"A child's learning is the function more of the characteristics of his classmates than those of the teacher." James Coleman, 1972

Saturday, May 23, 2009

The Nike School Innovation Fund - Corporate Philanthropy, Corporate Tax Breaks, Corporate Socialism

[Cross posted at SchoolsMatter and OurGlobalEducation.com]

     Nike, the global athletic giant based in Oregon, announced a $9 million "School Innovation Fund" back in January of 2007. The Portland Public Schools received $1 million a year over three years, "the largest contribution by a business in the history of PPS." The grant directed $250,000 for a five week "summer kindergarden academy," half a million for "Leadership Teams" in the middle and high schools, and $250,000 to "support a pilot project to recruit and train school business managers" (all quotes from Nike's site).
     How nice of Nike to give away their hard-earned profits. After paying their shareholders, paying taxes, and paying their employees, the company still manages to find $9 million to give to schools (Portland, Beaverton, and Hillsboro public schools). Wait a second, did I say taxes?
     See, Nike doesn't really pay their fair share of taxes. Sure, they gave away $9 million over three years but they also managed to not give to public funding in other ways. Other very significant ways.
     This all has to do with tax policy and how Oregon determines taxable income. I'll let Michael Leachman of the Oregon Center for Public Policy explain:

January, 2007

"Single-Sales" - A Modern Robber Baron

by Michael Leachman

When your W-2 form arrives, think of this: Certain multistate corporations are paying much less in corporate income taxes today because Oregon has changed the way multistate firms calculate state income taxes on their profits. That means you pay more than your fair share.

Multistate corporations make profits in more than one state, so there needs to be a way to decide how to allocate their profits for state taxation purposes. States have different rules around this. Most states use a formula that considers the state’s share of a corporation’s total property, payroll, and sales.

Prior to 1991, Oregon used a formula that equally weighted the three factors – property, payroll, and sales. In 1991, Oregon switched to a formula that “double-weighted” the sales factor. The change produced a tax break for companies that had a high share of their property and payroll in Oregon but a small share of their total sales in the state. Companies with sales in Oregon but little property and payroll here saw their taxes increase.

In 2001, Oregon began phasing in a “single-sales factor” formula. Under this formula, only in-state sales relative to all US sales matter in determining how much of a company’s profits are apportioned to and thus taxable by Oregon; it doesn’t matter how much of their property or payroll is based in Oregon. The Legislative Assembly in 2005 cut short the phase-in process and fully phased-in the “single-sales” formula for tax years starting on or after July 1, 2005.

How much did this tax change save Nike? (From Leachman):
Take Nike, for example. Nike lobbied for the switch to single-sales factor apportionment and it’s easy to see why. At the Oregon Center for Public Policy, we conservatively estimate that Nike's 2006 tax cut from "single-sales" was over $16 million. Other prominent, profitable firms such as Intel also received a massive tax break from "single-sales." When large, profitable businesses reduce their tax obligations, small businesses and individuals get stuck with paying more of the cost of state services.
The link in Leachman's article shows how Nike managed to avoid paying between $16 million and $23 under the "single sales" tax policy in 2006 alone. This saved Nike a bundle of cash while stripping Oregon's state budget of the same amount of funding. The state used 42.5% of our general fund to support public education between 2005 and 2007 while Nike continued to give less and less.
     But this is more than Nike not paying state taxes. Nike can lobby for laws that limit their contribution to the state's operating budget (which is by far the biggest financial supporter of public education, far more than federal support and local support) and then turn around and announce that they've decided to give away $9 million to support public education in ways they see fit. This brand of corporate philanthropy is used mostly as a marketing tool, as described here in an article written by Beaverton teacher Rachel Clouse that details her experience with Nike (the article is from the 2004/2005 winter issue of Rethinking Schools, so Clouse's experience was probably from the 2003-2004 school year).
     Who wins in this setup? Nike, hands down. Oregon gets screwed out of millions of dollars, our schools suffer, and Nike gets great publicity. Portland's media members are too busy coddling up to district officials to connect these kinds of dots, instead focusing on isolated pieces of information. As an added kick in the pants for those of us working in the PPS district: our newly elected board member, Pam Knowles, served on the advisory committee for Nike's corporate giving program (Knowles comes to the board after serving as the COO of the Portland Business Alliance). The revolving door linking the business community and the corporate school reform community continues.

1 comment:

  1. Anonymous12:30 PM

    This story does not surprise me one little bit. Charity just isn't what it used to be. GOOD WILL HAS BECOME BIG BUSINESS. Say that reminds me.

    I challenge Brad Pitt and Angelina Jolie to spend the obscene reserves held by their 'Jolie-Pitt' Foundation on legitimate efficient 'humanitarian' work or turn the funds over to others who will. To date, they have taken in $22,000,000 on the sale of baby photos alone, another 6 or 7 figures from other sources, and spent or granted only a fraction of that on 'humanitarian' work or 'good will' of any kind. The rest so far, has been spent on PR campaigns, plane rides, and super-high end accomodations for Brad and Angie in exotic locations around the world. I challenge them to meet the criteria of a legitimate charity, operate with a reasonable overhead, open their books to prove it, and get their 'foundation' worthy of a decent rating by an independent watchdog like Charitywatch.org. Otherwise, to stop selling baby photos for their own 'charity' and stop seeking publicity for donations made in their own name to their own foundation/travel/PR firm shortly before or after the premier of their latest film or DVD release. I challenge Brad Pitt to do the same with his 'Make it right' Foundation. Which to date, has not met the criteria of a legitimate charity or been given a decent rating by ANY independent charity watchdog. Otherwise, to stop competing with 'Habitat for Humanity' for PR, credit, and funding. Who by the way have been building homes for the less fortunate in every major city including New Orleans for decades. 'Habitat for Humanity' has been 'Top Rated' for years by charitywatch.org and others. They operate with a low overhead, volunteer workforce, and donated materials. No similar effort can match their progress hour for hour or dollar for dollar. They don't even come close. Unlike 'Make it right', the homes built by 'Habitat' don't sit vacant. They don't exclude by cost, lower income families. They are allocated and built specifically for the less fortunate who take part in the building process and move in immediately upon completion. 'Habitat' works in every major city including New Orleans. It puts 'Make it right' to shame. In fact, hundreds of legitimate charities have been given good-excellent ratings by Charitywatch.org and other independent watchdog groups. By contrast, the vast, overwhelming majority of celebrity 'foundations' have been rated poorly, fair, or not rated at all. They are inefficient, corrupt, focus heavily on PR, and operate with shady, self-serving, misleading accounting practices. They usually don't even meet the criteria of a legitimate charity. Still, they have the nerve to self-audit, self-praise, mislead the donor/fan base, seek funding from a number of sources including ordinary people, compete with legitimate charities, and cash in on maximum PR for their inefficient 'humanitarian' efforts. Its not right.