Fixing a Broken Trust How Alaska Succeeded The Alaska Children’s Trust (ACT) was born flawed, a ghost of its founders’ hopes, stripped of funding in a political battle that had nothing to do with child abuse prevention and buried with no money in a disinterested government agency. There it languished for eight years, forgotten by all but its most devoted supporters.
In the mid-1990s, a new governor and his staff, aided by a group of passionately committed volunteers, resurrected the Trust and set in motion 10 years of high- energy fundraising and successful grant-making.
But the flaws in the original structure were still there, obstacles in the way of the mission. In 2006, the ACT board of trustees and the Friends of Alaska Children’s Trust, a 501(c)(3) created in 1997 as an independent fundraiser for ACT, set out to fix what was wrong. This is the story of how they succeeded. creating the trust
the alaska children’s trust was created as a government entity — its trustees * Appointed the first board of trustees including business leaders, the appointed by the governor, the Trust corpus managed by the Commissioner of Attorney General, and the Commissioners of Education and Health and Revenue, grant proposals subject to state procurement regulations and given final Social Services. Carol Brice, a Fairbanks public health nurse long active in approval by the Department of Health and Social Services. community child abuse prevention, was elected chair.
The Trust entered state statute in 1988, approved by Alaska lawmakers after a fight * Asked staffer Deborah Bonito, who was returning to private life, to create a over its funding mechanism that spanned two legislative sessions. The original non-governmental fundraising 501(c)(3) organization called Friends of the 1987 bills gave Alaska residents who received an annual dividend check from the Alaska Children’s Trust (FACT) to focus on growing the Trust corpus. state’s oil holdings the option of donating part of that money to ACT — a so-called * Transferred $6 million to the Trust from the surplus in an unrelated account. “Permanent Fund Dividend check-off.” In 1988, realizing a vote on the Trust would Despite additional efforts, this proved to be the only state money ever not be allowed as long as it contained the dividend check-off, its sponsors removed appropriated outright to the Trust. (Lawmakers later earmarked special license it and the legislation passed with scant opposition. the trust went into statute plate, marriage license and birth certificate fees for deposit in the Trust.) Grants but was not activated. it had no money and two governors failed to appoint the first year totaled $285,000. the required trustees. Guided by Bonito and a group of highly motivated activists, FACT organized a In 1991, the Alaska State House approved a $2 million deposit into the Trust, but variety of fundraisers over the next decade. Some were single events, e.g. Gov. the State Senate killed it. The Trust remained dormant and broke. Knowles dedicated the money raised at his second inaugural ball to the Children’s In 1994, Tony Knowles was elected governor and made children’s issues a key focus Trust. Others were annual events such as Mush for Kids, a popular Fairbanks treat of his administration. Knowles’ chief of staff, Jim Ayers, was a former head of Kid for children featuring sled dog rides. Pact, a statewide coalition of nonprofits that originally pushed for creation of the Trust. Knowles’ lieutenant governor, former Rep. Fran Ulmer, had co-sponsored the $2 million deposit that died in 1991. knowles created a “children’s cabinet” and made cutting the rate of child abuse in alaska one of its primary goals. By 1996, the Knowles administration had accomplished the following: instrumental supporter * Rewritten the Alaska Children’s Trust statute using an Executive Order that streamlined the structure, made it part of the governor’s office, eliminated elected officials other than the governor from the board and reduced the carol brice a Fairbanks public health nurse long active in board from 10 to seven. However, the Trust remained a government community child abuse prevention, served as controlled entity. founding chair of the Alaska Children’s Trust.
1980 1987 1988 1991 First Children’s Trust created Bills introduced in Alaska Legislature approves Alaska House Finance attempts to deposit $2 million in Kansas. Legislature to create ACT. Children’s Trust without funding. in Trust, fails. 3 4 instrumental supporter
deborah bonito created a non-governmental fundraising 501(c)(3) organization called Friends of the Alaska Children’s limitations of structure Trust to focus on growing the Trust corpus.
By 2006, the original $6 million in the Trust had grown to $11 million, but only the earnings from interest and dividends were available for programs, an amount FACT members deemed woefully inadequate to fight Alaska’s high child abuse and neglect rates. despite educational and programmatic success over these years, the restrictions imposed on the trust by its status as a government * Attracting significant private donations to grow the Trust proved nearly entity loomed ever larger and more frustrating. According to current and impossible. FACT developed successful community fundraisers over the former staff and board members, major problems included: years, but larger donors were put off by the prospect of writing a check to the * The state’s grant application process was so onerous that many small State of Alaska. In addition, FACT could not truthfully promise any donor prevention programs could not successfully compete. They often didn’t that their money would be used for its designated purpose. act was called understand how to complete proposals, which could require more than 30 an endowment and a trust but it was in fact a pot of unprotected pages, and could not afford to hire a professional grant writer. For the first state money that could be grabbed or redirected at any time. seven years, an employee of the state, paid for by the Trust, worked with It was this problem that most troubled FACT board members, who believed soliciting potential grantees to perfect their applications. Smaller programs, especially large donors was essential to the mission but that doing so was unethical. from rural communities, often didn’t bother to apply. Others submitted flawed applications that were rejected under the state’s rigid point system Lesser but persistent frustrations included: and never brought before the Trustees. As a result, the community-based * The state required extensive quarterly reports from every grantee, even the smallest. funding needs that inspired creation of ACT were thwarted, making it Community-based programs didn’t have the staff or time to prepare acceptable impossible to aggressively work the mission. quarterlies, which as far as board members could tell, no one ever read.
* The Commissioner of Revenue was the statutory treasurer of the Trust but * During the grant review process, ACT Trustees were barred by state regulation from in the scope of his primary duties, the ACT money was too little — “decimal contacting anyone to clarify or inquire further about applicants or their programs. dust” — to command much attention. The department invested the fund so conservatively that for five bull market years running the annual returns * At the beginning, getting the state side of the Trust operation to meetings ranked at the very bottom for all endowments nationwide. to talk about plans or problems was extremely difficult, rendering useful communication among the disparate entities largely non-existent, said * When ACT Trustees met to award grants, they rarely knew how much money Deborah Bonito, FACT chair from 1997 to 2003. “It was always a big hassle was available to them or the status of projects they had funded in previous to get state bureaucrats to pay attention.” years. The Department of Revenue and the Department of Health and Social Services used different accounting systems. They didn’t communicate with each other, and neither was able to produce useful information in a timely manner.
1996 1997 2006 2007 The Knowles administration rewrites ACT law, appoints Deborah Bonito creates FACT, as fundraising nonprofit FACT begins discussions on possible privatizing. The Giving Practice advises FACT to negotiate Trustees, and deposits $6 million in Trust corpus. Carol for ACT. She chairs FACT from 1997 to 2003. Rasmuson Foundation funds study/reform of better terms with the state. ACT/FACT form 5 Brice named chair. First year grants total $285,000. state procurement process. Joint Restructuring Committee. 6 negotiations
ACT and FACT board members approached the idea of privatization cautiously. Some supporters were concerned that going private would require the diversion of needed program money into administrative costs to make up for the de facto subsidy provided by the state. The statute directed that $150,000 be paid annually from the Trust to the state to cover administrative costs—initially the cost of a state staffer—but the Trust paid no rent, used state phones and technology, and the peripheral services of employees in the Department of Health and Social Services during the process of soliciting and vetting grants.
The National Alliance of Children’s Trusts examined the state v. non-state status of children’s trusts in general and “eventually landed on the belief that any structure can work … depending on the level of support,” said Teresa Rafael, Alliance director. However, depending on the structure, association with the state gives a Trust clout it might not have as a private nonprofit, including the governor’s support and access to lawmakers, she said. It increases options for making child abuse and neglect a priority for state and national funding.
An evaluation done in the Department of Health and Social Services concluded privatization was not a good option. The Trust “didn’t have the base of support to generate the funds to pay for administrative costs,” said Rebecca Parker, a special assistant in HSS assigned to staff the Trust from 2003-2006.
act and fact board members listened, but grew weary of the status quo. Years of informal discussions produced repeated assurances from state officials that problems would be fixed, but they never were.
In 2006, in a move not directly involving the Trust but informed by its experience, Rasmuson Foundation funded a $100,000 study of the state procurement process with recommendations for changes; Rasmuson followed up with a $500,000 grant to the State of Alaska to implement the recommendations. The Foundation did this on behalf of its hundreds of small grantees who also had to deal with the state.
2008 2009 FACT hires lobbyist, two bills introduced repealing FACT delivers ultimatum to ACT. Rep. Anna Fairclough Trust and transferring money to Alaska Community introduces privatization bill and budget item transferring 7 Foundation. Both fail. $3 million to Alaska Community Foundation. After being apprised of the low rate of return problem, the Commissioner of Revenue agreed to revamp the Trust investment strategy to improve earnings. The quarterly report requirement was dropped for grants under $50,000. These fixes were appreciated but deemed “too little, too late.”
That same year, FACT hired a Seattle-based consulting firm, The Giving Practice, to examine its options. The consultant advised FACT/ACT to negotiate a better arrangement with the state if possible and called privatization a “daunting” prospect. Pursuant to the report, ACT Trustees and FACT board members formed a Joint Restructuring Committee in 2007. FACT agreed to scale back fundraising activities for one year while negotiating with the state to:
(1) Hire staff outside the state system;
(2) remove the Trust grant-making process from the state, and
(3) allow donor funds to go into a simple grant account, where they could be earmarked for designated use, rather than into the Trust corpus.
Negotiations on everything other than staff hiring failed. Privatization seemed the only remaining option. on sept. 10, 2009, on behalf of the fact board, chair carley lawrence delivered an ultimatum to the act trustee board: either the ethical donations problem gets solved or fact goes out of business.
From then on, the process was political.
instrumental supporter
carley lawrence FACT Chair, delivered the ultimatum to ACT: Either the ethical donations problem gets solved or FACT goes out of business.
2010 2011 Privatization measures pass. Gov. Parnell signs bills. Legislature approves transfer of $7 million Trust balance to Alaska Community Foundation. 10 the solution
simply put, fact had to convince lawmakers to end the existing alaska Since FACT was already a 501(c)(3), the joint ACT/FACT boards began the process children’s trust, appropriate its resources to a private organization, and of writing new bylaws, transforming FACT from a strictly fundraising group to the trust the organization to spend the public money properly. “daunting” was fundraiser and grant-maker of the privatized endowment. the right word. The bill languished through two legislative sessions, stalled by the same objections In 2008, FACT hired a lobbyist and approached supporters in both the House as the earlier versions. But Rep. Fairclough was committed to the mission of the and Senate. Bills were introduced to abolish the Trust and transfer its corpus Trust and believed it could best be served by privatization. A session-long, low-key to the Alaska Community Foundation. State lawyers questioned whether it was campaign to educate colleagues paid off. Working late into the night on the last day constitutional. Some lawmakers were reluctant to have a vote killing the Trust on of the session, Fairclough convinced House leaders, who had approved the bill, to their record. Opponents argued that the state had an ethical duty to personally sell the issue in the Senate before adjournment. “i told them, ‘it’s broken and supervise use of Trust funds. The bills failed. it’s the right thing to do.’” At shortly after midnight, the Senate unanimously approved restructuring the Alaska Children’s Trust in the last bill passed by the ACT and FACT board members regrouped and approached Rep. Anna Fairclough, a 2010 Legislature. conservative Republican with credibility in both the political and nonprofit arenas. Her experience as executive director of Standing Together Against Rape before On July 9, 2010, Gov. Sean Parnell signed it into law. becoming a legislator forged a strong commitment to abuse prevention programs. A separate item in the capital budget bill appropriated $3 million from the Trust to She agreed to take on the challenge. an endowment in the Alaska Community Foundation. In 2011, under Fairclough’s In 2009, Fairclough took a “dual track” approach, introducing two bills, separating sponsorship, the Legislature approved transfer of the remaining $7 million in the money issues from structure questions. The re-structuring bill (HB190) left the Trust to the Alaska Community Foundation endowment. Trust in statute but created a separate grant account in the general fund to receive Trust donations that could then be ”designated.” Fees from the special marriage licenses, birth certificates and “KID” license plates ($26,106 in 2011) would be deposited in this account, as would the annual payout from the Trust’s earned interest. The seven ACT Trustees appointed by the governor controlled use of the instrumental supporter grant account, but could enter into a joint arrangement with a private nonprofit (presumed to be FACT) for grant-making and fundraising.
The bill exempted the Trust from the state procurement code and allowed the rep. anna fairclough Trust to adopt regulations not subject to the Administrative Procedures Act. launched a session-long campaign to educate colleagues on privatizing the Trust. “I told them, ‘It’s broken and it’s the right thing to do.’”
2012 ACT re-launches its public image as a nonprofit organization ready to lead state in eliminating 11 child abuse and neglect. 12 reflections
Once begun in earnest, the transformation of the Alaska Children’s Trust from a struggling government entity to a vibrant and renewed 501(c)(3) took four years, with the effort teetering on the edge of disaster at several points. A primary purpose of this report is to share ACT’s experience with those running Children’s Trusts in other states who may be wrestling with the same problems that confronted Alaska.
That said, everything that came after the final decision to seek privatization was political. The outcome depended on the interaction of diverse personalities, uncontrollable, often unrelated, circumstances, and how the political wind was blowing at every step. success rested on commitment and stubborn persistence over years by a core group of volunteers, the kind of effort that can’t be ordered or bought.
As such, these thoughts from people involved in the process are not a roadmap transferrable to other times and other jurisdictions but reflections on our experience that may help illuminate a path.
1. Crucial to embarking on the long journey to privatization was unifying the two boards that ran the Trust: the ACT board of trustees, appointed by the governor, and the volunteer board of FACT, the fundraising 501(c)(3). The merged boards worked openly and together, building consensus and developing strategies, thereby eliminating concerns that one or the other might be trying to hijack the money or endanger the mission. The failure of repeated efforts to negotiate a solution that would keep the Trust within the state system was experienced firsthand by members of both boards.
2. Of particular importance was winning the support of the department commissioners serving as Trustees on the ACT board. Over the years, several commissioners came to embrace the concept of privatization due, in part, to their experience as Trustees unable to get timely information about the amount of money available to make grants or feedback on grants already made. It is generally agreed by participants that it took too long for the ACT-FACT boards to decide privatization was the only way to make the Trust work as it needed to; but one good result of the years of effort inside the government was that Trustees were able to form conclusions based on their own experience.
13 Two seats on the new board are reserved for commissioners; they can watch In the end, the credibility of Rasmuson Foundation and a commitment to the the process up close and be assured the mission is being responsibly pursued. mission won the day, Ellis said. Supporters came to understand that, in its public form, the Trust “wasn’t reaching its full potential … wasn’t doing as well 3. Efforts to fix the Trust were supported from the beginning by Rasmuson as it could.” Foundation, the largest private charitable foundation in Alaska. Its reputation for evenhandedness in grant-making and sound financial principles helped 7. Two categories of objections to privatization were never fully resolved: defuse the concerns of lawmakers who worried that ACT/FACT might be the objections of agency staff, who were reluctant to admit they could not trying to put something over on them. Since its chairman is a well-known fix whatever was wrong; and the Legislature’s legal division, which insisted conservative Republican and its president a well-known liberal, the Rasmuson privatization was somehow unconstitutional. presence worked to depoliticize the conversation. Testimony of people who had tried for years — and failed—to get problems fixed 4. Choosing the right sponsor was key. The ACT/FACT boards approached within the state system successfully countered the first objections. Rep. Anna Fairclough, a Republican with strong conservative credentials, The ACT/FACT board hired an attorney to help re-craft the legislation in an effort a reputation for competence, and the trust of her leadership. She had run a to meet the legal objections, but legislative lawyers never signed off on the bill. nonprofit and understood the issues. She personally checked out the 501(c)(3) Again, the advocacy of Rep. Fairclough and Rasmuson Foundation helped convince chosen to manage the privatized Trust, the Alaska Community Foundation, and the governor to sign the legislation into law. In two separate installments, the vouched for it to her colleagues. The choice of Fairclough as sponsor proved to Legislature then transferred the $10 million corpus of the Trust to the Alaska be the single most important decision made by the boards. Community Foundation. 5. The structural, legal and financial complexities of the Trust as it was, and what the boards proposed it become, made most people’s eyes glaze over. So explanations were kept short, simple and specific. Great effort was expended laying extensive groundwork before asking anyone to make a decision. Proponents, who had honed their pitch over years of discussing the issues, took every opportunity to testify at hearings about the bill, and explained it personally to any legislator or staff person who expressed concern or misunderstanding.
6. The word “privatization” proved useful in winning Republican votes. They were receptive to the message that a private entity could do a better job than the government. But the concept caused concern among traditional supporters of the Trust, liberal Democrats. instrumental supporter
Luck played a role there. One of the original sponsors of the 1987 bill creating diane kaplan the Trust was still in the Legislature, now a Senator in the leadership coalition. In 2004, Gov. Frank Murkowski appointed Sen. Johnny Ellis, a Democrat, set himself the task of finding “a construct that Diane Kaplan, president of Rasmuson Foundation, to the ACT Trustee board. She was reappointed by could get Democrats and Republicans together,” a way to depoliticize the debate Governors Palin and Parnell. A former FACT board so the Trust did not end up a token in the conservative-liberal culture wars. member, Kaplan lived with the limitations of trying to raise money for the Trust.
15 16 the future
The Trust structure in place when the smoke cleared looked clunky: The Commissioner of Revenue managing a trust account with no money; a board of Trustees appointed by the governor with nothing much to do; a new general fund account with just the license and certificate fee proceeds in it; a $10 million endowment called the Alaska Children’s Trust parked with the Alaska Community Foundation and financially managed by them; and a new 12-member ACT/FACT board of directors still figuring out exactly how things were going to run.
In truth, the new reality is a functional meshing of method and mission. For oversight purposes, the new ACT/FACT board has designated seats for the Commissioners of Education and Early Development and Health and Social Services, should they choose to serve. (Both currently do.) A single executive director currently manages the non-financial aspects of the Trust. Board members are conscious of keeping overhead expenses low.
The ACT/FACT board recently changed the organization’s name to the Alaska Children’s Trust. ACT is now free to create a grant application and performance standards that allow outreach and promote funding of the small, community-based child abuse and neglect prevention efforts the Trust was originally created to help. In addition, the board can now solicit and leverage grants from foundations and other large donors for designated programs.
As the Alaska Children’s Trust approaches its 25th year, the prospect of new opportunities to improve the lives of Alaska’s children has invigorated ACT board members. After years of mission-sapping struggles with state bureaucracy, with their fundraising potential finally unleashed, they can focus their time and energies on fulfilling the promise of the Trust: to make Alaska children the safest in the nation. ACT board of directors
Carley Lawrence, Chair (Anchorage) Michael Hanley (Juneau) Director of Digital Experience Commissioner Nerland Agency State of Alaska, Department of Education & Early Development Diane Kaplan, Vice Chair (Anchorage) President/CEO Mike Lesmann (Juneau) Rasmuson Foundation Special Staff Assistant Office of Governor Sean Parnell William J. Streur, Treasurer (Anchorage) Commissioner Margo McCabe (Anchorage) State of Alaska, Department of Health & Public Member Social Services Sammye Pokryfki, (Wasilla) Tlisa Northcutt, Secretary (Anchorage) Program Officer Donor Relations Director The Rasmuson Foundation University of Alaska Anchorage Ramona Reeves (Fairbanks) Susan Anderson (Anchorage) Public Member President/CEO The CIRI Foundation Ivy Spohnholz (Anchorage) Senior Development Officer Virginia Baim (Dillingham) University of Alaska Anchorage Executive Director Safe and Fear Free Environment Margaret Volz (Wasilla) Pediatric Nurse Practitioner Alaska CARES
The Alaska Children’s Trust Mailing Address: PO Box 92155 Anchorage, AK 99509
Physical Address: 161 Klevin Street, Suite 101 Anchorage, AK 99508
Phone: (907) 248-7676 General delivery email: [email protected] www.alaskachildrenstrust.org
“Fixing a Broken Trust” written by Sheila Toomey, 2011. Photographs; Erik Hill - pages 11 and 13, Alex Fenlon - pages 8 and 10 Clark James Mishler - pages 14 and 18.
This project was funded with a generous gift from the Doris Duke Charitable Foundation.