Friday, March 20, 1998

Nonprofit groups
shouldn’t be taxed

GOVERNMENT awards nonprofit status to organizations and exempts them from taxes in recognition of the social value of such groups. But a bill before the Legislature would impose a 1.5 percent general excise tax on nonprofits and eliminate many other exemptions.

Taxing nonprofits is a terrible idea. Ruth Ono, chairwoman of the board of directors of Aloha United Way, points out that "The principle of exempting charitable organizations from taxes is a long-standing one which recognizes the importance of those services to the well-being of people in our community. To begin to erode that historical and valuable commitment will have a detrimental effect on those needed services."

AUW supports the work of 65 member agencies and 130 donor choice agencies on Oahu that serve 500,000 people, mainly through programs and services that help the neediest people in the community. Ono said that given the current economic conditions and the cuts in state funding, "reducing the amount available to support these services is unconscionable."

Incredibly, among the organizations that would be taxed under this proposal would be nonprofit hospitals. Joan White, vice president of the Health Care Association of Hawaii, told state senators the proposal would cost hospitals and other health-care facilities $21 million and about 1,000 jobs. Is that how the Cayetano administration proposes to balance the budget and lower taxes? If so, forget it. The cure would be worse than the disease.

Among the currently exempt categories that would be subject to the excise tax under this measure are insurance proceeds due to death, accident or workers compensation benefits, and gifts and inheritances. Also to be taxed would be fraternal benefit societies, employee benefit plans and cemetery associations. To be sure, not all of the current exemptions slated for taxation under this bill necessarily deserve such protection. But taxing nonprofit organizations should never have been considered.


Kamehameha Schools

IF any further evidence was needed that some of the Bishop Estate trustees should be removed, it is provided in the report of a national school accreditation team. The report, by a team from the Western Association of Schools and Colleges, found that the trustees' management has damaged the Kamehameha Schools.

The so-called micromanagement of the schools by trustee Lokelani Lindsey -- with the authorization of the whole board -- was the issue that set off an explosion of protest last year by alumni, parents of students and faculty members. A subsequent investigation by retired Circuit Judge Patrick Yim confirmed the validity of those complaints. The publication of other damaging charges against the Bishop Estate board in the "Broken Trust" article in the Star-Bulletin provoked the current investigation by the state attorney general.

The accreditation team in effect verified the complaints about the Kamehameha Schools management that readers of this newspaper have seen for months. It reached this devastating conclusion: "Dysfunctional management and decision-making have weakened leadership, destroyed the professional morale of the faculty, severely damaged the professional climate for learning and teaching and provided bad lessons for students with respect to behavior of adults, integrity, care for people and justice."

The trustees have bungled the job of running the Kamehameha Schools, their prime responsibility. In addition, they may have violated their fiduciary responsibilities in managing the estate's resources, although the investigation of those matters has not been completed. But even without the resolution of those issues, there is enough evidence of mismanagement of the schools to justify the trustees' removal.

Bishop Estate Archive

Domestic partners

LEGAL decisions first chipped away at and finally toppled the balance achieved last year in legislation aimed at granting health benefits to gay partners and relatives of employees in Hawaii. The legislation was intended to offset a proposed constitutional amendment on the ballot in November that would restrict marriages to heterosexual couples. If the amendment is adopted at the polls, more legislation would be needed to restore the balance that has been destroyed.

Private employers challenged the law giving benefits to so-called reciprocal beneficiaries, and a federal judge agreed in September that the law could not be enforced with health maintenance organizations such as Kaiser Permanente or mutual benefit societies such as HMSA. That largely limited the effect to the gay partners and relatives of state employees.

Now, Attorney General Margery Bronster reportedly has determined that the state is not required to extend health coverage beyond an employee's legal spouse, and employees are being told they must reimburse the state for payments for benefits to others. In combination with the September ruling, Bronster's opinion dismantles the legislation and destroys the bargain that led to passage of the proposed amendment. The decision requires gay couples to rely on the 1996 state court decision that gays have a right to marry, which the voters will probably nullify.

"We had hoped (that) this law, while certainly not providing equality, at least provided something similar," commented state Sen. Matt Matsunaga, a sponsor of the legislation.

Providing health benefits to domestic partners of both private and public employees is attainable. A survey last year indicated 13 percent of U.S. employers have extended domestic-partner benefits to their employees, and several governmental entities do the same. Hawaii legislators should learn from those experiences and find ways to close the loopholes in the law.

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