Category Archives: Not-for-profits

Federal Support to K-12 Education of the Economically Disadvantaged – The Case of Richmond Public Schools Part One

By James C. Sherlock

We have discussed here the failures of the City of Richmond Public Schools (RPS) in educating its economically disadvantaged children, as well as the abysmal performance of Black children in its schools.  

I intend to help readers understand how it manages to fail repeatedly even with major federal funding as guardrails and state oversight officially in place.

Title I of the Elementary and Secondary Education Act (ESEA) provides financial assistance to local educational agencies (LEAs) such as RPS and its schools with high numbers or high percentages of children from low-income families to help ensure that all children meet state academic standards.

It is useful to drill down into the details of that program so that readers can understand how every school district in Virginia is supposed to plan and execute the education of poor kids to improve their chances of success.

The question that will remain when I finish will be accountability.  

How does a system like the Richmond Public Schools continue to submit similar paperwork every year and every year fail to meet its stated goals?  Where is the accountability? Why do the people of Richmond put up with it? 

The answer to that last question is partly because citizens largely have no idea how the system works or is supposed to work.  This 3-part essay will try to fix that.

First obvious question.  Can a failed system be taken over by the state?  The answer to that is no.  Virginia briefly had a law to permit that, but it was found unconstitutional.

The Virginia Department of Education requires the submission of the paperwork requesting Title I funds, and clearly from the language in Richmond’s SY 2020 – 2021 application VDOE exerts some level of oversight (see the reference to the MOU between RPS and VDOE).  

But nothing seems to change on the ground.  

Continue reading

Virginia’s Physicians and Nurses Must Take – Yes, Take – More Influence Over Virginia Health Policy

Virginia Health Service Areas and Health Districts

by James C. Sherlock

As I have studied and reported upon Virginia’s struggles in COVID response, many things have come into focus that need to be done better in healthcare. I have reported on a lot of them here and called for changes.

One major, overarching flaw needs attention.  

Virginia’s physicians and nurses do not have sufficient influence over health laws, policy, regulations, Department of Health oversight or health programs.  Physicians and nurses as organized groups largely were neither consulted or listened to in COVID response policy. If you doubt it, ask them. They are beyond frustrated.  

When you needed a COVID vaccination, were you able to get one from your doctor or nurse practitioner? Didn’t think so.

I will recommend here a way to change the balance of influence. It is important to all Virginians that it indeed be altered. Continue reading

Probably a Coincidence – COPN, the Monopolization of Health Care and the Marginalization of the Poor

by James C. Sherlock

The Business of Healthcare in Virginia

I have been asked many times about how freer markets in healthcare can coexist with our need to treat the poor. I will try to briefly cover some of the complexities of the answer to that question.

And I will show that of all of the government healthcare control systems, COPN is the only one that has proven to disproportionally hurt poor and minority populations by its decisions and their effects.  

And it does so by design. Continue reading

Bacon’s Rebellion Challenge: Donate Your COVID Recovery Check to Charity

Michael Sparks, creator of the UGK+ Soup: Community First Project, delivers a soup meal to Pearl and Gil Wick. Photo credit: Richmond Times-Dispatch

by James A. Bacon

So, I got my government COVID-19 check in the mail. I like getting money from the federal government, especially when it’s a tax refund. But I did nothing to deserve this particular sum. I have not been an economic victim of the epidemic (not yet, anyway) and I feel totally undeserving, especially when so many other people are suffering. Accordingly, I have decided to donate the sum to a local philanthropy to help Virginians in need. And I urge other Bacon’s Rebellion readers to do the same.

The philanthropy I have selected is Underground Kitchen’s Community First program. There are good reasons to support Underground Kitchen, but many other charities are doing wonderful work as well. I hope readers will take the time to share stories of their favorite nonprofit and explain why they make worthy recipients of readers’ federal-helicopter checks.

Underground Kitchen started as a Richmond-based enterprise providing high-end corporate events centered on good food and good wine, often in off-beat locations such as pastures or alleyways. After hitting it off in the Richmond and Northern Virginia markets, the business went national and was preparing to go international when the COVID-19 epidemic hit and effectively shut it down. Founders Michael Sparks and Kate Houck did a fast pivot. Continue reading

WTJU Podcast: COVID-19 and the Economy

By Peter Galuszka

Here’s is the twice-monthly podcast produced by WTJU, the official radio station of the University of Virginia. With me on this podcast  are Nathan Moore, the station general manager, and Sarah Vogelsong, who covers, labor, energy and environmental issues across the state for the Virginia Mercury, a fairly new and highly regarded non-profit news outlet. Our topic is how Virginia is handling the economic fallout from the COVID-19 pandemic.

Why Northam Is Such An Important Governor

By Peter Galuszka

This is a bit like throwing chum at a school of sharks, but here is my latest in Style Weekly.

I wrote an assessment of Gov. Ralph Northam that is overall, quite positive. My take goes against much of the sentiment of other contributors on this blog.

They are entitled to their views but, to be honest, I find some of the essays shrill and not really fact based. If Northam wants to delay elective surgeries at hospitals for a week or so, some want to empanel a grand jury.

An acute care health facility in Henrico County becomes one of the most notorious hot spots for coronavirus deaths and it is immediately Northam’s fault even though the care center has had serious problems that long predated the governor’s term in office.

He’s a trained physician who served as an Army doctor in combat during the Iraq War yet he is vilified as being incompetent and incapable of understanding the COVID-19 pandemic.

It’s like the constant repetition of the “Sins of Hillary” on Breitbart and Fox News about emails and Benghazi.

Like him or not, Northam is bound to be one of the most consequential governors in Virginia history given the gigantic problem of the pandemic. He’s not a showboat salesman like Terry McAuliffe nor a smarmy, small-time crook like Robert F. McDonnell.

Anyway, here’s the piece.

Earmarks are Back

The capital projects section of the budget bill is often overlooked by the media. That has been especially the case this year, with all the major initiatives brought forth by the Democrats.

I am working on one or more submissions dealing with capital development, but, in the meantime, there is one item that deserves a post of its own. Deep in the back of budget bill (HB 30), in Item C-72, there lurks a proposal of dubious constitutionality involving a lot of money.

The Children’s Hospital of the King’s Daughters (CHKD) is a well-regarded, private nonprofit, free-standing children’s hospital in Norfolk. The budget bill directs that $33.4 million in tax-supported bond proceeds be provided for the construction of a 60-bed mental health hospital at CHKD. Continue reading

Virginia Mercury At One: Kicking GOP Butt

Success and quality demand recognition, so congratulations to the folks at Virginia Mercury for one year of e-publication.  It represents the future of journalism, which is nothing short of tragic.

Not that a deep progressive bent (or conservative for that matter) has been unknown in journalism.  Most of the great early publications had political backers, and truly independent reporting has been largely mythical.  Everything old is new again.

I remember years ago learning that the page layout mock-ups marked certain advertising blocks so, for example, no story would be placed about lung cancer on the page selling Marlboros, or the plane crash wouldn’t be reported next to the Piedmont Airlines ad.  But with those ads for all to see, we knew who was paying the bills for the daily output of The Roanoke Times.  We have no idea who is paying the bills and potentially pulling the strings at the new internet periodicals and dailies.  Continue reading

Who Are These Guys, and Where Do They Get All Their Money?

Shenandoah Valley Juvenile Center

The report issued by the Northam administration investigating charges of abuse at the Shenandoah Valley Juvenile Center has come under withering criticism by nonprofit groups that filed a lawsuit last year bringing attention to the treatment of unaccompanied immigrant children held there. The Virginia Mercury has the story here.

While I used the Department of Juvenile Justice report as the basis for a blog post yesterday arguing that people were making much ado about a non-scandal, I have to concede that the criticisms of the report are substantive. By substantive, I don’t presume them to be valid. But they are are not frivolous. If I were reporting the story, I would deem them worth probing to see if they were valid.

An interesting sidebar to the controversy is the revelation of the existence of two nonprofit groups that revealed (or, depending upon your viewpoint, concocted) the abuses the first place. One is the Washington, D.C.-based Washington Lawyers Committee for Civil Rights and Urban Affairs. The other is the Henrico County-based disAbility Law Center of Virginia. Both pursue social-justice work. One hews to high standards of transparency; the other does not. 

The Washington Lawyer’s Committee (WLC) is forthright about its commitment to social justice — or at least a leftist perspective on social justice. States the organization’s Guidestar profile: “While we fight discrimination against all people, we recognize the central role that current and historic race discrimination plays in sustaining inequity and recognize the critical importance of identifying, exposing, combating and dismantling the systems that sustain racial oppression.”

The organization reported more than $5 million in revenue in its 2016 990 form, makes the forms accessible on its website, and lists 27 employees on its website. Unlike many nonprofits, the WLC is open about where its money comes from. in 2016 about $3 million came from “contributions and grants,” $830,000 from fund-raising events, and $1.8 million from “legal fees and court awards.”

Most impressively (from a transparency perspective), WLC lists many of its major donors, which include Wiley, Rein & Fielding, a K Street law firm ($414,000); Dentons US LLP, also a K Street Law firm ($173,000), and the Morrison & Foerster Foundation, a San Francisco-based foundation ($215,000); the D.C. Bar Association ($80,000); and Kirkland and Ellis, a Chicago law firm ($153,000), among others. WLC reported another $1.7 million in contributions from unnamed individuals who contributed less than 2% of total revenue.

What emerges is a picture of a well-funded activist group funded mainly by wealthy lawyers, which supplements its income by collecting legal fees and awards from the lawsuits its files. This is not a grassroots organization. It reflects the views of the nation’s liberal legal elite.

In describing what it does, WLC notes a special concern for “people of color, women, children and persons with disabilities [who] are disproportionately forced to live in poverty” (my italics). That may explain the connection with the disAbility Law Center of Virginia. which provides advocacy services across Virginia for people with disabilities.

The disAbilities Law Center is not nearly as transparent. Its 2015 990 form reported $2.9 million in revenue, and its website lists 34 employees. But the nonprofit did not reveal who its major contributors are. More than $2.6 million was classified as “Government grants (contributions),” another $109,000 was described as “National Disability Rights,” $61,000 came from “other attorneys fees,” and $4,000 from settlement fees. The nonprofit reported no revenue from membership dues or fundraising events. As with the WLC, it is safe to say that the disAbilities Law Center is not a grassroots organization, but rather relies upon generous benefactors. I would conjecture that the group’s priorities reflect the preoccupations of liberal elites, but further research is required to document the suspicion.

How does a nonprofit focused on disabilities get mixed up with a center holding illegal unaccompanied-minor immigrants? In its own description, the disAbilities Law Center is part of a “nationwide network of organizations known as ‘Protection and Advocacy systems,’ designed to offer an array of education and legal representation services to people with disabilities and to combat abuse and neglect in both governmentally operated and privately operated facilities.”

The federal government officially recognized the disAbilities Law Center in July 2018 as a group with “authority to monitor conditions and treatment in immigration facilities if those facilities have residents with disabilities.”

So, what does all this mean? The Virginia Mercury was the only media outlet to report today on the follow-up criticism to the report. Reporter Ned Oliver describes the groups as “advocates for the immigrant teens,” never mentioning their social-justice mission or the fact that they are part of a larger constellation of organizations seeking to influence public policy.

Now, this network may be totally benign and above-board. Or it may be part of a larger coalition of nonprofit and advocacy groups intent upon undermining the Trump administration immigration policy by filing lawsuits and generating publicity. I don’t know the truth of the matter. My point here is not to criticize either group, for I have no tangible basis for doing so, but to raise the kind of questions that the media should be asking when they report on the Shenandoah Valley Juvenile Center controversy. If a right-wing legal advocacy group were filing a lawsuit, the ideological orientation of the group surely would be noted in any story. The same rule should apply to liberal-progressive groups and their causes.

Love Is A Juicy Tomato, A Ripe Melon

“We as a country have fallen out of love with healthy fruits and vegetables.”

Dominic Barrett said that while sitting at a picnic table a few feet from an acre of healthy fruits and vegetables, a new urban garden in the heart of Northside Richmond created by Shalom Farms.  The location is in my neighborhood beside my normal walking path.  Looking for a story I asked Barrett to meet me there and talk.

Turns out the story is there is no big story, and it’s told from time to time.  This is another example of Richmonders (Virginians, Americans) seeing a problem and doing something about it.  No fuss, no muss, no parade permits, no angry tweets.  The non-profit farm was stared a decade ago as a United Methodist urban mission, has spun off and is now approaching $1 million in annual budget, its staff supplemented by thousands of volunteer hours.

Dominic Barrett, Executive Director Shalom Farms

While official statistics indicate that only one in ten of us eats enough healthy fruits and vegetables, Barrett and his group have plenty of customers for their produce.  Nobody has fallen out of love with fresh-picked tomatoes or corn. Shalom Farms sells product at discounted prices from a “Grown to Go” truck which stops at 11 locations in the city (the stop I saw was bustling), through Richmond Healthy Corner Stores, and give much of it away through a network of other distribution points.

They measure their 2017 output as about 550,000 “servings.”  They also offer food preparation classes, have visitors out to their larger 12-acre farm off Virginia 288 in Powhatan County, and for a few people offer a personalized prescription produce plan to restore health.  A key partner is Health Brigade, formally known as the Fan Free Clinic.

Click on Image for Annual Report

The stories about “food deserts” often fail to mention that decades ago home or neighborhood vegetable gardens or fruit trees were common, even in the city, supplementing purchased food.  This time of year, people were awash with produce grown, given or traded.  At least some of the bounty was then canned or preserved in some other way.  Modern distractions, growing incomes, sprawling supermarkets – all have had a hand in the decline of home gardens.

And of course, as Barrett lists as his biggest lesson from his time in the work, farming is hard and risky.  Why risk a failure from weather or insects when stores have abundant supplies?  But big stores are rare in parts of the city, while cheap and attractive unhealthy food choices are everywhere.  Barrett reported that the group has strong relationships with grocery chains in the area, who do not see Shalom as competition.

The farm on the Westwood Tract inside the city has generated no controversy, Barrett reported.  Five acres are rented from Union Theological Seminary and sit on the edge of a large park-like expanse which is actually at risk for future development.  Many neighbors would prefer the farm to 300 more apartments.

Shalom Farms follows organic practices and has been certified as a natural grower but has not taken the steps (which can be expensive) for official organic certification.  Nor does it preach the Gospel of Organic that discourages people from commercially-grown or even canned or frozen vegetables or fruits.   Fresh is great, local is great, but it’s all better than most prepared foods, so enjoy.

There are aspects of the nutrition challenge Shalom Farms leaves to others, despite what Barrett called “the temptation to be all things.”  The mission is not to rekindle the practice of home gardening, or to feed mass numbers of people.  Like millions of other Americans, they do what they can for those they can reach.  As I said, no big story, nothing new here, but a welcome reminder that more good is being done daily than most realize, and we don’t celebrate that enough.

Moneysaurus and the Trumpenproletariat

Since the end of World War II, the nonprofit sector has consumed an increasing share of the United States economy. Health care, which is dominated by nonprofit hospitals, now hogs an 18% share. The growth of higher education, an overwhelmingly nonprofit industry, continues to outpace the general economy. Millionaires and billionaires are converting wealth into non-taxable foundations on an unprecedented scale, supporting the proliferation of tax-exempt foundations and nonprofit enterprises.

There are now some 1.6 million nonprofit institutions in the U.S. employing 11.4 million people and comprising the third largest employer in the country after retail and manufacturing, according to the Independent Sector website. In 2016 the PHP Staffing Group reported that employment over the previous 10 years had grown 20%  for non-profits compared to 2% to 3% for the for-profit sector.

Americans typically think of the U.S. economy as divided between the government sector and the private sector. But that view grossly oversimplifies the modern American economy. The nonprofit sector, which comprises 10% of the economy, belongs in category by itself. Nonprofit entities are private in the sense that they are not government organizations. But they behave very differently from for-profit enterprises. Most importantly, they aren’t accountable to the public in the same way that government and corporations are.

Americans have a U.S. Constitution and 50 state constitutions with checks and balances. We hold elections to throw out politicians we don’t like. We have the right to attend public meetings and to petition the government. We have transparency rules governing access to information. We have a fourth estate which, though diminished in size and capacity, views its central mission as acting as a watchdog over government. Governance leaves much to be desired — gerrymandering is a travesty of democracy — but the public is acutely aware of the inadequacies, and people are working to fix them.

We have a different set of mechanisms to hold corporations accountable. Executives of U.S. corporations answer to boards of directors, to equity investors, to bond holders, to banks and other financiers, and, most dramatically, to the marketplace. Unlike failed governments, failed corporations go out of business. Their corporate DNA exits the economic gene pool. Government functions as an additional backstop against corporate abuses against the public health and safety.

To whom do nonprofits answer in exchange for the massive benefit of being exempt from taxes? Nonprofits do have boards of directors (or trustees) but they don’t have investors capable of overthrowing them in a shareholder revolt or otherwise enforcing accountability. Most nonprofit boards are docile; they rubber stamp management’s vision for institutional advancement. While nonprofits aren’t as immune to catastrophic failure as governments are, they don’t pay the same price that corporations do for failure. Indeed, nonprofits with large endowments can be immune to outside pressure. Not that anyone notices. Transparency standards are minimal compared to those for government and publicly traded companies. Billions of dollars of so-called “dark money” slosh through the nonprofit system with almost no oversight and accountability. Except when scandals erupt, the fourth estate considers nonprofit activities of secondary interest. 

The political economy of nonprofits. Nonprofit entities have fundamentally changed the nature of American society, the economy. and the political system. Americans have been astonishingly sanguine about the creation of a new set of winners and losers.

Who are the winners? There are two sets of clear-cut winners — the millionaires and billionaires who get to shelter their wealth, and the nonprofit managerial class that gets to administer it. Insofar as the nonprofit managerial class is comprised of university-educated progressives who prioritize social justice issues, poor people and minorities are intended beneficiaries. However, insofar as the therapeutic ministrations of social-justice minions are counter-productive — a point I have argued repeatedly on this blog — the poor and minorities may be in actuality more victims than beneficiaries.

Whatever may be the case in that particular regard, the priorities of millionaires, billionaires and nonprofit administrators rarely extend to the well-being of working-class and middle-class Americans — especially the alienated, white Trump-voting segment of the electorate whom some have labeled the Trumpenproletariat.

These biases are most clearly visible in the higher education sector. The number one goal of the managerial class at colleges and universities is institutional advancement: building edifices, programs, and bureaucratic empires that maximize the prestige of the institution. In the pursuit of this goal, the managerial class is responsive to two main constituencies: (1) affluent alumni and their offspring (commonly referred to as legacies) whose good will they cultivate for gifts and benefactions, and (2)  lower-income and minority Americans in alignment with the leftist, politically correct value system of academe. The Trumpenproletariat, representing some 40% or so of the nation’s population, has zero influence. Continue reading

Health Care Dies in Darkness

VCU Health System has broken ground on a $349 million outpatient facility, the largest investment in its history.

The City of Richmond has an annual budget of about $700 million a year. The city gets loads of coverage by local media. Henrico County has an annual budget of about $1 billion a year. County government doesn’t warrant the same number of column inches or minutes of air time, but local media do catch the highlights.

The publicly owned and operated VCU Health System has a budget of about $1.5 billion a year. The quality of medical care there has just as critical an impact on the lives of the Richmond-area residents as, say, schools, roads, and municipal services. Moreover, increases in hospital charges have rapidly outpaced the increase in local tax rates for years — perhaps decades. Yet no one raises a peep, and local media tell us nothing about the hospital’s internal deliberations.

My purpose here is not to dis local media, which are under tremendous cost-cutting pressure and have shrinking resources to cover the news. It is simply to suggest than an institution so large and vitally important to a community — and the same could be said of Sentara in Norfolk, Riverside in Newport News, Carilion in Roanoke, Inova in Northern Virginia, and the University of Virginia Hospital in Charlottesville — needs public accountability. Oversight is all the more imperative when an institution enjoys nonprofit status that frees it from the burden of paying property taxes, sales taxes, corporate income taxes, and miscellaneous levies and excises.

It’s fair to say that the general public knows almost nothing about how VCU is run, what it’s long-range goals are, or how well it’s doing its job. Its annual report (like all annual reports) is essentially a public relations document. The only glimmer of accountability comes from the Virginia Health Information website, which compiles hospital data and publishes some “efficiency” metrics,  but provides no narrative analysis.

VCU Health generated an operating income of $136 million in fiscal 2016 — $120 million, if non-operating gains and losses are taken into account. It enjoys a protected market thanks to state and federal restrictions on competition. What is the public getting for the quasi monopoly status conferred upon VCU and the massive profits it generates? Not efficiency, that’s for sure.

Source: Virginia Health Information

Virginia Health Information compares gross and net hospital revenues per admission, adjusting for the acuity of cases. (As a tertiary care hospital and trauma center, VCU gets a disproportionate share of the hard cases, but the VFI methodology accounts for that.) For both categories, VCU falls within the most expensive quartile of hospitals, as shown in the table above.

Source: Virginia Health Information

VHI also looks at underlying costs. Again, VCU consistently comes out as one of the most expensive hospitals in Virginia, whether labor cost per admission, non-labor cost, or capital cost. Other tables shows that productivity/utilization ratios fall in the bottom two quartiles.

Despite these unfavorable comparisons — which VCU undoubtedly will say are unfair, perhaps with good reason — the health system retains $120 million a year in profits (what VHI terms “Revenue and gains in excess of expenses and losses”). An industry rule of thumb is that hospitals need to retain 3% of their earnings to reinvest in new plant, equipment and technology. VCU retains 8%, a difference of about $75 million a year.

In theory, VCU could rebate that $75 million a year to the community in the form of lower charges to patients. But hospital management, with the backing of the VCU board, has chosen to invest in institutional expansion. That includes, most controversially, significant expenditures to create the Virginia Treatment Center for Children, even though philanthropist William H. Goodwin had pledged to give $350 million to create an independent children’s treatment and research hospital. VCU declined to collaborate with Goodwin, preferring to charge ahead with plans to keep the children’s hospital under its own corporate umbrella. Goodwin has not announced how he might otherwise dispose of his proposed gift, but there is no guarantee that the Richmond community will be the beneficiary.

Nonprofit hospitals, like colleges and universities, are not profit-maximizing institutions — they are prestige-maximizing institutions. Hospital administrators don’t go into the hospital business to make massive fortunes (although they do very nicely). They go into the hospital business to enhance the status of the institutions with which they are affiliated. Nonprofit status is not some magic fairy dust that makes self-interest and self-dealing disappear. As with the quest for profit, there is no limit to how much money hospital leaders will spend to advance their institutional standing in a never-ending race with other institutions seeking to do the same.

These massive revenue- and profit-generating enterprises — VCU is hardly alone — operate with no effective restraint or public oversight in Virginia. For time immemorial, Virginia’s news media has defined its mission as holding government entities accountable. It’s high time they begin holding nonprofit universities and hospitals accountable as well. But they can’t — they lack the resources. As nonprofit universities and hospitals metastasize, growing swaths of Virginia’s economy function in darkness.

Medicaid Expansion and the Coming Gusher of Hospital Profits


S&P Global Ratings, a big-three bond rating agency, predicts that Medicaid expansion will be “credit positive” for Virginia hospitals by reducing the level of uncompensated and charity care. Reports the Richmond Times-Dispatch:

The report does not change the current credit ratings of any Virginia health system, but S&P credit analyst Anne E. Cosgrove said the positive outlook “should help their bottom lines.”

“If you don’t have as much uncompensated care, this should help your underlying profitability,” Cosgrove said in an interview on Wednesday.

Virginia hospital officials played down the S&P announcement because they said enrollment under expanded Medical eligibility hasn’t begun and the benefits will vary among health systems depending on the mix of patients they serve.

Let’s get a sense of what the impact will be when an estimated additional 400,000 Virginians enroll in Medicaid. I have downloaded the latest financial data for Virginia acute care hospitals from the Virginia Health Information website, as displayed above. Collectively, they provided $2.6 billion in charity care and wrote off $1.9 billion in bad debts in the fiscal year 2016. They also made nearly $1.7 billion in profit (including “surplus” revenue reported by nonprofits).

Speaking in rough numbers, the federal and state budget for Medicaid expansion will inject about $3 billion annually into Virginia’s health system. I don’t know how that money is to be distributed between acute care hospitals, physicians, long-term care facilities and other medical providers. But for purposes of illustration and subject to verification, let us assume that one-third goes to acute care hospitals, thus reducing charity care and bad-debt write-offs by $1 billion. Virginia hospitals still will be providing a lot of free health care, but they could see a roughly 60% increase in profits.

So, yeah, I expect Medicaid expansion will be “credit positive” for the industry.

Now, let’s conduct another mental exercise. Let’s ask what the impact will be on Virginia’s most profitable hospitals. I totaled the charity care and bad debts for each institution and assumed that Medicaid would reduce them by one-third. Please note, these estimates represent no more than a Scientific Wild Ass Guess useful only for ascertaining order-of-magnitude effects. Here’s what the numbers look like:

Of the hospitals reporting the highest profits in FY 2016, all but Henrico Doctors Hospital were “non profit.”

As Bacon’s Rebellion readers know, I think profits are a beautiful thing. But some profits — those that arise from innovation, productivity, efficiency, and the like — are more socially beneficial than others. Profits that arise from creating monopolies and cartels, restricting competition through the exercise of political influence on government rules and regulations, and relentlessly jacking up charges to paying patients is not socially beneficial. The problem is compounded when the entities engaging in this behavior are nonprofit. Whatever else you say about the business practices of Andrew Carnegie, Henry Clay Frick and John D. Rockefeller, at least they paid taxes!

Bacon’s Rebellion will be watching hospital profitability closely. The big question: What will the highly profitable non-profits do with the gusher of money? Will they hold down charges to patients… or will they continue plowing the money into institutional expansion?

Update: Readers have pointed out that hospitals’ reports of charity care are wildly inflated because they are pegged to absurdly high nominal prices for care that almost no one pays. One implication is that hospitals are far less generous than they purport to be. Another is that my methodology for calculating the financial impact of Medicaid reform on profits is inflated by a similar amount.

Transparency for Thee But Not for Me

Is Ralph Nader the driving force behind UnKoch My Campus?

In response to attacks from left-wing critics, the Charles Koch Foundation said last week that it will post all future multiyear agreements with universities online. The Foundation is one of the nation’s most generous contributors to higher education in the United States, ladling out $90 million in gifts in 2017. Among the biggest beneficiaries has been the Mercatus Center, a free market/fiscal conservative think tank, and to a lesser degree the Antonin Scalia Law School, at George Mason University

Reported the Wall Street Journal last week:

Private colleges and universities aren’t subject to public-record disclosures; some public-university relationships are forged through the schools’ foundations, which can also be exempt from disclosure requirements. Some schools receiving Koch grants have shared the agreement details publicly, but historically not all have been required to do so.

The UnKoch My Campus group has led the criticism of Koch Foundation influence at GMU and elsewhere nationally. Ironically, it is not clear who funds UnKoch My Campus or what strings might be attached to its funding agreements.

In an age in which politics is polarized — and in which everything is deemed political — “dark money” is a massive issue. Millionaires and billionaires influence public policy not just directly through campaign contributions and paid lobbyists but indirectly by funneling foundation money through programs to influence public opinion — as well as those, such as university scholars and new media outlets, who shape public opinion.

Although the Koch Foundation has committed to increased transparency, its critics are not satisfied.

“Unless they are going to release all past agreements, and documentation for all their programs, Koch is not providing clarity, but simply executing a p.r. move to deflect scrutiny from the programs on hundreds of campuses where they continue to leverage undue influence for private gain,” Ralph Wilson, research director for UnKoch My Campus, told the Journal.

At least the Koch Foundation files a 990 form with the Internal Revenue Service, which you can view here. The foundation may not live up to UnKoch My Campus’s lofty ideals for transparency, but then… neither does UnKoch My Campus.

UnKoch My Campus does not publish any agreements it has with funders. It doesn’t even identify its funders. Indeed, it doesn’t even file a 990 form. Here’s what you see when you search the Foundation Center’s 990 finder:


While UnKoch’s web page says nothing about where it gets its money, if you want to donate, you can stroke a check to “Essential Information,” a Washington, D.C.,-based outfit, founded in 1992 by Ralph Nader, whose affiliation is not explained.  You can see a a 990 form for Essential Information here.

Reporting total assets of $86,000, Essential Information does not appear to have an endowment or to be otherwise self-funded. The group reported receiving $382,000 in gifts, grants and contributions in 2016 but it did not identify the source of those funds.

The foundation listed $97,000 in salary and other administrative expenses, and it listed the Free Africa Foundation as the recipient of a $25,000 grant. (The previous year, it gave $50,000 to the Environmental Action Center.) The foundation provided no indication of how the other $260,000 was spent.

The president of Essential Information is listed as John Richard, who devoted on average five hours of week to foundation duties. And who is John Richard? According to the Public Citizen website, upon whose board he sits, he “supervises staff at The Center for Study of Responsive Law, the hub of Ralph Nader’s public interest activities in Washington.”

The Center for Study of Responsive Law takes donations on its website, but does not say where its money comes from. The Center’s 990 form is only partially illuminating. The group collected $808,000 in 2016, and it supported a staff of 11 with wages, payroll taxes and benefits of $574,000. Where did that money come from? The group didn’t say. And what did the Center spend its money on? Three things mainly: two Breaking Through Power conferences, the DC Library Renaissance Project and “a wide variety of research and educational projects to encourage government and corporate institutions to be more aware of the needs of the citizen consumer.”

Did Ralph Nader’s Center for Study of Responsive Law donate money to Essential Information and/or UnKoch My Campus? Publicly available data provides no answer. Where did Nader’s $808,000 in 2016 contributions come from? Did he rely upon small-dollar donations? Did he self-fund? Did he rely upon one or two big donors? If there is a funding agreement in the mix, I’d love to see it. Good luck with that.

Sixty Percent of Slover Foundation Budget Goes Toward Administration

Paul Fraim. Photo credit: Virginian-Pilot

The Slover Literary Foundation, a tax-exempt charity set up to support Norfolk’s flagship Slover Library, plans to spend more on salaries next year than on direct aid to the library, the Virginian-Pilot reports today.

The Slover foundation will spend almost 60% of its fiscal 2018 budget on administrative costs including a $150,000 salary for former Norfolk Mayor Paul Fraim, according to figures Fraim provided the Pilot. The highest-rated charities on Charity Navigator tend to spend 10% or less on administration, the newspaper notes.

Foundation board members argue that the salary paid to the 67-year-old Fraim is worth it. The former mayor brings a vast network of relationships to the foundation and can make things happen. His skills and connections have helped bring high-profile events to the library such as a NATO panel and a “future of the Navy symposium as well as guest speakers, music, and youth programs.

Slover is one of 13 public libraries in Norfolk. The city has tried to make it a cultural destination with technology, architecture and events.

Bacon’s bottom line: Read the Pilot article on the pros and cons of paying Fraim a $150,000 salary. I can see both sides of the story. But I’m mainly interested in a different point: Whether the salary is justified or not, transparency is vital. If a charity or non-profit benefits from tax-exempt status, it owes an obligation to the public. Tax exemptions, after all, are an indirect subsidy from taxpayers.

Most charities report this data in 990 forms. But The Slover foundation did not release the data for four years. Reports Eric Hartley:

Until now, it had been difficult for donors or other outsiders to evaluate the Slover foundation’s spending. Founded in 2008 to raise money to build a downtown library, the organization did not make its finances public between 2013 and this year. Its outside accountants said it was not required to, unlike most charities, because it was a “supporting organization” to the city government.

The justification for not releasing the financial information is specious. If anything, its affiliation with the City of Norfolk means it should be held to the same Freedom of Information Act standards as Virginia government! Who could be blamed for suspecting that Fraim avoided so long releasing the information to avoid embarrassment of having it appear in the Pilot?

There’s a bigger point here: the lack of accountability of non-profit organizations generally. Nonprofits are required to basic financial information in 990 forms. But non-profits have minimal government regulatory oversight. They have no shareholders to answer to. They receive little press scrutiny. (The Pilot’s coverage of Slover is a rarity). And boards of directors are typically clubby conclaves of well-heeled members of the business and political elite who don’t want to rock the boat.

I’m reminded of a recent column by Walter Williams, an economics professor at George Mason University, who wrote of university trustees:

Every board of trustees has fiduciary responsibility for the governance of a university, shaping its broad policies. Unfortunately, most trustees are wealthy businessmen who are busy and aren’t interested in spending time on university matters. They become trustees for the prestige it brings, and as such, they are little more than yes men for the university president and provost.

The same critique extends to many government boards and nonprofit boards. There are always exceptions — in my coverage, I’ve seen a few individuals willing to ask tough questions — but they are rare. I sometimes wonder if the best way I could “give back” to the community when I retire is to convert Bacon’s Rebellion into a platform for covering governance of Virginia’s foundations, charities, universities and health systems. I’d be interested to know what readers think of the idea.