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How can non-profit organizations survive?

Date Published: 05/01/2009

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How can non-profit organizations survive?

Echo Press | January 13, 2006
By Al Edenloff

Those who are doing well financially should try to contribute more to non-profit organizations, such as the Listening Ear Crisis Center, that help disadvantaged families.

But the government should also do more by increasing taxes on the wealthy and wisely spending the proceeds to create equal opportunities for everyone.

That was the message speaker Joel Kramer gave at a Listening Ear Crisis Center "Because You Care" luncheon at Arrowwood Wednesday.

Kramer, a former publisher of the Star Tribune, is the executive director of Growth and Justice, an economic "think tank" that wants to make Minnesota's economy more prosperous, fair and environmentally sustainable.

Kramer is also a member of the One Percent Club, which includes about 700 members from the Twin Cities who made the commitment to give away 1 percent of their net worth or 5 percent of their income every year.

Kramer said that when he first started donating money to worthy causes he didn't want to talk about his philanthropy, believing that it amounted to bragging. He since has realized that those who give away money can be role models, encouraging others to follow their lead.

Minnesota, Kramer said, is a prosperous state, with above-average income levels and a low unemployment rate. Yet, he added, one in four Minnesota children live in a household with a budget that can't meet basic needs.

At the same time, government support of disadvantaged families is diminishing, Kramer said.

Contrary to what some anti-tax groups have been saying, government spending is not out of control, he said. In fact, it's shrinking if inflation, population increases and personal income growth are considered.

He offered an example: Say 30 years ago, a worker earning $6,000 a year spent $1,500 on a car. Today, if that car would cost $15,000, you could say the expense increased 10 fold. Such a view fails to take into account, however, that the worker's income also increased to $60,000.

A better way of measuring spending is to consider the price of government, Kramer, said, which considers the percentage impact that fees, taxes and other government costs have on income.

In the mid 1990s, the price of government was about 17.7 cents on every dollar earned, Kramer said. The figure dropped to 15 cents in 2003, has since increased to 16 cents, but still shows that state and local governments are smaller today than 10 years ago.

When government cuts a program, Kramer said, it does not necessarily improve efficiency. The impact ripples out to the "real world," he said, placing a greater burden on non-profit groups to fill the gap.

"There is no reduction in need," Kramer said. "There are more families struggling now than five years ago."

There are also not enough equal opportunities in Minnesota, Kramer said. A high school graduate from a high-income family is seven times more likely to graduate from college than a graduate from a household in the bottom fifth income, he said.

To solve the problem, more people should stand up and demand an adequately funded government that can support the private sector in building wealth, Kramer said.

Philanthropy plays a pivotal role in helping non-profits give opportunities to those in need, but it can't solve everything, Kramer said.

More money has to come from somewhere, he said. Those with low and middle incomes are more than willing to pay their share, and do, he said, but they simply don't have enough money to contribute after taking care of their own families.

The place to start, Kramer said, is with those who earn very high incomes - the top 2 to 3 percent of Minnesota's income bracket. As a percentage of income, the high-income earners are not paying their fair share of taxes, he said.

Those making $400,000 a year pay only about 8 percent of their income in state and local taxes while the rate for those making between $17,110 and $116,135 ranges between 10 and nearly 12 percent.

Governor Tim Pawlenty dismissed a move to raise the income tax on those making $250,000 or more a year last session, calling the idea "profoundly stupid." Kramer predicted the issue will be debated again in the Legislature soon.

"Even a lot of the wealthy people agree that they could be paying more in taxes," Kramer said.

As unfair as Minnesota's tax structure is, the federal government is even worse at favoring the wealthy, Kramer said. Families earning $1 million a year have enjoyed tax cuts of $100,000 annually while the middle class tax cut amounts to only $740 a year and the bottom fifth of the incomes received a tax break of just $18 a year.

Kramer concluded his remarks by encouraging others to continue to support the efforts of the Listening Ear, which helps make the whole community healthier.



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