RIP, New Mexico Independent

On Wednesday, the New Mexico Independent ceased operations after its parent organization, the American Independent News Network, ran out of money to keep the online publication going. By all accounts, the Independent was aggressive in covering state government, and its presence will be missed.

But the lesson here is one of the importance of building a sustainable model -- and how hard that is to achieve. The Independent, which has eight sister publications still operating in states from Colorado to North Carolina, ran out of money in part because it had received grants from supporting foundations on a year-to-year basis, according to David Bennhehaum, president and CEO of the American Independent News Network.

Here's part of what he said to the New Mexico Business Weekly:

Bennehaum concedes one problem with the business model was that the creators of the network only secured one-year commitments from foundations for what was a multi-year project. Many of those commitments expired in the first quarter of 2009 — right after the financial meltdown in fall 2008. As a result, many funders were not in a position to recommit.

Ouch.

Could Bennehaum have anticipated the impact of a downturn in the economy? Maybe. Should he have insisted on multi-year commitments such as the rolling, three-year, $10 million-a-year commitment the Sandler Foundation has made to ProPublica? Again, maybe. But had he done so, he probably never would have gotten off the ground.

Nonprofits Among The ONA Finalists

Congrats to the many nonprofits named among the finalists for the Online News Association's 2010 Online Journalism Awards. They cleared out all competitors in the general excellence, micro- and small-site categories, and placed one of three finalists in each of the medium- and large-site categories.

Here are the highlights:

General Excellence in Online Journalism, Micro Site
* California Watch and the Center for Investigative Reporting
* Gotham Gazette
* St. Louis Beacon

General Excellence in Online Journalism, Small Site
* ProPublica
* The Texas Tribune | texastribune.org
* voiceofsandiego.org

General Excellence in Online Journalism, Medium Site
* Mother Jones

General Excellence in Online Journalism, Large Site
* NPR: NPR.ORG

Gannett Foundation Award for Innovative Investigative Journalism, Small Site
* The Center for Public Integrity: Sexual Assault on Campus: A Frustrating Search for Justice
* ProPublica, the New Orleans Times-Picayune and Frontline: Law and Disorder
* voiceofsandiego.org: Out of Reach

Gannett Foundation Award for Innovative Investigative Journalism, Large Site
* NPR, ProPublica, Frontline: Brain Wars: How the Military is Failing the Wounded

Do-It-Yourself Nonprofit Journalism

At last: A comprehensive tool kit for those interested in starting their own nonprofit news sites, courtesy of Brant Houston, Andy Hall and the Knight Citizen News Network.

The best thing about the tool kit may be the advice that comes with it -- things like taking time to assess whether you're really up for all the work and frustration that comes with launching a new enterprise. And some great tips, like finding another 501c3 to act as fiscal agent.

Brant and Andy clearly put a lot of time, energy and passion into this project. Kudos for a great job.

Government-free* Nonprofit Journalism

Here's a test for nonprofit journalism and its stakeholders.

The following sentence comes from the "Contribute" page of a nonprofit journalism organization. What's wrong with it?

The (organization) neither accepts nor receives any government or taxpayer-financed grants and relies solely on the generous support of our donors.

The answer is ... nothing is wrong.

Ha! It was a trick question. The website belongs to organization that claims to help produce independent journalism and doesn't like the idea of government supporting its work. No problem.

But in the same breath, the organization informs its potential donors: "Your donation ... is tax deductible to the fullest extent of the law under Internal Revenue Service Code Section 501(c)(3)."

Now we have a problem.

The organization I am zinging here, the Franklin Center for Government and Public Integrity, says tax deductions aren't the same thing as government support. "Our generous contributors are not funding government support of journalism when they donate to the Franklin Center," Jason Stverak, the group's president wrote in an email. (Complete response below.)

Economists disagree.

Charitable deductions are known within the realm of economics as "tax expenditures," and according to Stanley Surrey, the former assistant Treasury secretary who coined the term, they're no different than direct government spending.

"Whatever their form, these departures from the normative tax structure represent government spending for favored activities or groups, effected through the tax system rather than through direct grants, loans, or other forms of government assistance," Surrey wrote in 1985 with co-author Paul McDaniel (emphasis, mine).

The Heritage Foundation offers a similar definition. It says in part: "The word 'expenditure' is used to highlight the similarity between the use of the tax code to provide advantages to a select group and the more traditional method of giving the group a slice of the federal budget."

Last month, I took WikiLeaks to task for promoting itself as a cutting-edge proponent of transparency in government while failing to disclose much of anything about its own funding and expenditures. My gripe, in a nutshell, was that WikiLeaks' adherence to a double standard undercuts not only its own credibility, but also that of the entire nonprofit sector in journalism.

Like WikiLeaks, the Franklin Center seeks to "advance the cause of transparency in government" while it also withholds information about its own finances. But it slides further down the slippery slope when it condemns the idea of government support for journalism and then makes that condemnation a central selling point in its case for philanthropy -- tax-deductible philanthropy, no less.

The Franklin Center isn't alone.

In Idaho, the Idaho Freedom Foundation, publisher of the nonprofit Idaho Reporter says this on its "Donate" page:

The Idaho Freedom Foundation relies solely on the generosity of individuals, foundations, and corporations that share its commitment to freedom. IFF does not accept any government funding. IFF is a tax-exempt organization under section 501c3 of the Internal Revenue Code. U.S. citizens will find their contributions to be tax-deductible to the extent allowable by law.

Some of the biggest names in the world of Washington think-tankdom commit the same offense.

They include the Progress and Freedom Foundation and the Heritage Foundation, both of which slammed the idea of government policy changes that could help support journalism as old business models crumble. Bottom line for both of these big-name foundations: Government support is bad -- except when it helps them stay afloat.

I'm not here to flog the Franklin Center or any of these other organizations for their ideology. I know from a decade of reporting on Capitol Hill that it's darned hard to maintain one's purity when money is involved. But those who count themselves among the nonprofit sector in journalism should walk their own talk. Any nonprofit organization that says it "relies solely on the generous support of our donors" while also promoting the charitable tax deduction available to its donors is issuing, at best, what the late Ron Ziegler might have called an inoperative statement.

The fact is, government subsidies for journalism are everywhere. In addition to the charitable tax deduction, they include mechanisms such as favorable postal rates and revenue-producing legal-notice requirements. Geoffrey Cowan and David Westphal of USC identified these government subsidies to journalism in a report earlier this year and argued that they were intended by our founding fathers to help support a vigorous press.

If you don't buy their argument, another proponent of the view that tax deductions constitute government support is view is Sen. Chuck Grassley. The Iowa Republican has been a tireless watchdog over the nonprofit sector, and the charitable tax deduction has been his entry point to investigations of hospitals, athletic booster clubs and other 501(c)(3)s.

So what to do in a world of ambiguity?

One solution would be for journalism nonprofits that eschew government support to refund the value of donors' tax deductions to the U.S. Treasury. The Franklin Center recently named an advisory council that includes well-known journalists such as Tucker Carlson, and maybe that body could take up the idea at their next meeting. But I'm not holding my breath for that to happen.

Here's another scenario: What if Grassley slipped in a legislative rider ending the charitable tax deduction for organizations involved in journalism? I bet the nonprofits mentioned above would howl like holy heck.

Perhaps the best thing would be for these organizations to acknowledge the reality of their dependence on government support and focus instead on journalism. They have a lot to contribute from their point of view, and that should be reason enough for readers to support them.

Until then, a little more transparency might be in order. If journalism nonprofits want to denounce government support while promoting tax deductions for donors, they should add an asterisk and a disclaimer to their solicitations for support.

It's the transparent thing to do.

++++++++++++++++++++++++++++++++++

I asked representatives of several journalism nonprofits whether they thought tax deductions constituted government support. Here is the full response I got from Jason Stverak of the Franklin Center.

Our generous contributors are not funding government support of journalism when they donate to the Franklin Center. In fact, the Franklin Center strongly believes that government intervention in media will create greater problems than the struggling newspaper business is currently enduring. If government intervenes in the news industry, journalists will no longer be able to report credibly on stories that matter to the people, but ultimately only on what matters to officials. Journalists may ignore scandal and corruption for fear of losing government funds. They could become political flacks and write to appease government instead of investigating it.

Drawing the conclusion that every donation to a non-profit 501 c3 is supporting the government in some way is incorrect. Tax deductions for gifts to houses of worship are not funding government support of religion and tax deductable (sic) donations to health care associations are not supporting government healthcare.

Googling Serendipity

Twelve years ago, when I was reporting on the pending Microsoft antitrust case, I learned that what was really at stake wasn't immediately apparent in the legal briefs. It wasn't the browser market (remember Netscape?) or whether Windows should be able to run somebody else's word-processing program. Rather, it was how control was exercised over the places where we learned, created and engaged in critical thought.

One of the best thinkers on the topic was Ben Shneiderman, founding director of the Human-Computer Interaction Lab at the University of Maryland. He told me at the time that the critical question for Microsoft was not whether the company encouraged innovation -- it did -- but rather how financial pressures dictated which innovations it adopted and which it let wither. The Microsoft software suite, he noted, wasn't very accessible to people with learning disabilities or those with low incomes.

Fast-forward to 2010, and now we hear from Eric Schmidt, CEO of Google, another powerful technology company that controls the tools of creativity and expression. Schmidt recently talked to the Wall Street Journal about the potential for applying artificial intelligence to search, suggesting that the search engine of the future would figure out what we meant rather than find what we actually typed.

Schmidt seems to be pushing the idea that the future -- or, more accurately, each of our individual futures, interests and passions -- all can be plotted by algorithm from now until our dying day. The role of serendipity in our lives, he said, "can be calculated now. We can actually produce it electronically."

Really?

According to Webster's, serendipity is "the faculty or phenomenon of finding valuable or agreeable things not sought for." So if the essence of serendipity is chance or fortune or chaos, then by definition, anything that a search engine brings to you, even on spec, isn't serendipitous.

I don't know whether Schmidt's comments should be chalked up to blind ambition or to quant-nerd naivete. But it's troubling that Schmidt seems to discount the role that human nature plays in our everyday lives and, ultimately, in guiding our relationships with technology.

It might be that Schmidt's vision for the search engine of the future would serve us well in finding a new restaurant, movie or book. But if Google really wants to take the guesswork out of our lives, we should be asking the same question that Shneiderman put to Microsoft. How might financial pressures shape Google's "serendipity algorithm"? What content -- journalism and otherwise -- will it push our way that will shape our worldview? And, to Shneiderman's point, what limits does it impose?

I think it's safe to say that some good ideas don't lend themselves to being monetized online -- witness the rise of nonprofit startups in bringing us investigative, public affairs and explanatory journalism. How might they fare in Schmidt's world order?

I caught up with Shneiderman on Monday, and he agreed that this is one of the key questions that should be debated as we depend more and more on a "recommender system" in which companies like Google or Amazon use massive databases to anticipate our needs and wants. Public interest groups and other nonprofits that can't afford the right keywords could be most vulnerable in these systems, Shneiderman said. "How far down the list do the concerns of civic groups get pushed?" he asked.

It's fair to ask companies what considerations and factors might be weighted in their search formulas, Shneiderman said, but it isn't clear what level of transparency should be expected. "What is a reasonable a request to make without exposing their algorithm and their business practices?" he said.

I can't say either. But I do think there are some lessons that Google can take from the history that Microsoft has helped write.

One lesson is that what's good for the bottom line doesn't always jibe with what's best for consumers. A dozen years ago, the Netscape browser was regarded by many as more as more functional, but Microsoft saw it as a threat. So it bundled its own Explorer browser in its operating system and effectively priced Netscape out of existence.

Another lesson is that it isn't always possible to divine what people will want in the future based on a profile of what they (or people like them) have wanted it the past. Indeed, some of the most successful technology companies -- Google included -- have succeeded precisely because their vision for the future was radical, new and compelling. Microsoft once played that role to a monolithic IBM. But today, as Microsoft's market valuation has been eclipsed by that of Apple, it has become debatable whether Microsoft remains a consumer-driven company.

None of this should be interpreted as an anti-capitalistic rant. We're all better off for Google's search box, and it'll be interesting to see where Schmidt's vision takes the company.

Rather, it is a suggestion that even the most elaborate algorithms and high-touch e-marketing can't address every human need.

One of the best vacations I ever took was when I pulled out of my driveway in Raleigh in late August 1991 with no particular destination. Two days later, I found myself in North Dakota, discovering places I never would have appreciated based on my past interests or those of my friends and peers. The experience was so compelling to me precisely because it was serendipitous.

That trip has served as an important reminder to me ever since. When we don't know what we want, sometimes what we really need is to figure it out for ourselves.

NPR's Folkenflik on Texas Tribune

NPR's David Folkenflik checked in on the progress of Texas Tribune in a profile that was aired on Weekend Edition yesterday.

The transcript doesn't quite capture the full experience -- including David's attempt to make the pop-up thought-bubble noise from the Trib's "Stump Interrupted" feature -- but it's a quicker read if you're in a hurry.

Some of the most interesting comments come from the editors of newspapers that now are partnering with Texas Tribune.

"We are picking up their stories and publishing them in the print newspaper because it gives us another well of political content," says Christopher Lopez of the El Paso Times.

Not long ago, no self-respecting newspaper editor would publish statehouse coverage from what would appear to be a competitor. Now, it's standard operating procedure.

My, how attitudes have changed.

ProPublica's 990: A Closer Look

ProPublica posted its Form 990 report to the IRS on Monday and -- predictably -- the only Google-able coverage, which comes courtesy of New York Fishbowl, zeroes in on the salaries paid to Paul Steiger, the organization's president and editor in chief.

Yes, Steiger made a lot of money -- $571,687 -- but this isn't news: This is essentially the same salary that Steiger made and disclosed the year before. We can argue (again) over whether that's appropriate at a nonprofit -- he probably made lots more than that at the Wall Street Journal -- but it's hard to summon outrage at this late date.

Potentially more interesting was the schedule of contributors included in the filing. Among other things, it shows that the Sandler Foundation, controlled by ProPublica founders Herb and Marion Sandler, kicked in just $4.5 million last year -- far short of the $10 million they had offered to front.

But there's no change in the Sandlers' rolling $10 million-per-year commitment, GM Dick Tofel explained in an email.

"We just came into the year with a lot of cash, requiring less during the year," he wrote. "The Sandlers’ commitment is unchanged."

Other big donors include the Knight Foundation ($985,000), the MacArthur Foundation ($500,000) and board member Mary Graham ($208,000 worth of Washington Post Co. Class B stock).

There's still work to be done filling out ProPublica's donor pyramid, however.

After Graham, the next-biggest contribution came from the Kohlberg Foundation ($50,000), meaning that ProPublica's five biggest donors accounted for 98 percent of the organization's $6.36 million in total revenues.