobbying activities over those decades, especially when re-regulation of the sector was being considered. Indeed, elected officials bring new meaning to the term FIRE sale: As the late philanthropist Phil Stern pointed out in his 1988 book, we have The Best Congress Money Can Buy.

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Trust and Corruption

March 03, 2014

(Mark Rosenman is emeritus professor at Union Institute & University and a frequent contributor to PhilanTopic. He lives in Washington, D.C., from where he drew many of the examples of the national problems cited below.)

Rosenman_headshotSelf-serving and dishonest actions in both the public and private sectors are severely testing the trust and confidence of Americans. That's a problem for government, for courts and the criminal justice system, for corporations and business leaders, and, yes, for the nonprofit sector.

It's a much more significant problem, however, for the larger society. Are we destined to slide further toward the pernicious levels of corruption so prevalent in other parts of the world? Can the already strained fabric of American society hold as growing numbers of public, private, and charity officials scramble to profit, legally and otherwise, from their positions? What happens when the fundamental American belief in fairness is undermined by declining confidence in the institutions we all rely on?

Make no mistake, confidence in our institutions is declining. Since the early 1970s, those of us who have a "great deal" or "quite a lot" of confidence in our institutions, including banks, newspapers, and the medical establishment, has fallen dramatically – in some cases by more than 50 percent. Confidence in religion, the Supreme Court, schools, organized labor, and the presidency has fallen by 25 percent or more, while fewer than 25 percent of us have a "great deal" or "quite a lot" of confidence in big business.

Charitable organizations don't fare so well, either. Following a precipitous drop more than ten years ago, a recent survey found that over a third of Americans have "not too much" or no confidence in nonprofits. Meanwhile, Congress's approval rating has fallen to an all-time low of 10 percent.

Interestingly, the few institutions that have shown gains in public confidence include the military and the police and criminal justice system. But while the military is the most respected of American institutions, a series of recent incidents is beginning to take a toll. They include a scandal involving two Navy officers and a senior agent with the Naval Criminal Investigative Service, and a series of misconduct charges leveled at senior military officers for abusing their positions and accepting illegal gifts. His confidence shaken, Secretary of Defense Chuck Hagel has demanded a broader investigation.

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Nonprofits Must Speak Out Against Poverty and Income Inequality

January 21, 2014

(Mark Rosenman, professor emeritus, Union Institute & University, is a frequent contributor to PhilanTopic. In his previous post, he argued that the rush by many to embrace social impact bonds is another example of private profit crowding out a public good.)

Rosenman_headshotIn the battle to stem and reverse widening economic inequality in the United States, too many tax-exempt organizations are either missing from action or are part of the problem. While charities and foundations in general do much to help the poor and indigent, some organizations and institutions actually make the problem worse through their own compensation practices. At the same time, these organizations and others often go out of their way to disassociate themselves from policy debates on a host of related issues, from increasing the minimum wage to preserving government programs for needy families.

The good news is that both Democrats and Republicans in Congress have started to pay more attention to poverty and economic inequality. Given the profound ideological differences between the parties, however, there is a great deal of disagreement about how government ought to address these problems and what kind of nonprofit programs it ought to support. Unfortunately, charities and foundations cannot truly serve the public interest unless they engage in these debates — today and into the future.

First, though, let's consider the deteriorating economic circumstances of many Americans. While most of the 15 percent of Americans living in poverty are children or adults who do not participate in the labor market, close to 1 in 4 of the 46.5 million people in the United States who are poor do work; that's 7 percent of the country's total workforce, and among other things it means the poverty rate today is as high as it has been since 1965.

What's more, income inequality in the U.S. has reached historic levels. Based on something called the Gini coefficient, the United States now ranks 32 out of 34 OECD member countries in terms of inequality; in fact, we haven't seen these levels of inequality since the 1920s, just before the onset of the Great Depression.

It gets worse. In the three decades prior to 2010, the top 1 percent of Americans increased their share of the national income by 66 percent, while those at the bottom of the economic ladder actually lost ground. Meanwhile, 95 percent of income gains since 2009 have gone to the top 1 percent, who now claim 22 percent of the national income, while the richest 5 percent of American households control more than 60 percent of the country's wealth.

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SIBs: Private Gain or Public Good?

December 12, 2013

(Mark Rosenman, professor emeritus, Union Institute & University, is a frequent contributor to PhilanTopic. In his previous post, he argued that foundations and advocacy organizations need to rethink how their resources can be deployed to build the infrastructure and institutions of democracy in the twenty-first century.)

Rosenman_headshotNot long ago, New York City and Goldman Sachs began to experiment with a new financial instrument known as a social impact (or pay-for-success) bond that raises capital from the private sector for nonprofit social programs which in the past would have been funded largely by government. If, after an agreed-upon period of time, the program in question is able to demonstrate success, the investors are paid back, along with a profit, by their government partner. The concept has generated a fair amount of buzz, in part because deficit-strapped governments, underfunded charities, and resource-constrained foundations see SIBs as a potential new source of program dollars.

Unfortunately, the SIB model is being touted as the next best thing without any critical examination of the assumptions behind it or the funding crisis which drives it.

What, for example, would happen if taxes were cut to the point that government is hard pressed just to fund defense/public safety, entitlements, and its own operations and so has to turn to private investors who demand a profitable return to finance critical public infrastructure and nonprofit services? If some have their way, we're likely to find out.

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Philanthropy Not Talking Power

October 31, 2013

(Mark Rosenman is an emeritus professor at the Union Institute & University and directed Caring to Change, an initiative that sought to improve how foundations serve the public. In his previous post, he urged nonprofit leaders to do more to restore Americans' confidence in the sector's ability to serve the common good.)

Rosenman_headshotIn a way, foundations are partly to blame for the dysfunction in Congress. After all, conservative-leaning foundations helped build the Tea Party movement and are still supporting it and many like-minded organizations. Reasons for assigning blame to moderate and progressive foundations are less obvious -- and mostly have to do with actions not taken and opportunities squandered.

In the wake of the government shutdown and the destructive and economically costly legislative brinksmanship around the debt ceiling, some leaders in the foundation world are calling for philanthropy to play a more active role in healing our democracy, fixing a broken Washington, and developing an immediate action plan in support of those ends.

They rightfully note, as have others, that the myriad issues of concern to foundations and nonprofit organizations are powerfully affected by the actions of and funding provided by government. They point out that moneyed private interests continue to trump the public interest when it comes to policy. And they note the growing sense that economic inequality in the United States may be undermining belief in the American dream and our very system of government.

What's more, a survey soon to be released by the Center for Effective Philanthropy finds that a majority of U.S. foundation leaders view the "current government policy environment" as a significant barrier to their organizations' ability to achieve their programmatic aims -- and those responses were gathered before weeks of acrimonious debate in Congress and the sixteen-day shutdown of the federal government.

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Hey, Wall Street, Can You Spare a Dime?

August 05, 2013

(Mark Rosenman is an emeritus professor at the Union Institute & University and directed Caring to Change, in Washington, D.C. In his last post, he urged nonprofit leaders to speak out when confronted with evidence of illegal or unscrupulous behavior in the sector.)

Rosenman_headshotWhile religious groups and nonprofit organizations are forming new coalitions and joining established leaders in the fight to preserve the charitable tax deduction, most charities have remained silent about cuts in government funding for domestic needs. Even more disturbing, few in the nonprofit world seem aware of a new legislative initiative that could add billions of dollars to such programs -- and their own funding streams.

Senator Tom Harkin (D-IA) and Rep. Peter DeFazio (D-OR) have introduced a financial transaction tax modeled after one approved by the European Parliament that is being adapted in eleven nations. Oddly, though Harkin and DeFazio's version of this "Wall Street speculators sales tax" has attracted support from over forty national nonprofit organizations and labor unions, it has not captured the imagination of local and regional charities or nonprofit sector leaders.

According to one study, up to $350 billion a year might be raised by a tax on equity and bond trades as well as the trading of options, swaps, futures, and other derivatives. Such a tax would not apply to the day-to-day financial transactions of individuals or to things like loans and debt issuance.

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Silence Isn’t Golden

July 09, 2013

(Mark Rosenman is an emeritus professor at the Union Institute & University and directs Caring to Change, an initiative that seeks to improve how foundations serve the public. In his last post, he urged PhilanTopic readers to assess how they value the things they value.)

Rosenman_headshotConfronted by headlines about truly questionable practices at a few dozen charities, the response of too many nonprofit leaders has been to bury their heads in the sand and try to pull the hole in after them. What these leaders fail to appreciate is that silence in response to scandalous behavior is neither golden nor in their best interests.

By now, most of you have seen the carefully researched list compiled by the Center for Investigative Reporting, in partnership with the Tampa Bay Times and CNN, of "America's 50 worst charities" -- tax-exempt organizations that "channel most of the money they raise to professional solicitors, mimic other charities' names, deceive donors on telemarketing calls, divert money and contracts to people with ties to their organizations, and use accounting tricks to inflate the amount they report spending on their missions."

Yet, despite overwhelming evidence of self-dealing by these groups and their closely associated entities, key leadership organizations in the sector, including Independent Sector, have responded to requests for comment from the press by declaring that they didn't have enough information to make a judgment, while others have defended outrageous fundraising percentages diverted to what the California Association of Nonprofits' Jan Masaoka labels the "philanthropic-consultant industrial complex."

When it comes to nonprofits, these kinds of abuses are nothing new, and neither is the timidity of nonprofit leaders in condemning them. Their silence in the past has greeted media coverage of huge salaries paid to charity officials, outlandish benefits, self-dealing within boards, tax gimmicks for donors, and malfeasance in program operations. Unfortunately, the cost of that silence is something we all bear.

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What We Value

February 19, 2013

(Mark Rosenman is an emeritus professor at the Union Institute & University and directs Caring to Change, an initiative that seeks to improve how foundations serve the public. In his last post, he wrote about accountability -- or the lack thereof -- in government, business, and the nonprofit sector.)

Rosenman_headshotIn his State of the Union address, President Obama called for government-provided student financial aid to somehow be tied to the value of the education which it helps underwrite. While it's an interesting idea, it presents a challenge not only to institutions of higher education, but to every nonprofit organization in the country. Put simply, who gets to measure the value of any charitable program? Who gets to stipulate their purposes and assess their performance and the outcomes they deliver?

Although such data are not readily available, we know that the White House believes that how well a particular college or university's graduates do in the job market after graduation ought to be a part of a "college scorecard." We also know that Sen. Marco Rubio (R-FL), who gave the Republican rebuttal to the president's State of the Union address, feels even more strongly about the idea and has joined with Sen. Ron Wyden (D-OR) to push The Student Right to Know Before You Go Act, which requires colleges and universities to provide detailed information to prospective students about how much one can expect to make in any given field post-graduation.

Given the state of the economy and students' understandable concerns about their futures, that makes a lot of sense, practically and politically. But should that be the principal measure of the value of higher education? When did we decide that the value of an associate's, bachelor's, master's, or doctoral degree should be quantified and measured in vocational education terms? And who decided it?

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