'How did L.A. Times get a grant when I can’t?'

Second of two parts. This first part is here. 

For 24 years, hundreds of Los Angeles high school journalists have learned about reporting, writing and life itself by volunteering at L.A. Youth, a free newspaper read by an estimated 350,000 teens a year. 

But the non-profit publication may not live to celebrate its 25th birthday, says founder Donna Myrow, because she can’t raise enough money to fund its annual $500,000 operating budget. 

Myrow’s dismay was understandable last month when she received an email from the Ford Foundation rejecting a requested grant of $72,500. But her disappointment quickly turned to displeasure when she remembered that the very same foundation gave the Los Angeles Times $1 million in May to hire four new reporters for a two-year period.   

“Am I sour grapes? Yes, I am,” said Myrow, whose office is a short drive from the headquarters of the Times, which has donated printing for her paper since its inception. “I got funded by Ford as recently as 2011, but now they say they there’s not enough money to go around. How did the Times get a grant when I can’t?” 

As discussed here yesterday, the newspaper’s parent, the Tribune Co., has amassed $2.4 billion in cash since going into bankruptcy in late 2008.  The foundation separately gave the Washington Post $500,000 to hire additional staffers, even though its parent company generated $525 million in pre-tax profits in the last 12 months and has $688 million in cash in the bank. 

Donna Myrow is far from the only non-profit journalistic entrepreneur rankled by the foundation’s charitable gift to the Times. She is different from many of her peers, however, because she put her concerns on the record in a recent telephone interview. Others were more circumspect.  
“I am certainly not going to say publicly that I am upset” by the gift to the Times, said the founder of another non-profit news organization who hopes to attract future charitable support and doesn’t want to offend any potential benefactors.  

But he was upset, because he, like many entrepreneurs trying to make ends meet at prospective or existing non-profit journalistic ventures, knows that one organization’s success in attracting support necessarily comes at another’s expense. They also are aware that the chances of winning support are shrinking all the time, owing to two reasons: 

∷ First, the resources of most charitable organizations declined in concert with the downturn in the economy in the last four years.  Although the Ford Foundation endowment was a hefty $10 billion at the end of 2011, that sum was more than $8 billion lower than its all-time peak in 2000, according to its annual report.   

∷ Second, the demand for funding has increased, owing to the number of new non-profit journalistic start-ups seeking to fill the void created by the contraction of the legacy media. 

While there is no authoritative census of the number of non-profit journalistic ventures in the country, the anecdotal evidence shows a significant increase in the number of people plunging into such activities.

Professor Charles Lewis of American University, who co-founded the Investigative News Network, reports that there now are 65 groups in his confederation of non-profit news organizations, as compared with “roughly half a dozen” known ventures prior to 2004.  A project a couple of years ago at the Graduate School of Journalism at the University of California at Berkeley identified more than 200 grassroots blogs and media enterprises in just Northern California. 

For operators of long-running efforts like L.A. Youth, the diminishing availability of philanthropic support in recent years has caused sleepless nights and budget cuts. Those hoping to launch new non-profit ventures are challenged not only by the paucity of financial support but also by the complex and opaque process established by the Internal Revenue Service to determine which organizations qualify for non-profit status. 

Absent IRS designation as a qualified 501(c)3, non-profit journalistic start-ups have trouble raising money from individuals and foundations, because donations are not tax deductible.  The news organizations have to be careful in selling ads or running subscription drives, so they are not construed as for-profit businesses – and, thus, become ineligible for tax-exempt status before their applications even come up for consideration.  

To make matters worse, the IRS has put a hold for several years on a number of applications from aspiring news non-profits.  

One of them is The Lens, which hopes to help fill the void that will be created as the New Orleans Times-Picayune next month trims its print publication schedule to three days a week from seven.  The Lens application for non-profit status has been on hold by the IRS since 2009, though it is able to take charitable donations through an affiliation with the Center for Public Integrity.  

Other applicants in the queue at the IRS are the San Francisco Public Press, which has been waiting for two years, and the Arlington (VA) Mercury, which has been waiting for 12 months, according to Current.Org, a publication from American University. 

The reason these and other applications have been delayed is that the IRS does not consider ”journalism” to be a defined non-profit activity.  News organizations that to date have gained non-profit status have had to adopt “education,” which is a duly recognized non-profit activity, as their mission. 

With all the organizational and operational hurdles in front of them, it is perhaps understandable why news entrepreneurs like Donna Myrow were taken aback by the decision of the Ford Foundation  to help the Los Angeles Times and Washington Post,  instead of one of their own.  

Explaining the decision, Joshua Cinelli of the Ford Foundation said his organization is backing the metros precisely because of their size.  Small, entrepreneurial news organizations, he added, “have less reach than more established institutions.” 

Steering clear of the question of who ought to get funded, Kevin Davis, the chief executive of the Investigative News Network, said he was troubled by the limited amount of philanthropic support available to experiment with new ways to produce “investigative and public-interest journalism” at a time the traditional media are scaling back.   

“Investigative journalism never was a money-maker,” he said.  “It was a function of prestige and public service” on the part of media companies when the print and broadcast media were more prosperous than they generally are today.   “Because there aren’t a lot of new business models and revenue streams to support journalism, philanthropy – whether in big or small sums – is going to be required for the foreseeable future.”

The question for philanthropists worried about journalism is how to make the best use of what they have to spend.  Should they put their limited resources into supporting existing infrastructure like the L.A. Times and Washington Post? Or, should they give the money to grassroots organizations and untested upstarts, who may – or may not – successfully deliver the next-generation model for journalism?  

As for the Ford Foundation, Cinelli says it intends to do both.