Issues Seen Through the Nonprofit Experience of Barack and Michelle Obama

A presidential candidate’s nonprofit history may serve as a mirror for the kinds of decisions he might make about philanthropy once he’s seated in the Oval Office. That history of nonprofit involvement by a candidate or his spouse may also shine a light on the political values of the future putative leader of the Western world.

Barack Obama has had no major reportable nonprofit connections show up on disclosure forms filed during his brief time in the U.S. Senate or during his run as a presidential candidate. In some previous years, his name appears as a former trustee of the Joyce Foundation and the Woods Fund in Chicago, both highly reputable foundations. Joyce is known for many areas of program grants, though its long-standing dedication to campaign finance issues is notable given the senator’s White House aspirations.[1]

The Woods Fund is known as a longtime supporter of community organizing in Chicago[2] and it is where Barack Obama’s nonprofit history is rooted. Probably unlike any major presidential candidate in history, Obama was a real-life community organizer. For some, that’s enough; “Obama the organizer” says it all, no further discussion is necessary, particularly as organized philanthropy has begun to put money into community organizing like never before.[3]

There’s no need to reify the idea of “community organizer” or Obama’s history as a young organizer for the Developing Communities Project (DCP) to discern important values. During the mid-1980s, one of Obama’s initiatives at DCP was organizing in the Altgeld Gardens housing project over asbestos cleanup. Like many largely black public-housing projects, Altgeld Gardens was surrounded by hazardous waste sites. But Obama’s involvement in Altgeld Gardens has nonprofit lessons that might be worth his attention if he were to reach the White House.

Reportedly, Altgeld Gardens is surrounded by 53 toxic waste sites and 90 percent of the landfills of Chicago. Designed for returning African-American veterans of World War II, Altgeld Gardens was even built on a landfill.[4] In keeping with many of its nationally infamous public-housing projects, the Chicago Housing Authority (CHA) is renovating some of the site, but as part of an overall redevelopment of the entire inventory of public housing that will reduce the total number of public-housing units by roughly half. The residents moved out of public housing will be given vouchers to relocate, with the hope that private landlords will take them as tenants.

Maybe the (1) condition of public housing in Chicago or (2) the challenge of transforming an inventory of more than 20,000 units or (3) the Bush administration’s slashes of public housing redevelopment funds will propel Obama to become the first presidential candidate in eons to put affordable housing back on the national agenda. Because of the Bush administration’s cuts, the burden of creating affordable housing has largely been the domain of nonprofit housing developers and community development corporations. The subsidy needs are huge, the resources aren’t there, and nonprofit developers are splicing together spit and glue to preserve existing affordable units, build new ones, and at the same time fight the ravages of predatory lending and subprime mortgages.

The toxic location of Altgeld Gardens might remind a prospective President Obama to push the nation—and philanthropy—to heed issues of environmental justice. Many foundations are comfortable putting money toward environmental issues that are open-space preservation issues, but not toward the frequently racially charged dynamics of environmental justice.

A brief review of major foundation grantmakers between 2002 and 2004 that are also supporters of environmental causes reveals some of the usual suspects:

Top 10 funders, 2004 (environment)

(in $ millions)

Top 10 funders, 2003 (environment)

(in $ millions)

Moore

52.2

Moore

60.8

Packard

40.2

153

Pew[5]

42.5

Ford

34.5

221

Hewlett

40.2

108

Hewlett

33.4

Packard

37.6

131

Longwood

27.6

Ford

37.0

257

Energy

18.7

246

Kresge

21.5

Woodruff

18.7

Lilly

20.5

MacArthur

15.7

Energy

19.5

244

Blanchard/Dendroica[6]

14.8

William Penn

18.4

C.S. Mott

14.7

MacArthur

18.2

Top Ten Funders [2004]	millions
Moore	$52.2
Packard
Ford
Hewlett

But a search on the Foundation Center Web site for funders that specifically reference environmental justice generates a different picture of funders:

EJ Foundation Grantmaker

State

EJ Grant Totals (cumulative from approx. 2002-2005) (in $ millions)

Ford Foundation

21.0

California Endowment

2.0

Jessie Smith Noyes Foundation

1.5

California Wellness Foundation

1.2

San Francisco Foundation

1.1

Beldon Fund

1.1

Public Welfare Foundation

1,0

William and Flora Hewlett Foundation

0.9

Surdna Foundation

0.7

Bush Foundation

0.6

Environmental justice grantmaking is crucial for drawing the attention of housing authorities, corporations, Congress, and potential White House occupants to redress toxic crimes like Altgeld Gardens. Obama might want to use his bully pulpit of personal experience to remind philanthropy about the grantmaking at the intersection of environmental issues and social justice—as Democratic Senator Max Baucus of Montana did earlier this month when he pushed foundations to better understand rural philanthropy to be aware of underfunded toxic sites such as the W.R. Grace asbestos-contaminated vermiculite mine in Libby.[7]

Michelle Obama

Barack Obama doesn’t have much current connection to the nonprofit sector,[8] but that doesn’t hold true for Michelle Obama. She has several nonprofit connections, serving on the boards of a few nonprofits, ranging from small- and moderate-sized ones (the South East Chicago Commission, which champions neighborhood anticrime programs, and the Muntu Dance Theatre of Chicago) to the large (the University of Chicago Hospitals). Michelle Obama is a formidable, accomplished professional in her own right. In Senator Obama’s presidential campaign, she is on the hustings speaking about policies and programs. As a result, her nonprofit activities have implications for a prospective President Barack Obama.

Nothing wrong, nothing illegal, but there are a couple of important nonprofit issues in Michelle Obama’s nonprofit relationships that one might hope a future president Obama and a future First Lady Obama would be attentive to:

She is a vice president of the University of Chicago Hospitals. Like most nonprofit hospitals, many functionally and financially indistinguishable from their for-profit peers, the university hospital pays mammoth salaries. A search of the top nonprofit salaries in Chicago,[9] with data only a couple of years old, shows executives at the hospital earning among the top five nonprofit salaries,[10] seven-figure salaries in fact. In 2005 the president and CEO earned a salary of $1.3 million, plus a contribution to his employee benefit account of $606,829. The organization’s 990s for the years 2004 and 2005 also report generous loans to the hospital and to executives at significantly below-market interest rates.

There have been numerous reports of Obama’s salary as a community relations VP at the medical center, implications that she got promotions and significant salary jumps roughly timed with her husband’s burgeoning national political profile. The hospital’s 990 for 2004 (covering a period ending in June of 2005) reported her as a VP with a $133,000 salary, though newspaper reports suggested that later in the year, her salary apparently doubled,[11] which the CEO suggested to the press as not out of line for the hospital’s salary schedule nor at a competing institution that might have lured her away.[12]

The University of Chicago Hospitals salaries—and reports of its “profitable” operations—ought to be a concern for the prospective president. According to the institution’s 990s, the hospital’s net assets, based primarily on the excess of revenues compared with expenses incurred, increased $77 million in 2003 and nearly $100 million in 2004. Nearby, the old former Cook County public hospital, dedicated to serving the poor, runs an operating deficit comparable to the university hospital’s net income. The Chicago Hospitals use a broad definition of community benefits, including the costs of education, research, government-sponsored indigent care, charity care, and bad debt write-offs.[13] Most people concerned about what nonprofit hospitals deliver to the poor focus on their charity care and some portion of their bad debt write-offs; but at the University of Chicago Hospitals, charity care was a mere 1.5 percent of total hospital expenses, and charity care plus half of bad debt totaled only 3.2 percent,[14] well below the 8 percent charity care that Illinois Attorney General Lisa Madigan suggested should be the norm.[15]

Hardly anyone would suggest that America’s health care and health insurance problems should be solved solely by nonprofit hospitals. But there are legitimate questions about what the charity care functions of tax-exempt hospitals should be, including the one that employed Michelle Obama. Just last year, an IRS study found that one-fifth of nonprofit hospitals surveyed spent less than 1 percent of revenue on uncompensated care (which for many hospitals represented not just charity care, but bad debt write-offs as well).[16] The University of Chicago Hospitals has housed several high-profile charity care programs, with Michelle Obama as a not-infrequent spokesperson. Hopefully, a future President Obama would encourage the IRS and state attorneys general to ensure that nonprofit hospitals earn their tax exemptions.

Lobbying Reform

Senator Obama said he sees “a lot of good” in the lobbying reform bill passed by Congress in August, heading for President George W. Bush’s potential veto.[17] The improvement in the bill is that sponsors of earmarks have to be identified 48 hours before floor consideration of a bill, the location of reportable earmarks can be in committee reports and joint resolutions (where they are often hidden), in addition to specific lines in budget, credit, and spending legislation. It also stipulates that earmarks cannot go to entities where a senator or his primary family members have “pecuniary” interests. The legislation would make these so-called congressionally directed spending items Internet-searchable, and the sponsors would have to explain the “essential governmental purpose” behind the earmarks.

The bill will make earmarks transparent two days before a vote, but it won’t stop them. To the contrary, the bill could well start a new flurry of earmarking, since there’s no specific challenge to what qualifies as “essential governmental purpose,” and sponsors might add earmark promotion as a new arrow in their quiver of constituent services. While the bill is better than the smoke-filled rooms of pre-reform earmarking, it’s not a curative. Senator Obama is already out ahead of the game in taking credit for earmarks.

For approximately three years, Michelle Obama also served as the Chicago program director of Public Allies.[18] Headquartered in Milwaukee, the “signature” program of Public Allies is its AmeriCorps-funded program of paid internships for young adults in nonprofit organizations. Michelle Obama has no “pecuniary” role in Public Allies, a nonprofit entity that no longer employs her, but it is noteworthy that in late 2006 Public Allies was able to announce two federal earmarks it had received: $100,000 for its Connecticut program facilitated by Congresswoman Rosa DeLauro and $125,000 engineered by Senator Dick Durbin and Senator Obama for PA’s Chicago program.[19]

Should Public Allies forgo its access to powerful legislators and pass on earmarking opportunities? If that’s the game, of course, Public Allies—like nearly any other nonprofit—will play. And Obama earns good press and probably not just a little next-gen support for engineering the grant. But only a small slice of America’s nonprofits has the access and lobbying resources to get earmarks. Whether they’re publicized or not, earmarks are more often than not distortions of the federal budgetary process, available generally to nonprofits with the political and financial heft to recruit the bevy of Beltway lobbyists now specializing in earmarks.

Consider some of the biggest earmarks in the 2006 list for youth-serving nonprofits and imagine how only a few would probably be able to compete at this level: Points of Light, or POLF ($10,000,000), Big Brothers Big Sisters, or BBBS ($7,000,000); and America’s Promise ($5,000,000). POLF’s “honorary” board members include Mitt Romney; Andrew Card; Ray Chambers (co-founder); and Harris Wofford (a former Pennsylvania senator and the former head of the Corporation for National and Community Service); and the incoming chair of the board of POLF newly merged with the Hands-On Network is the president’s brother, Neil Bush.[20] At BBBS, the power is corporate; the board includes the CEOs of Cargill, the Gap, and Ashland; the CFO of Dell; and Roger Goodell, the head of the National Football League. General Colin Powell founded America’s Promise, whose board includes Cal Ripkin Jr., Michael Jordan, Tim Russert, Harris Wofford and Ray Chambers. POLF uses Sonnenschein Nath & Rosenthal as outside lobbyists, BBBS uses Beacon Consulting Group, and with Colin and Alma Powell as board members, outside lobbyists may not be necessary at America’s Promise.

Senator Obama’s support of the earmarking bill is a step, albeit limited, in the right direction regarding earmarks. Revealing his handiwork in a six-figure earmark to an organization that used to employ his wife is not beyond the pale of legitimate behavior for a senator. The ability of Public Allies to secure an Obama earmark is a feather in its political cap. But a future president Obama might want to think carefully about how much more is needed to rein in earmarks and to even the playing field for nonprofits that don’t have access to General Powell, Michael Jordan, and Roger Goodell.

It’s not Barack and Michelle Obama’s fault, nor their sole responsibility, to find answers to the problems of public-housing disinvestment, inadequate foundation funding for environmental justice causes, generous hospital salaries, questionable levels of nonprofit hospital charity care, and imbalances in nonprofit access to congressional earmarks. But by having been involved in nonprofits connected to these issues, they stand on a platform to call the nonprofit sector’s attention to the issues these nonprofits reveal or address.

End Notes

1 Consistent with the Joyce Foundation’s long history of promoting campaign finance reforms, Barack Obama has expressed interest in exploring public financing, among other improvements to the current system.

2 The Woods Web site identifies its mission as one of increasing “opportunities for less advantaged people and communities in the metropolitan area, including the opportunity to shape decisions affecting them” through “participatory decision making”; in other words, Woods has long been a thoughtful and conscious funder of community organizing groups and initiatives (see http://www.woodsfund.org/about/mission).

3 In 2005, for example, the Marguerite Casey Foundation of Seattle gave ACORN at least two grants of $1.5 million as general operating support and another $1 million for ACORN’s campaign to promote the Earned Income Tax Credit.

4 See http://www.geology.wisc.edu/~wang/EJBaldwin/PCR/pcrwhatisaltgeld.htm.

5 Pew’s disappearance between 2003 and 2004 from the list of top 10 environmental grantmakers appears to coincide with the organization’s conversion from a private foundation to a public charity.

6 This was one grant to the Greenwood Gardens and Nature Center associated with the Blanchard Trust.

7 The Libby superfund Web page posted by the Environmental Protection Agency (http://www.epa.gov/region8/superfund/libby/background.html) notes that the Libby mine produced 80% of the world’s supply of vermiculite, but it does seem to include the hundreds of deaths it has caused.

8 According to the 2006 disclosure report for his service in the U.S. Senate, Obama acknowledged having received a $2,000 speaking fee for a speech at the Herb Block Foundation, which he donated to the Bush-Clinton Katrina Fund.

9 Search conducted using the Nonprofit Compensation Comparables Assessor software of the ERI Economic Research Institute (http://www.erieri.com).

10 She also sat on the board of the Chicago Council on Global Affairs, whose CEO also ranked among Chicago’s highest-paid nonprofit executives, clocking in with a salary of nearly $400,000, more than three times as much as the second highest-paid employee.

11 Christi Parsons, Bruce Japsen and Bob Secter, “ Barack’s rock: Sen. Obama’s blunt, tough partner, Michelle, helps shape her husband’s politics and life and is integral to his White House run”, Chicago Tribune , April 27, 2007.

12 Mike Dorning, “Employer: Michelle Obama ‘s raise well-earned”, Chicago Tribune, September 27, 2006.

13 Caring for Their Communities: A Comprehensive Report on the Community Benefits Provided by

Tax-Exempt Hospitals in Cook County, Chicago: Metropolitan Chicago Healthcare Council and the Illinois Hospital Association, May 2006.

14 Heather O’Donnell and Ralph Martire, An Analysis of the Tax Exemptions Granted to Cook County Non-Profit Hospitals and the Charity Care Provided in Return, Chicago: Center for Tax and Budget Accountability, May 2006 (http://www.ctbaonline.org/All%20Links%20to%20Press%20and%20Reports/Health%20Care/Charity%20Care%20Study_Final%20Released.pdf).

15 Madigan’s bill succumbed to the lobbying of the hospitals and never came up for a vote in the Illinois legislature.

16 See http://www.senate.gov/~finance/press/Gpress/2007/prg071907f.pdf.

17 See http://www.latimes.com/news/nationworld/nation/la-na-lobby3aug03,1,5813537.story?coll=la-headlines-nation.

18 As a matter of full disclosure, the author is a former national board member of Public Allies.

19 Youth Today runs a fabulous listing of earmarks for youth-serving nonprofits (see http://www.youthtoday.org/youthtoday/Feb06/Earmarks_2006.xls) from YT’s February 2006 issue for the two Public Allies earmarks, and PA’s own November 2006 eUpdate for the photo of Obama (without Durbin) and the Chicago Public Allies graduates and staff (http://www.publicallies.org/Domains/publicallies/Documents/e-Update%2011.06.pdf).

20 See the August 2007 Cohen Report on the nonprofit connections of Mitt Romney and John McCain (http://www.dev-npq-site.pantheonsite.io/section/908.html) for a discussion of the seamy nonprofit history of Neil Bush.