Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, June 5, 1995 TAG: 9506060085
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
``This is a vast business empire that has figured out how to gimmick the nonprofit laws,'' Sen. Alan K. Simpson said in announcing the first congressional hearing into AARP's finances and tax status, slated for June 13 before his Finance subcommittee.
Simpson accused the lobby of ``reckless and irresponsible statements'' and ``frightening senior citizens'' to influence policy.
AARP's frequent skirmishes with Congress and the changing of the guard on Capitol Hill contributed to its woes: It is viewed by conservatives as a protector of the welfare state and opposes Medicare and Social Security reforms backed by Simpson, of Wyoming, and other Republicans.
AARP also is in a dispute with the Internal Revenue Service over some tax-exempt claims. Plus, some charge that its leaders don't have members' interests at heart.
Horace B. Deets, AARP's executive director, said the test of a nonprofit is whether it meets its mission.
``The key is what do you do with the revenue,'' he said.
AARP was founded in 1958 to support older Americans through education, advocacy, research and social services. It also contracts with companies to sell its members insurance, rent them cars and provide them with other goods and services.
AARP collected $382 million in 1994, including $173 million from such commercial ventures. Advertising in its publications raised $47 million. Other income totalled $16 million. Dues raised nearly $146 million.
In addition, it received $86 million in federal grants for services it provided the elderly.
``AARP, like all nonprofits, is trying to accomplish a growing workload of activity with shrinking resource availability,'' Deets said. ``All of us have had to look to sources other than dues to find the revenue to do the work.''
Expenses totaled about $359 million, including $100 million spent on publications. AARP netted about $23 million and had $43 million saved in 1994.
Simpson points to AARP's 22 million-circulation magazine, Modern Maturity, as an example of how the group takes advantage of its nonprofit status.
He said the magazine is mailed at lower nonprofit postal rates, but refuses advertising for products that compete with those in which AARP has a financial interest.
AARP's arrangement to provide insurance to its members drew attention from the IRS, which has been investigating how nonprofit groups raise money.
The association paid $135 million last year to the IRS in lieu of taxes on revenue from insurers. It plans to pay another $15 million this year to keep negotiating.
At the heart of the dispute is whether providing insurance to members is part of AARP's mission, or whether it should be considered taxable income.
When AARP was founded, Medicare did not exist, so the group sought to provide insurance to senior citizens who couldn't find coverage elsewhere.
The group also paid the postal service $2.8 million last year to settle accusations that it improperly used nonprofit mailing privileges in 1991 and 1992.
Some allege that the AARP's business ties cloud its judgment about what's best for its members, a charge AARP officials strongly deny.
Spokesman Peter Ashkenaz said the association constantly polls its members and frequently holds public hearings. During last year's health care reform debate, AARP coordinated about 3,000 public forums nationwide.
Dr. Sidney M. Wolfe of Public Citizen's Research Health Group charged that AARP's relationship with the insurance industry prevented it from backing a single-payer model, which he said would save money by reducing paperwork.
Ashkenaz said fewer than a third of AARP members back single-payer insurance, and that the group endorsed the major Democratic reform proposal because it was the only one to cover both prescription drugs and long-term care costs.
AARP has been criticized for losing touch with its members before. Executive directors left the organization in 1978 and 1987, partly over disputes about the national office's handling of membership services.
And in 1988, AARP lobbied successfully for catastrophic health care legislation, only to see it repealed after senior citizens revolted, fearing the plan would prove too costly.
But Deets is confident that AARP is true to its members. He points out that the association's positions on health care reform and Medicare run counter to its business interests.
``That doesn't sound as a group that's trying to make money as a pre-eminent goal,'' Deets said.
by CNB