KSG Panel Discusses Social Services

Improved tax structures and easier access to capital are the key to encouraging both for-profit and not-for-profit organizations to pursue social services, a star-studded panel told an audience at the Kennedy School of Government yesterday.

The panel, titled “Thinking Outside the Box: New Corporate Structures, Tax Policy and Public Policy for 21st-Century Social Enterprises,” was moderated by Kennedy School professor and former presidential advisor David R. Gergen and included a former Internal Revenue Service (IRS) commissioner, a former mayor of Indianapolis, and philanthropist Catherine B. Reynolds, who founded Loan to Learn, a major student loan business.

The event’s discussion focused on the blurring of the lines between non- and for-profit organizations providing social services—such as student loans and healthcare—and the need for regulation and transparency. The talk also touched upon how to encourage entrepreneurs to enter the non-profit world.

“We must find the balance between greater accountability and transparency without over-regulating organizations trying to do good,” Reynolds said in her closing remarks.

Fred T. Goldberg Jr., the former commissioner of the IRS, said that access to the capital markets needs to be facilitated for companies pursuing social services.

“Whether you’re talking about access to student loans or starting a new business...it has to happen through the capital loan market,” he said.

Stephen Goldsmith, the former Indianapolis mayor and a Kennedy School professor, said that another barrier to the success of government social service organizations is the inability of non-profits to compete for employees on salary.

There are a “large number of students interested in changing the world,” he said, “but who want to do so through non-governmental means, such as NGOs or non-profits.”

Victoria Bjorklund, a leading nonprofit tax lawyer, said that the difficulty of regulating non-profits and the inadequacy of laws governing non-profits can lead to scandals such as the one that engulfed student loan giant Sallie Mae earlier this spring that resulted in the company agreeing to pay a $2 million settlement.

“In the IRS, we have 180 agents, who are underpaid and under-trained, and are attempting to regulate almost 1 million charities—they just don’t understand the subtle distinctions between non-profits and for-profits doing social work.”