Maryland Senator proposes newspaper bailout

Sen. Cardin suggests classifying newspapers as non-profit organizations.

By Will Guldin

Published April 2, 2009

Falling sales and advertising revenues are causing many of the countries' newspapers to lay off employees or even to go out of business.

One bill, proposed last week by U.S. Sen. Benjamin Cardin, D-Md., would work to stem this tide.

The bill would allow newspapers to become non-profit organizations by claiming status as an organization with an educational purpose. This means newspapers that qualify would be exempt from taxes and any advertisements or contributions made to them could be written off as charitable donations.

As a non-profit organization, a newspaper would be under some government restrictions that would not allow the paper to endorse any political candidate.

Jeff Hurwit, an attorney who specializes in non-profit law, said if an impartial reader was able to tell which candidate the reporter or editorial board preferred based on the content of the coverage, the government could take action.

He said the quantity of coverage wouldn't play a role in determining this, which means non-profit papers would not be forced to give each candidate the same amount of attention.

MU journalism professor Jacqui Banaszynski said no other institution is able to monitor government as well as newspapers, and she said any law that would make papers less independent is going to raise questions.

She also said the role government would play in regulating newspaper's content would depend on how any laws supporting this bill are written.

This legislation comes as more than 20,000 people have been laid off or bought out at papers across the U.S. since 2008. Many papers, including the Denver-based Rocky Mountain News, which was founded in 1859 and closed its doors in February, have been forced to fold.

In a news release, Cardin said the economic recession has only highlighted problems with the business model used by newspapers.

"We are losing our newspaper industry," Cardin said. "The economy has caused an immediate problem, but the business model for newspapers, based on circulation and advertising revenue, is broken, and that is a real tragedy for communities across the nation and for our democracy."

National Newspaper Association Executive Director Brian Steffens said he was glad the legislation was proposed but he believes this broken business model is one reason why the bill is not a permanent solution to newspapers' problems.

"Personally, I think it's a band-aid," Steffens said. "It might help some papers in the short term, but in the long run it is not a good solution. I mean the problem is partly educational. Many people don't understand the value and the purpose of newspapers, and that could be our fault."

Steffens said while tax incentives were a positive step they were not a cure-all for newspapers.

"The tax bill for many papers is not that huge," Steffens said. "The revenue challenge is more about advertising and showing advertisers that newspapers are still a highly effective advertising medium."

According to the Newspaper Association of America, ad revenue in printed publications dropped 17.7 percent from 2007 to 2008. The organization anticipated 9.7 percent drop in advertising for 2009. About 80 percent of newspapers' revenue comes from advertisements.