Nonprofit Board Crisis

Working Board #NonprofitBoards

If I have to say it 1000 times, I will.  In her review of her 2022 column for nonprofits in the Tallahassee Democrat, Alyce Le Stansbury offers that a "working" board essentially does the program/hands-on work of the organization.  I heartily absolutely disagree.  I pose that the work of the board is governance.  A working board is the board engaged in governing (policy, planning and evaluation to fulfill its fiduciary duties).  Yes, there are stages of development and during these stages boards may fail to govern and lean toward volunteering or doing the hands-on work of the organization (or they might ALSO serve in voluntary hands-on roles).  

So, the only WORKING Board is the one that does the governing work of the board.  Enough said?

Nonprofits

Alyce Lee Stansbury

Notes on Nonprofits

 

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2022 has been a challenging year for nonprofits in many ways. Here’s a look back at the questions you asked and the issues we discussed.

In January, a reader asked what it meant to be a “working board.” Grassroots and start-up organizations are typically governed by a working board until they secure enough money to hire staff. This topic also bubbles up when established boards are struggling with engagement because some directors mistakenly think their role is advisory when there’s hands-on work to be done.

Nonprofit Risks 2023 #NonprofitBoards

If your board governance committee has not finished their ruminations as to what will be the generative conversation for 2023 board meetings (of course, boards are having generative conversations and governance committees are planning for these!), take a look at the following projected threats boards may want to consider.

4 Critical Threats Nonprofits Will Face in 2023 — and How to Prepare for Them

From the state of the market to increased cyber risk, here are four challenges nonprofit organizations should keep in mind as they move into 2023.

By: Peggy Fogarty | December 29, 2022

Topics: Emerging Risks | Insurance Industry | Nonprofit | Risk Management

Every quarter of society was presented with challenges that began with the COVID-19 pandemic, and the nonprofit sector was no exception. Ongoing economic volatility has placed even more strain on nonprofits as they face greater demand for their services, disruption of operations due to labor shortages and uncertainty over funding.

Through it all, nonprofits have continued to provide essential services — services that, in many cases, the for-profit sector doesn’t address.

According to a 2023 Nonprofit Outlook report from HUB and other sources, here are some of the risk management areas nonprofit boards and staff will need to have their eye on as we move into 2023 if they are to survive and thrive.

Challenge No. 1: Economic Viability

Nonprofit organizations, especially in the health and human services (HHS) sector, have experienced an increased demand for their services over the past few years due to the COVID-19 pandemic.

While numerous nonprofits saw an accompanying surge in federal funding and donations, they are now challenged with finding financial stability as that federal support and other funding streams taper off.

Given that inflation reached a 40-year high in June and the S&P 500 is down 15% year-over-year, donors are pessimistic about the economic forecast. While the amount of money for crisis-related causes rose, the number of donors resumed a more than 10-year decline in 2022, according to Independent Sector’s Health of the U.S. Nonprofit Sector Quarterly Review, released in September 2022.

U.S. nonprofits, a valuable contributor to the economy, added $1.4 trillion in the second quarter of 2022 in fees, service charges, government payments and philanthropy, as reported in the Health of the U.S. Nonprofit Sector Quarterly Review. While nonprofits contribute significantly to the economy, most have limited resources.

Finances have been further strained for nonprofits that dipped into their reserves or borrowed to get through the pandemic, The Urban Institute reported in Nonprofit Trends and Impacts 2021. The financial pressures experienced during inflation include reduced donations, shrinking government funds and rising operating costs.

From an insurance perspective, directors will also need to plan for increased insurance rates, including cyber, automobile, general liability, property insurance, and umbrella and excess liability, as HUB forecasts in its Nonprofit Industry Rate Outlook.

When resources are tight, the focus should be on innovative solutions to achieve efficiency. HUB encourages organizations to align with partners across nonprofits and even across sectors to leverage their paid and voluntary workforce. Following best practices in fundraising will always include diversifying funding sources, but efficiencies can be reached through partnerships with complementary nonprofits to maximize the pool of potential donors.

Nonprofit leaders would be wise to develop a communication strategy to pinpoint and reach their target audience. To remain relevant to donors, nonprofits can leverage technology, identify the appropriate medium and utilize social media to engage supporters. They can also create additional giving opportunities through storytelling, testimonials, pictures and graphics that communicate measurable outcomes to demonstrate impact.

Challenge No. 2: Talent Shortages

Nonprofits as a sector are the third-largest private employer in the U.S., with 12.3 million employees — 81% of whom are in health and human services, reports Independent Sector in its Quarterly Snapshot.

Employment in the nonprofit sector fell by 1.6 million during the pandemic, according to HUB’s report, then decreased further during the Great Resignation. In addition, the tight labor market increased talent competition, leaving a large number of nonprofits short-staffed.

The pressure on nonprofits intensified as “concerns about COVID-19 exposure and public health safety measures” resulted in a national decline in volunteers willing to give their time, according to a January 2021 Gallup report. Volunteerism is still below pre-pandemic levels as people continue to worry about their health, vaccine protocols and sanitation practices, according to Gallup.

Understanding the most common reasons for employee departure can help leaders to address the issues and implement solutions. As Forbes reported, the top reasons for voluntary exits in nonprofits included that 49% of these employees found better opportunities and 44% lacked opportunities for career growth in their former positions. An additional 32% left for better pay and benefits.

Another disturbing workforce trend in the sector shows a loss of racial and ethnic diversity, resulting in a 5.7% drop in Black employees (to 12.2%) and a growing proportion of white workers (now at 77.8%), as reported in the Health of the U.S. Nonprofit Sector Quarterly Review.

To compete with the public sector, nonprofits will need to pay market-rate salaries and should adopt a benefits strategy that includes health insurance, disability and retirement plans. Efficiencies can be reached within organizations that provide group insurance as a membership benefit and by allowing employees to personalize their benefits.

To prioritize the wellbeing of their workforce, nonprofits will need to address employee burnout. Internal policies and recruitment strategies that are intentional about racial equity and diversity will also need to be implemented.

Additionally, investments should be made in professional development to provide pathways for career growth. By applying best practices in wellness and work-life balance — such as hybrid work, flex time and additional paid time off — nonprofits can improve their value proposition to attract and retain excellent employees while providing opportunities to engage in meaningful work.

Challenge No. 3: Increased Cyber Risk

Nonprofits leveraged technology to increase efficiency in response to the pandemic when staff moved to a remote working environment. The increased use of technology for cloud storage, meeting rooms and fundraising platforms to process donations or event registrations, however, will require investments in digital literacy, hardware and ongoing operating costs.

Increased use of technology also brings increased cyber risks. Nonprofits that are less technologically savvy will need to understand how to safely use these systems to protect their data and ensure privacy.

Cyber insurance rates for many nonprofits soared in recent months and years as organizations with inadequate controls suffered system shutdowns and breaches that resulted in the loss of personally identifiable information.

HUB’s report indicates that nonprofit organizations will experience cyber insurance rate increases of between 20 and 40% in the coming year. Organizations with weaker controls could be looking at difficult renewals and are encouraged to speak with their broker at least 90 days prior to policy renewal dates.

Boards and staff will need to define their risks and take proactive steps to mitigate their cyber vulnerabilities. HUB reports that multifactor authentication, endpoint detection and response and background screening will be crucial risk management tools now and in the future. The brokerage also advises that managing third-party vendor contracts with access to data can “further offload risk and protect the organization in the event of a breach.”

Challenge No. 4: Resiliency

HUB reports that many nonprofits were damaged in the pandemic because they had no contingency plan in place.

Nonprofit leaders have been tested these past three years with increased demand for services, loss of revenue, staffing shortages and an increasing reliance on technology in a changing work environment. Establishing regular reviews of strategies, procedures and insurance policies will help boards and executive directors invest in their people, systems and programs to better serve their communities in the future.

In addition, according to HUB, organizations that implement an enterprise risk management plan to proactively understand and address underlying causes will improve their resiliency. &

Peggy Fogarty is a business development and technical writing specialist. She is a graduate of the University of Arizona, where she received her master’s degree in family and consumer sciences, and Rutgers University, where she received her bachelor’s degree in anthropology and urban studies. She can be reached at [email protected].

A Governance Issue #NonprofitBoards

The following story should have us all asking: where is the board of directors?  Are these not their policies being implemented by their CEO's?  And while I understand the adage, no money no mission, are hospital boards taking this a bit too far?  Unless of course the mission really is: serve the rich first although then that should leave some money for serving those without means.  Not a bad strategy if truly applied but is this the strategy?  From SlashDot....

Big Nonprofit Hospitals Expand in Wealthier Areas, Shun Poorer Ones (wsj.com)187

Posted by msmash on Monday December 26, 2022 @02:00PM from the closer-look dept.

Many of the nation's largest nonprofit hospital systems, which give aid to poorer communities to earn tax breaks, have been leaving those areas and moving into wealthier ones as they have added and shed hospitals in the last two decades. From a report:As nonprofits, these regional and national giants reap $8.8 billion from tax breaks annually, by one Johns Hopkins University researcher's estimate. Among their obligations, they are expected to provide free medical care to those least able to afford it. Many top nonprofits, however, avoid communities where more people are likely to need that aid, according to a Wall Street Journal analysis of nearly 470 transactions. As these systems grew, many were more likely to divest or close hospitals in low-income communities than to add them.

Since 2001, half the hospitals divested by CommonSpirit Health, a large Catholic system based in Chicago, were in communities where the poverty rate was above the medians for state hospital markets, compared with 30% of those it added. At Bon Secours Mercy Health, formed by the 2018 merger of two growing regional nonprofits, about 42% of hospitals it divested were in areas with higher poverty, compared with 27% of hospitals it added. Of hospitals divested or closed by St. Louis-based Ascension, about half were located in higher-poverty areas, compared with 40% of the Catholic system's acquisitions.

At the same time, many top nonprofits were moving more aggressively to add hospitals in more affluent areas. At Mercy, a St. Louis-based hospital nonprofit, 56% of new hospitals were in places with lower poverty rates, compared with 25% of those it shed. About two-thirds of the hospitals it added were in markets where the share of households with incomes of at least $200,000 was above the state median. That compared with 25% of those the system shed. Of hospitals acquired by Florida-based AdventHealth, nearly two-thirds were in low-poverty areas, compared with 40% of those they divested. And 59% had a larger share of higher-income households, compared with 40% of those they exited.

Governance Tips for 2023

While intended for boards governing nonprofit newsrooms, the following Nieman Lab advice is applicable to many nonprofit boards.

Sumi Aggarwal

Smart newsrooms will prioritize board development

 

“Many leaders focus their board efforts on traditional fundraising, audits, and budget approvals, but they miss opportunities to have their boards be true partners.”

 

Journalists and news organizations spend a lot of time thinking about deepening audience engagement. And many newsrooms are rightly focusing on building trust between management and staff, all in service of ambitious and impactful reporting. But we often lose sight of the need to engage more purposefully with one critical constituency — our boards.

We’ll see that change in 2023.

As more nonprofit newsrooms emerge — and commercial outlets look to make the jump to becoming nonprofits — newsrooms will start to focus on the role boards play in their success. Boards will help news organizations weather economic downturns, platform collapse, generational disconnect with audiences, and pandemic and climate preparedness.

Many leaders focus their board efforts on traditional fundraising, audits, and budget approvals, but they miss opportunities to have their boards be true partners. In 2023, newsrooms, particularly those in the nonprofit realm, will need their boards to:

Strengthen and diversify fundraising. Fundraising is table stakes for nonprofit boards, but fundraising models tend to remain static and don’t evolve past what was successful at the organizations’ inception. When a key benefactor or board director moves on, this creates existential risk for the organization. Nonprofit newsrooms will need boards that can be nimble and help diversify fundraising and revenue sources.

Galvanize newsroom culture and preparedness. Newsrooms will increasingly need their boards to help them develop more agile strategic plans, to attract and retain talent, adjust resources to align with goals, and undertake scenario planning. Part of this shift will require newsroom executives to help teams understand the role boards play and create opportunities for greater transparency between boards and the organizations they serve.

Share best practices from other industries. We will also increasingly see newsrooms bring leaders from other industries — including industries we might not think of as connected to journalism — to their boards to represent innovative thinking at the top of the organization. It will be particularly beneficial for newsrooms to understand best practices from other sectors that could provide inspiration for the challenges facing journalism leaders. Newsrooms should consider gaining board expertise from unexpected places — can Fortune 500 leaders who work for companies with excellent employee retention rates work with newsrooms to craft a plan to improve culture? Can CleanTok influencers help newsrooms create solutions-oriented content strategies?

Strong boards will consistently invest energy into understanding what drives the organization’s team and creating opportunities for them to thrive. It means getting your hands dirty to try to mend problematic relationships and interactions, creating pathways for meaningful feedback, and being generous with introductions, asking tough questions, and taking real steps to help leaders raise money to enable their visions.

Creating this deeper engagement between news organizations and their boards will lead to healthier, more stable newsrooms, which will yield more thorough and impactful reporting, which is ultimately the best outcome for news organizations and most importantly, audiences.

AG Issues Guidance on Governance #NonprofitBoards

The Massachusetts Attorney General has issued updated guidance for boards of nonprofit organization.  While the AG is suggesting that this guidance is based on "best practices" the guidance likely holds water enough that the idea there are best practices can be laid aside.  And no, in my opinion there are actually no existing formal "best practices", that is evidence-based, tried and true approaches to nonprofit governance.  There are common sense practices and better practices but there is little or no literature that provides research-based evidence that there are particularly proven approaches that should be followed in board governance.  

That said, there is a lot of common agreement that certain approaches do have a more positive impact and that's pretty much reflected in this Massachusetts AG release.  I will note though that the AG highlights there to be only two fiduciary duties: care and loyalty while obedience has 'till at least this moment been recognized as a third duty (obedience to mission that is).  Curious but the AG is the lawyer of the land (or at least Massachusetts).  Perhaps there is a feeling that enforcing obedience to mission is just not as easily accomplished at the duties of care and loyalty (aka, conflict of interest).

Anyway, check it out.  Much of what is outlined is a very good and common sense approach and reference to governing.

Time, Talent, Treasure? #NonprofitBoards

Well, the following certainly provides one lens (a lens that is actually promoted by lots of people) on board recruitment.  Funny enough, my one ingredient, is actually not specified: Passion for Mission.  Without that I believe a board member is useless.  Sure, the other stuff is helpful but is it really enough or even too much?  You be the judge.

Time Talent Treasure: Advice for Nonprofits on Choosing Board Members

The Board of Directors is a key pipeline for resources for any US nonprofit organization. Most nonprofits do not pay Board members for their service, so organizations rely upon dedicated volunteers.

A common expression within the nonprofit industry is that potential Board members should have time, talent, or treasure to contribute to the organization. Not all Board members need to offer all three contributions. If they have more than one, even better, but organizations should look for directors that can offer at least one of those three inputs.

Time. Volunteers for an organization, including members of the Board of Directors, typically give generously of their time. From attending Board meetings to serving on committees to participating in events and running special projects, volunteers are often the lifeblood of an organization. No matter whether the person is a busy full-time working parent or a full-time retiree with time to spare, the question is how much time and commitment the person is willing to give to this organization. It is certainly possible to have a Board member whose primary contribution is not volunteer time, but each potential Board member must at least commit to attending Board meetings and being able to perform proper oversight of the organization as required by the role.

Talent. Some people have specific skills, experiences, or perspectives that make them particularly useful to a nonprofit organization as a Board member. For example, a community garden nonprofit may benefit from having a horticulturalist on its Board. Do not assume, however, that a potential Board member is willing to contribute their “day job” skills for free to the organization without having a conversation on point first—a professional web designer may or may not be willing to be the nonprofit’s webmaster. Lawyers, accountants, and business consultants are in frequent demand for nonprofit Boards, but any organization considering inviting a new Board member on the basis of their profession is well-advised to first confirm the person’s willingness and availability to provide those services to the organization. Note that having a lawyer on a Board of Directors does not on its own create an attorney-client relationship between the lawyer and the entity.

Treasure. Nonprofit Boards often rely on their Board members for fundraising and financial support for the organization, either through direct donations or connections to the Board members’ personal networks. This is valuable to the organization because most of its operations depend on sufficient funding, even in an all-volunteer organization. Potential Board members bring a lot to the table if they can make significant contributions personally, connect the organization to other people or corporations who are likely to donate, or facilitate meaningful in-kind donations relevant to the organization’s work. Organizations should be clear with potential Board members about fundraising expectations before the person joins the Board. If there’s a specific dollar amount a Board member is expected or encouraged to raise, make it explicit. Practices range widely. Some organizations say nothing about fundraising and are simply grateful for whatever efforts Board members make on that front. At the other end of the spectrum, some large nonprofits have a stated expectation that each Board member contribute a specified amount per year to the organization to support its mission. Others might have a suggested or requested amount per year per Board member, which can be met through direct donations, friends and family contributions, or in-kind donations. Requiring, encouraging, suggesting, or requesting contributions from potential Board members can significantly help the organization’s financial sustainability, but it can also prove a barrier to Board membership for otherwise great candidates.

If a potential Board member offers neither time nor talent nor treasure, the organization should take a hard look at why this person is being considered for the position. Organizations need to take care when adding a Board member and remember that this person will have legally binding voting authority. When adding or removing directors, organizations should follow their bylaws and applicable law, and should keep in mind the overall size of the Board and its ability to carry out its oversight responsibilities. For information about the right size for a nonprofit Board, see Too Small, Too Big, Just Right: The Goldilocks Size for a Nonprofit Board.

In conclusion, strong nonprofits are led by committed Boards. Good Board members lend a wealth of resources to a nonprofit organization, whether through the time they spend on the organization’s work, the talents and skills they bring to the table, or the financial stability they can help create. Taking the time to evaluate the contributions of existing and potential Board members can help any organization meet its goals and ensure a sustainable future.

Last reviewed: December 21, 2022

Training Nonprofit Board Members #NonprofitBoards

Should the training of nonprofit board members be restricted to "policy versus the social issues of governance"?  And is teaching so-called "woke" material "agenda-driven" and just "cultural experiments"?

So first we must answer the question, are boards at all being trained?  I of course would truly hope that even the fundamentals behind understanding board roles and responsibilities, process, and decision-making would indeed be "taught".  Individuals do not inherently, within their DNA, naturally understand or have experience with these matters.  On-the-job training can certainly be one learning source but the time to learn is limited so formal training must occur for all kinds of reasons that affect both efficiency and effectiveness.

That said, there is on-going and perhaps heightened debate over what training should constitute beyond the fundamentals of governing.  For instance, in Texas, the school boards are struggling with what content is "appropriate" versus inherently biased (by either side).  There's the question of "woke" training - the label applied to actually in the end lessen un-recognized or implicit bias which can indeed affect big decisions.  As noted in a Gilmer Mirror article, all kinds of social issues are being brought into the board room while less acknowledge, decisions are being made based on personal "biases" versus a full understanding of the subjects.  But training on the subjects is viewed as biased.  So what to do?

Bottom line, I believe that effective decision-making is that which is fully informed understanding both the facts and the opinions.  Isn't this who we are within a democracy?

Feel free to check-out the Gilmer Mirror article referenced earlier.  Funny enough, the initial focus of this article is not actually whether training should be conducted but whether those conducting training should not be a convicted felon.  Funny.

 

Retaining Tax Exemption is Not a Guarantee #NonprofitBoards

Keeping a tax exempt status should be a fairly routine and simple act for smaller nonprofits.  It's as simple as completing a post card return once each year.  But, as reported by the Yale News, the New Haven Pride Center managed to illustrate that failure to file can mean losing the tax exempt status.  And yes, it's possible to get the status back and that's not so difficult but it will take some time and process.  

The Board of the Pride Center, which I would pose is responsible (aka governance, compliance, Treasurer or Secretary) for ensuring that the annual return is completed, fired and has seated an interim for the organization's failure to file for 3 years - yes, 3 years.  The 3 year-rule is evidence that the IRS doesn't want to take away the status any more than a nonprofit wants to lose its tax status. 

And yes, retention of the tax status has to do with ensuring that donor gifts are tax exempt and that an organization's income is tax exempt.  So there is indeed much at stake.  But while an exec is responsible for getting the paperwork completed, it's the board that should be asking the question: have we filed?  It would appear that the Pride Center board may not have understood its fiduciary duty or just lost track - but for 3 years.  Hm....I would offer that the board really needs some work on what is its role and responsibilities and how to do this.

Anyway, here's the Yale News article.

New Haven Pride Center loses tax-exempt nonprofit status

The Center lost its 501(c)(3) status after failing to file three consecutive years of taxes and recently replaced its executive director.

KINNIA CHEUK 1:33 AM, NOV 15, 2022

After losing its 501(c)(3) tax-exempt nonprofit status, the New Haven Pride Center has replaced its executive director and taken action to reinstate its nonprofit status as soon as possible

The revocation was a result of the Pride Center failing to file IRS Form 990 for three consecutive years. In response, the Pride Center has made a change in leadership by removing former executive director Patrick Dunn and appointing Juancarlos Soto as the acting executive director via unanimous vote by the board of directors.

“The revocation of the status was just based on 990 tax returns not being filed in a timely manner,” said Board President Dolores Hopkins. “If you go over three consecutive years, you automatically are put on a hold status. And that’s what had occurred.”

On Oct. 31, the Pride Center released an official announcement on its Facebook page stating that the board had been conducting a thorough investigation of the situation. The Pride Center said they are working with an outside professional service to determine the exact nature of the situation and seek retroactive reinstatement of the Center’s 501(c)(3) status.

“Part of us releasing that statement is practicing our commitment of transparency to the community,” said Board Member Hope Chávez. “As soon as we became aware of the egregiousness of this situation, it was important to say, ‘Oh, my goodness, community, this is where we are.’”

The Pride Center has been working with BryteBridge Nonprofit Solutions to regain their 501(c)(3) status. According to Hopkins, the Pride Center has been able to move forward in the nonprofit reinstatement process quickly. She said BryteBridge is prioritizing completing the tax forms, which is a necessary step for the Pride Center to be reinstated as a tax-exempt nonprofit.

Filing the required tax returns is explicitly mentioned as part of the executive director’s responsibilities. According to Chávez, the Board had previously directed Dunn to hire an accountant to support him in his capacity management. The Pride Center’s relationship with BryteBridge had started earlier this year — before the Pride Center’s nonprofit status was revoked — to provide support with ongoing tax filings. 

“[BryteBridge] was retained and paid for — part of what led to the removal of the executive director was our awareness that they had not actually been engaged,” Chávez said. “And nor had an accountant really been engaged in the way that we understood they would be.”

Dunn did not immediately respond to a request for comment.

In light of this incident, programming at the Pride Center was suspended from Oct. 30 to Nov. 5, and the Pride Center’s staff took the week off. The only event held during this period was the “Chocolate and Cheesecake” fundraiser to support Connecticut’s LGBTQ+ Youth Conference.

Both Hopkins and Chávez believe that the Pride Center’s loss of nonprofit status will not cause donations to dwindle. They noted that they received support from the community for their youth programming fundraiser.

“There just wasn’t a concern [about a lack of donations],” Hopkins said. “The people donated from their heart for what we were doing and to support.”

Hopkins and Chávez also emphasized that when the Center’s 501(c)(3) status is reinstated, it will retroactively cover the period of time that the Pride Center has not been able to issue tax deduction letters. They said there is a high probability that donors will eventually be able to receive tax deductions on their current contributions to the Center.

Looking forward, the Pride Center’s goal is to keep functioning as planned. Upcoming events at the Pride Center include the TDOR — short for Transgender Day of Remembrance — Art Exhibition on Nov. 14 and a TDOR Panel on “Trans and Non-binary Joy” on Nov. 19.

“The New Haven Pride Center has served this community for over 25 years,” wrote Samuel Byrd, the director of Yale’s Office of LGBTQ Resources.  “We look forward to continuing our partnerships here in New Haven and nationally to advance access, equity and inclusion, both on and off campus.” 

The New Haven Pride Center is located at 84 Orange Street.

KINNIA CHEUK 

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Nonprofit Divestment #NonprofitBoard

Putting your money where are your values is what the St. Paul Minnesota School Board has just agreed to by "ending $9 million investment in fossil fuels, citing equity and justice.  The school board also voted not to invest in private prisons. The school district doesn’t invest in prisons, but the vote will prevent that from happening in the future.

Otherwise known as socially related investments, nonprofits and philanthropies alike have the option of putting their investments into places that are consistent with core values like investing in clean industries (e.g. solar).  Now let's be real: very few corporations are "without sin" but some far less than others.  Divesting is a strategy that accomplishes matching values with action and this is what the School Board is committed to doing.  And, yes, the School Board has $9 million but even the smallest of nonprofits with assets can put their money into socially responsible activities. 

From the Sahan Journal:

By ESTELLE TIMAR-WILCOX
DECEMBER 16, 2022

Clockwise from top left: St. Paul school board members Jessica Kopp, Chauntyll Allen, Jim Vue, Uriah Ward, Halla Henderson, Zuki Ellis, and Jeanelle Foster. Credit: Jaida Grey Eagle, Drew Arrieta | Sahan Journal, and St. Paul School Board handout
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The St. Paul school board recently voted to stop investing the school district’s money in fossil fuels and private prisons, joining a growing number of institutions distancing themselves from controversial industries.

The board made its unanimous decision at a November 15th meeting, approving twin divestment resolutions after nearly a year of research, consultation with its bank, and time needed to draft the new rules. School board members Uriah Ward and Chauntyll Allen started the discussions about divestment.

The issues of prison divestment and fossil fuel divestment are separate, but the written resolutions for each emphasize racial disparities in the respective industries.

“All actions that address climate change and environmental degradation must prioritize justice and equity,” reads the resolution about fossil fuels. “While vulnerable populations, such as those in developing countries, women, children, indigenous groups, people of color, and the financially insecure, have accrued few if any economic benefits from fossil fuels, they disproportionately bear harms.”

The majority of students in the district are students of color. As of 2021, 25 percent of the student body were Black, 30 percent were Asian, and 14 percent were Hispanic/Latino, according to St. Paul Public Schools.

The school board oversees a fund for “other post-employment benefits” that are paid out to qualifying school district employees after they retire. That fund is worth about $50 million, and is invested in several different places to continue generating money to pay retired employees.

About $9 million, or 19 percent, was invested in fossil fuel companies, according to Ward. The names of the companies where the funds were invested are kept confidential due to agreements between the board and their asset manager at Wells Fargo, Ward said.

At its first meeting of the year, the school board holds a routine vote authorizing the assistant treasurer to handle the board’s investments. Ward, who was elected to the board last year, noticed the vote on the meeting agenda and started asking the district and school board where that money went.

Ward set out to see if the school board could change the investments.

“We as an organization do the best we can to serve our kids, but we also have economic power in the way that we invest,” Ward said at the November board meeting. “It’s our responsibility to make sure that we’re using that power to help to cultivate the kind of world that we want to build for our students.”

The school board doesn’t invest that fund directly; an asset manager at the board’s bank handles the day-to-day decisions about where to invest the district’s money. Asset managers generally put that money where they believe it will grow—unless there’s a policy asking them not to invest in certain industries.

That means that if an organization hasn’t set specific parameters, its money could be invested in any industry—which is how the school board’s funds ended up in fossil fuels.

When Ward first proposed divesting from fossil fuels, Allen suggested an additional change: divesting from private prisons. The board doesn’t hold any investments in private prisons, but there was nothing stopping them from doing so.

School board chair Jim Vue said the board’s diversity and the members’ understanding of divestment as an equity issue helped the approval process go smoothly.

“I think one of the reasons why there wasn’t a whole lot of opposition is because board members understood the connection between divesting from the school to prison pipeline and divesting from fossil fuels, because we know that our communities that are not white are disproportionately impacted,” Vue said.

Ward hasn’t found a record of any other school board in the country divesting from fossil fuels or private prisons even as such moves become more common among other institutions.

Several organizations in Minnesota have taken steps to divest from fossil fuels. The University of Minnesota is in the process of divesting, and the Minnesota State Board of Investments has divested from the coal industry. The Minneapolis City Council voted in 2015 to divest its funds from fossil fuels.

Private prison divestment has caught on at several organizations and universities, too—Columbia University was the first university to divest in 2015, followed closely by the University of California system.

What does ‘divestment’ mean?
Activists across several social justice movements have demanded that governments, colleges, and nonprofit organizations take their money out of industries they feel are harmful.

Activists push divestment for a few key reasons: Economically, if enough organizations stop investing in an industry, it could create a financial barrier for that industry. Divestment is often a symbolic move, too.

Tee McClenty is the executive director of MN350, a climate justice organization that encourages divestment from fossil fuels. She said divestment sends a message to the industries that are targeted.

“When we invest in fossil fuel companies, we are collectively writing them social license, allowing them to extract from the earth and local communities—especially Black and brown and Indigenous communities—where they operate with little regard to the consequences,” McClenty said. “Divestment is one way we can impose consequences and begin to heal the harm that has been done.”

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Divestment movements often spark controversy. Behind the University of Minnesota’s vote to divest from fossil fuels was an eight-year-long student movement. Students at Harvard University have been pushing the university for four years to divest from private prisons to no avail.

Unlike those drawn-out debates, Ward said the St. Paul school board’s effort went fairly smoothly. Board members had questions for their bank and wanted to ensure that divestment wouldn’t pose a financial risk. According to Ward, their advisor said it wouldn’t.

The board also received positive input from community members, teachers, and parents.

“I don’t remember seeing any negative community feedback about it, which is not usually what happens whenever we talk about issues that are facing our schools,” Ward said. “It was really nice to see it being a unifying effort, and also, I think, demonstrates that the effort does reflect the values of this community.

The teachers’ union, St. Paul Federation of Educators, wrote a letter to the school board endorsing both of the proposals. Tom Lucy, a social worker in St. Paul Public Schools and a member of the union’s climate action team, spread the word about divestment among union members and encouraged teachers and community members to send letters of support to the board.

“Where we put our money shows where our values are,” Lucy said. “Our job is to educate our kids, our job is to prepare them for a future. We feel it’s very obvious that without addressing climate change, their future is very much at risk.”

Some students got behind the measure, too. At a school board meeting in April, eighth grader Harriet Miller took the mic to read a statement in support of divestment.

“I want to grow up in a world where I can actually live, where children can live without the worry of climate change being our biggest predator,” Miller said at the time. “I know this won’t end climate change and all, but knowing that our schools can be doing something—that will put a little ease to my mind.”

With the board’s vote to divest, its asset manager at Wells Fargo will be able to move the money from fossil fuels to other investments in a matter of weeks, Ward said, adding that the change won’t create any additional work for district employees or school board members.

Investing in an equitable future
The St. Paul school board has previously taken steps toward distancing itself from the criminal justice system. In 2020, the board voted not to renew its contract with the St. Paul Police Department, ending the practice of placing police in schools as school resource officers.

With these two divestment measures, the school board is looking to further some of that equity work.

The resolution to divest from private prisons notes the high rates of incarceration in the United States, and cites statistics from Michelle Alexander’s book, “The New Jim Crow”: The United States makes up approximately 5 percent of the overall world population but comprises 25 percent of the world’s prison population.

The proportion of people incarcerated in private facilities has increased in the last twenty years. Over 26,000 people were held in private immigration detention centers in 2017—a 442 percent increase since 2002, according to The Sentencing Project.

The resolution to divest from fossil fuels also emphasizes equity, noting that environmental issues tend to disproportionately impact low-income communities the hardest.

Researchers have found that asthma hospitalization rates in the Twin Cities are much higher along the Interstate 94 corridor, which includes several communities of color, because vehicles traveling on the highway create air pollution.

McClenty said she sees these disparities across the country and world in her role as a climate justice activist.

“We know that the most catastrophic impacts of climate change fall first and hardest on those communities who have historically contributed least to the crisis, whether it’s BIPOC (Black, Indigenous, and people of color) communities here in Minnesota… or the youth around the world,” McClenty said.

Ward said his biggest takeaway from the board’s vote is that effecting change wasn’t as difficult to accomplish as he had expected. He hopes more school boards will take a look at their own investments.

“Maybe some other ones hop on and decide to make this part of their agenda,” Ward said. “If all of us at all levels decide to make these changes and align our money with our values, then it can make a really big impact.”

Board Chair Appointment in the News #NonprofitBoards

The appointment of a nonprofit board chair is really a big "thing".  Not every citizen joins a board and not every citizen who does is recognized for their joining and even fewer take on the mantle of board officer.

I love that the Hylton folks saw it correct to do a whole story on their Board Chair.  This is the type of promotion I believe is a win:win:win for the Chair, the Organization: the Community/Donors giving credibility to the organization and validation that there is a smart volunteer doing her part with a passion for the organization.  Yay Hylton!  May all nonprofits see the advantages of promoting their officers and board.