Maine’s Plan Offers Model for Nation

To the Editor:

Several weeks ago, the State of Maine enacted legislation that grants authority to its attorney general and courts to regulate the conversion of nonprofit organizations to for-profit corporations. This enlightened decision stands in stark contrast to the actions of New York’s governor and legislature in the conversion of Empire Blue Cross (“$1-Billion Conversion Plan Draws Criticism in N.Y.,” January 24).

Placing political expediency ahead of the long-term interests of its citizens, New York’s political leaders hijacked over $1-billion of Blue Cross assets and steered them into the state’s general fund. Reserving only $50-million for a new health-care foundation, they chose to sacrifice the health needs of future generations in the name of a temporary budget fix, designed to gain them political support.

Nonprofit, charitable organizations such as Empire Blue Cross receive preferential tax status, government grants, foundation support, and individual donations because they are deemed to be fulfilling important public purposes. For this reason 38 states, including New York, have accepted the common-law doctrine known as cy pres, which means that the assets of a nonprofit organization must be used to help its former beneficiaries.

In 1996, faced with a similar situation as New York, the State of California placed $3.2- billion from the sale of Blue Cross of California into two health-care foundations. Today, those assets are valued at over $6-billion, enabling the foundations to distribute close to $200-million annually in health-related grants.

Maine’s new conversion law reaches across issue areas to cover all nonprofits. It will ensure that the assets of converting nonprofits forever remain in the public domain for the benefit of the community. These dollars will be placed in foundations, with grants provided for charitable purposes that are in line with the converting entity’s mission.

Fortunately, Maine has taken the long view. We hope that political leaders in New York will reverse their decision, and that other states will follow Maine’s example.

Elizabeth M. Imholz
Director, West Coast Regional Office
Consumers Union of U.S.
San Francisco