Oregon Kills Bill to Regulate Charity Overhead Spending

A high-profile bill in Oregon that would have required charities to spend at least 30 percent of their expenses on programs or deny donors the right to claim a state charitable deduction failed to become law this month.

The bill was drafted by Oregon Attorney General John Kroger, who had hoped to crack down on nonprofits that he considers nothing more than “sham charities.”

Though the legislation had the support of the Nonprofit Association of Oregon and passed the state Senate by a large margin, it never made it out of a House committee before the legislative session ended on June 30.

Rep. Vicki Berger, the committee’s Republican co-chair, stopped the proposal before it could move to the full House for a vote, saying it could tarnish the reputation of all nonprofits, including reputable ones.

“I killed this bill. I just didn’t think it was ready for prime time,” Ms. Berger said. “I worked with the attorney general’s staff to understand what it was getting at, but I just didn’t think this was the way to go. If the charities are truly fraudulent, our attorney general has a lot of [existing] statutes to use to go after them.”

Plans to Try Again

Despite the setback, the attorney general plans to reintroduce the legislation in the future, officials said.

“We are disappointed that the bill did not get a vote in the House. It is not a controversial bill,” said Tony Green, a spokesman for Mr. Kroger, in an e-mail. “We intend to bring the bill back at some point.”

That wouldn’t happen before 2013, though, because the Legislature’s makeup will not change until then, Mr. Green said.

If that happens, it will probably face opposition from the Direct Marketing Association’s Nonprofit Federation.

The group argued heavily against the bill, charging that it would hurt charities, violate First Amendment free-speech protections for fund raisers, and send the false message that high administrative costs demonstrate fraud.

But many nonprofit leaders in Oregon remain supportive of the measure. Carrie Hoops, executive director of the Nonprofit Association of Oregon, a coalition of charities, said her group was disappointed the bill never got a hearing, noting that 87 percent of its members said in a survey that they strongly supported Mr. Kroger’s approach.

The association argued that the legislation would have affected only a handful of organizations, most from out of state, that were spending as much as 80 to 90 percent of their donations on telemarketing and siphoning off donations from effective charities

Useful Conversations

Ms. Hoops said she was pleased, however, that the bill had prompted the group to have some “meaningful conversations” with its members about how to handle fund-raising and administrative costs and maintain the trust of donors.

Ms. Berger, the Oregon lawmaker, who has considerable experience raising money—for example as president of a YMCA board—said that she would be willing to sit down with Mr. Kroger during the next legislative session to work out a compromise.

“The bill was pretty complicated for what it did,” Ms. Berger said. “I’m willing to see if there’s some way we can put all this financial information on the Web and let donors have access to it and make their own decisions.”