Editorial: Will Pittsburgh nonprofits pass a charity inspection?
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In order to drive a car in Pennsylvania, you have to do more than pay your registration fee.
You have to pass an inspection. The mechanic looks at your registration and insurance, but he also looks over the car itself. He makes sure it isn’t just legal but that it also does what it is supposed to do. The engine carries it forward, the brakes make it stop, the exhaust system is functional and your lights all do their job.
Why isn’t this how nonprofits in Pennsylvania work?
On Tuesday, Pittsburgh Mayor Ed Gainey called for a deep dive into the city’s “purely public charities.”
According to Pa. Act 55 of 1997, a purely public charity has to meet certain requirements. It has to have a charitable purpose directed in one or more of six areas: poverty relief, education, religion, health care, government and “accomplishment of a purpose which is … important and beneficial to the public.”
It also must be “entirely free from private profit motive.” It must “donate or render gratuitously a substantial portion of its services.” It must “benefit a substantial and indefinite class of persons who are legitimate subjects of charity.”
And, notably, it must “relieve the government of some of its burden.”
The problem is that charity is big business. Of the top 30 employers in Pennsylvania, 11 are nonprofits. They include UPMC, the University of Pittsburgh and Allegheny Health Network.
In some ways, this is a good thing. These are industries that rebuilt Pittsburgh’s economy as it transitioned away from steel. But they do so without paying taxes, which makes it a lot easier to expand. That means more of the tax map is ceded to nonprofits, which puts more of a burden on the government and other property owners.
Gainey isn’t the first mayor to deal with it. His predecessor, Bill Peduto, tried to bring the government and charities together with his ONE PGH collaboration aimed at creating up to $115 million for city projects. Gainey walked away from it last summer, favoring pursuit of voluntary payments in lieu of taxes.
But if payments are voluntary, unlike taxes, they are an unreliable foundation for building a budget.
Gainey’s call is long past due. It isn’t because the nonprofits are untrustworthy. They are a critical part of the city, county and state economic infrastructure.
It is important because, like a car’s inspection, it is an impartial assessment of where the entity stands.
Just because a nonprofit met the requirements to be a purely public charity when it was founded doesn’t mean that needs to be taken on faith going forward. Is it still meeting its charitable purpose? Is it still operating free of profit motive? Is it providing enough of its services for free to be considered substantial?
Many, if not most, of the nonprofits likely will meet those criteria. But how will they fare against the separate category of “relieve the government of some of its burden?”
This is an inspection that every charity in the state, not just in Pittsburgh, should have to pass regularly.