In This Issue:
Welcome to the Latest Edition of The Policy Brief
This is a busy time for CMF and Michigan philanthropy as we look for ways to engage the new state administration on priority policy issues affecting the charitable sector and Michigan residents. We are excited to highlight CMF members’ great work and the efforts we are advancing in the public policy space in this latest edition of The Policy Brief.
The work you have supported in local communities, the regional partnerships you’ve committed to and the state-wide structures you’ve put in place have made great and positive changes across Michigan. An example featured in this issue is the effort to garner national support for a new bill (Senate Bill 676) that will support the growing economy of our state through the ingenuity of our very own Community Foundation of St. Clair County.
In the February 2019 edition of The Policy Brief, we shared the Public Policy Committee’s (PPC) concern for scholarship displacement. In March 2019, the CMF Board of Trustees adopted a resolution opposing the practice. CMF staff will work with members to develop a plan to better support Michigan’s students. In this edition, you’ll learn about how we’ve confronted tax legislation at the state and federal level and how we’re working with national partners to decrease student loan debt and grow our economy.
Additionally, as we continue to advocate for the charitable sector, the issue of unrelated business income tax (UBIT) has once again approached Congress. We’ve partnered with the Michigan Nonprofit Association (MNA) to send letters on behalf of the sector to Senators Debbie Stabenow and Gary Peters, as well as every Michigan House representative, advocating for a repeal of the new taxes. Now, CMF is partnering with MNA to collect stories of how the unrelated income business tax (UBIT) may impact Michigan's nonprofit sector. If you'd like to share your perspective on how UBIT has impacted your organization, please email Joan Gustafson, external affairs officer at MNA.
Thank you for your time and tireless work.
Policy Radar: Attracting Talent to Support Michigan’s Economy
Michigan has had nine uninterrupted years of job growth.
According to economists with the University of Michigan, the state has also seen a 29 percent rise in the number of college-educated 25-to-34-year-olds between 2010 and 2017. But after a decades-long economic downturn and loss of population, Michigan must continue creating opportunities to attract and retain a highly skilled and educated workforce.
That is why the Community Foundation of St. Clair County’s Come Home Award Fund is so important. The talent retention program provides student loan forgiveness to college students who agree to move to St. Clair after graduation.
In a webinar earlier this year, Randy Maiers, president and CEO of the community foundation said just three years into the program, he’s beginning to see people move back home for reasons outside of family obligation. Maiers shared that having a new pool of talented young adults has been one of the greatest aspects of the Come Home program.
The first person to take advantage of the Come Home Award has continued to stay in the area, Maiers said. She also serves on the selection committee of the Come Home Fund.
Now, St. Clair’s work has a national stage through a federal bill.
In March, Senator Gary Peters and Senator Shelly Moore-Capito of West Virginia introduced SB 676. If passed, the bill will allow philanthropic scholarships like the Come Home Award to college-degree-seeking individuals who choose to “move back home” and students wouldn’t be taxed for the financial support. The bill, also known as the Workforce Development Through Post-Graduation Scholarships Act of 2019, has three criteria:
The community must be within an opportunity zone.
The community must have had a loss of population over a 10-year period.
The community must have a rate of 25-to-34-year-old bachelor’s degree holders lower than the national average.
Much of Michigan’s net-in migration spurred within the last two years, allowing the state to welcome more newcomers than any other state in the Great Lakes region during the same time period. Even with that growth, many areas within Michigan would still be eligible under the population loss requirement. This is especially true for rural areas and most of the Detroit metro area.
In St. Clair, almost 92 percent of residents have a high school diploma, but just 18 percent have a bachelor’s degree or higher, compared to the state rate of 29 percent.
“The key element that we had to prove …was that the lack of college graduates in our area and region was a burden to our economy,” Maiers said.
According to census data, St. Clair’s median household income is just over $57,000, which is $3,000 less than the United States median, yet still higher than the state median at $54,909. Michigan Radio has reported that 2.6 million people in Michigan are hourly workers.
Last year, Michigan One Fair Wage proposed a ballot measure that would have increased minimum wage to $12 an hour by 2022; however, Governor Rick Snyder and legislature delayed the increase until 2030.
The United Way’s Asset Limited Income Constrained Employed (ALICE) report showed low-wage jobs continue to dominate Michigan’s economy. Job growth has specifically been present within education, health care and retail industries, but the pay rates have not supported the basic Michigan household budget.
Should the state attract more educated and high-skilled talent, the demand for higher wage jobs is expected to follow.
A 2013 Economic Policy Institute report showed that one of the keys to a prosperous economy is a well-educated workforce. According to the report, states have had a difficult time creating a high-wage economy without a well-educated workforce—except Alaska, and Michigan in the 1970s when there was a presence of strong labor unions. The report stated growing and attracting high-wage employers can be done by investing in education and increasing the number of well-educated workers.
Last year the Office of Foundation Liaison (OFL) hosted several site visits for funders to see the benefit of Career Technical Education (CTE) programs and learn about the public-private partnerships that sustain them. In a follow-up webinar hosted by CMF, speakers from states that have experienced similar economic downturns and comparative workforces to Michigan discussed the need for a more educated workforce in rustbelt states.
CMF recently reviewed the Michigan Department of Technology, Management and Budget’s latest forecast of 50 high-demand, high-wage careers through 2026. The list includes a note on training or education that may be required beyond high school. Of the 50 featured careers, 36 require at least a bachelor’s degree.
While creating skilled trade positions is one pathway to economic stability and self-sufficiency, our state also needs more educated workers to contribute to the economy. The senate bill has been referred to the Finance Committee as we look for support from other legislators. Should the Come Home Award be carried through, philanthropy could help strengthen Michigan’s economy by attracting the largest age group of educated and working people.
Bills We’re Watching
CMF and our affinity groups continue to learn about the broad concerns of Michigan’s communities and our members’ work to address those challenges. That information has helped to determine the focus and priorities of the Public Policy Committee (PPC) and CMF’s Board of Trustees as they identify what matters most in the policy landscape of the charitable sector. Based on those priorities and other pressing issues for Michigan philanthropy, CMF is tracking several bills at the state and federal level, including those highlighted below:
Come Home Award/SB 676: This bill supports economic development within opportunity zone communities by allowing community foundations to pay a portion of student loan balances to incoming bachelor’s degree-holding employees as untaxed to the recipient.
- Why we’re watching: The PPC supports economic development through its affinity group work. Encouraging Michiganders and newcomers to live, work and play in our state supports a strong charitable sector.
- What you can do now: Determine if your community foundation can rally behind this issue and contact CMF to discuss ways you can approach your local representatives.
Public Service Loan Forgiveness/SB 1175: This bill is an update to the current partial student loan forgiveness program for employees of the nonprofit sector. Not only would the program be expanded, but program participants would be given more upfront information about how to achieve loan forgiveness.
- Why we’re watching: CMF supports civic engagement, national and volunteer service, and public service as ways to expand the charitable sector generally.
Unrelated Business Income Tax (UBIT)/HR 1545: Tax law changes in 2017 expanded UBIT from a tax on revenue to a tax on nonprofit expenses like employee parking and transportation, which has created additional costs for charities.
- Why we’re watching: Taxing nonprofits shifts limited resources away from critical missions and puts an added burden on donor contributions. UBIT is expected to be discussed in the House Ways and Means Committee later this summer.
- What we’re doing: CMF and MNA have submitted letters to Michigan representatives describing the financial burden placed on the charitable sector by the tax.
- What you can do now: CMF is partnering with MNA to collect stories of how the quarterly unrelated income business tax (UBIT) is an additional financial and time-consuming burden that takes away from charitable organization’s missions. If you'd like to share the impact on your organization with us, please email Joan Gustafson, external affairs officer at MNA.
Charitable Tax Credit/SB 55 HB 4388: Tax law changes in 2017 decreased incentives for the everyday person to give to charitable causes. Repealing or amending this decision will take bipartisan effort.
- What we’ve been doing: During Foundations on the Hill, the CMF delegation shared a research briefing on the lack of viability of a federal charitable tax credit with Michigan representatives. The research was commissioned by CMF and authored by Nicolas J. Duquette at the Sol Price School of Public Policy at USC.
Highly Compensated Employees (This bill is already law): This regulatory issue spurred from the Tax Cuts and Jobs Act of 2017 (TCJA). It requires foundations to combine compensation paid to employees, board members and trustees’ non-foundation work to their foundation salary, determining whether the foundation owes a 21 percent tax on “excess compensation.”
- Why we’re watching: In addition to creating an unnecessary cost for the charitable sector, this bill could turn away potential and valuable interest on serving on a nonprofit board or working as an executive at a nonprofit.
Census 2020: Governor Gretchen Whitmer has included funds in her supplemental budget to support the statewide efforts of the Census 2020 Michigan Nonprofits Count Campaign.
- What we’re doing: CMF continues to advocate with MNA to encourage federal and state funding for the census.
- What you can do: Continue to support the campaign and your local census hub. Click here to learn more.
Charitable Tax Credit/HB 4038: Two bills introduced by Michigan’s House and Senate would restore tax credits for contributions to community foundations, including food banks and homeless shelters.
- Why we’re watching: CMF supports the charitable sector and encourages all Michiganders to do the same.
Earned Income Tax Credit/SB 107: This bill would restore the Earned Income Tax Credit with an incremental increase to its former level of 20 percent.
- Why we’re watching: A strong economy supports the charitable sector by decreasing poverty and strengthening local communities. EITC has been largely seen as a highly efficient low-income financial resource.
Reconnect Grants/SB 0268 and HB 4456: These House and Senate bills would establish a financial aid program for students over the age of 25 who are seeking an associate degree or industry-recognized certificate.
- Why we’re watching: CMF supports economic development efforts, specifically within talent investment.
Michigan Opportunity Initiative/SB 0267 and HB 4464: These House and Senate bills would establish a tuition assistance program for certain undergraduate students at both four-year universities and community colleges.
- Why we’re watching: The PPC and Board of Trustees have taken an official stance against scholarship displacement and will therefore support innovative ways to help students pay for college.
Raise the Age: These House and Senate bills recently passed to increase the age of juvenile court jurisdiction from 17 to 18 years old.
- Why we’re watching: A pilot survey from the OFL revealed CMF members have an interest in learning and engaging in criminal justice work.
Finding the Sweet Spot: Learn, Align, Engage
From the Office of Foundation Liaison (OFL)
At its core, OFL is a partnership office trying to find the sweet spot of potential partnerships to effect policy change.
To continue that work, OFL developed and piloted a new survey tool in which funders could self-identify their level of interest among policy priorities determined by Governor Whitmer’s team: education, workforce and economic development, and urban poverty.
The tool was developed after a December 2018 introductory meeting hosted by then-Governor-elect Gretchen Whitmer’s transition team co-chairs and CMF. During the meeting, Michigan philanthropy was given an update on state government transition activities while connecting funders to Whitmer’s transition team policy advisors in an effort to share opportunities for moving forward.
Foundation Liaison Karen Aldridge-Eason says the work of the “sweet spot” is more art than science.
“I encourage the staff to be vigilant in looking for the sweet spot of the right timing, the right partners—on equal footing and with overlapping interests—to improve the lives of Michigan’s children and families,” Aldridge-Eason said.
Encouraged by the new administration’s openness to partnership, funders expressed a need to better understand how philanthropy could best learn, align and engage through the state leadership transition.
Survey respondents were asked to share their level of engagement on the governor’s given priorities through detailed policy issues including: literacy coaches, the MI Opportunity Scholarship, teacher training programs, paid sick leave, opioids and criminal justice reform. Respondents could indicate they were either: (1) learning about the issue, (2) aligning with other foundations and the administration, or (3) engaging by actively making grants on issues and are a leader in the work.
The survey data has already helped inform OFL’s strategic considerations as it works to move government and philanthropy into the partnership sweet spot.
OFL identified and invited interested funders to join a recent webinar on criminal justice reform that featured Lt. Governor Garlin Gilchirst and to participate in a briefing opportunity with Michigan Department of Corrections Director Heidi Washington. On education, survey data was shared at the P-20 Education Affinity Group spring convening. The report included a list of issues identified as priorities by both funders and the Whitmer administration for the affinity group to consider in identifying next steps for their work.
With OFL’s successful transition to a third gubernatorial administration, our Foundation Liaison Advisory Committee is encouraging us to ask: How can philanthropy continue to provide leadership? With respect to the Governor’s office, foundations in Michigan have typically waited for government to move first.
Moving forward, OFL is developing a plan of work based on the survey framework. In addition to providing a strong starting point for partnership development in the new administration, OFL will continue working to develop more opportunities for philanthropy to lead in the interest of creating a better Michigan for children and families.
Explaining UBIT and the Importance of Sharing the Charitable Sector’s Contributions
Keeping a watchful eye on tax policies have stayed atop CMF’s public policy work since Tax Cuts and Jobs Act of 2017 (TCJA) changes. But a key strategic component includes highlighting the charitable sector’s contributions to the state economy and the tireless work for Michigan families.
It is expected that Congress will address the unrelated business income tax (UBIT) by the end of the summer. While CMF has already reached out to Michigan representatives to share the negative impact the tax holds on the charitable sector, hearing from local organizations can make a big difference, too.
CMF and MNA are partnering to collect stories of how UBIT is an additional financial and time-consuming burden that takes away from charitable organization’s missions. The stories will be collected and submitted for public comment on the bill. If you'd like to share the impact on your organization with us, please email Joan Gustafson, external affairs officer at MNA.
CMF has also supported the United Philanthropy Forum’s education and advocacy around the negative impact of portions of the TCJA on foundations.
The United Philanthropy Forum offered a formal policy position against UBIT, requesting its repeal in 2019. The Forum has been vocal about the negative impact of the TCJA on foundations through learning engagements for its members, including CMF. The Forum provided a two-page memo and talking points on the detrimental aspects of UBIT to FOTH delegates. The Forum has also discussed UBIT at length with its public policy committee, which includes CMF’s public policy fellow and a CMF member.
The IRS defines unrelated business income as a trade or business regularly carried on and not substantially related to furthering the exempt purposes of the organization.
That’s big trouble for Michigan’s charitable sector, which according to The 2018 Economic Benefits of Nonprofits report employed 470,000 people across Michigan through over 11,700 charities in the third quarter of 2018 _ a 19.5 percent increase since 2013 to Michigan’s charitable sector.
The report was shared with the Michigan delegation at Foundations on the Hill (FOTH) and given to every Michigan representative (or their staff members) in Washington.
It is noted in the report: “...Michigan’s nonprofit sector has stabilized following the tumult of the recession and is now demonstrating growth. More importantly, the nonprofit sector has helped fuel Michigan’s turnaround by adding wages and sustaining jobs.”
UBIT applies a tax to expenses on employees like provided parking or travel expenses. With the tax, those benefits may dissolve due to the burdensome cost which includes new accountant fees for the quarterly tax. That’s a threat to the stability of the sector and takes time and money away from the missions of charities nationwide.
An overwhelming response from representatives at FOTH was “I’d like to hear more,” as they consider the input they are receiving on this topic and their own decision making.
While CMF employees continue to find avenues for a repeal or amendment of the bill, the next step includes hearing your voices and experiences. We hope you will consider contributing a story.