Gov. Neil Abercrombie is not a fan of the AARP.

In a recent interview with Civil Beat, the governor slammed the nonprofit for its lobbying efforts against his proposed pension tax. (AARP members packed the Legislature to oppose the tax, which was eventually killed.)

Abercrombie told Civil Beat he would “roll over” AARP in the next legislative session.

Self-described as an advocacy group for the elderly, AARP has almost 150,000 members in Hawaii. Nationally, the organization boasts close to 38 million members, according to Bruce Bottorff, AARP Hawaii’s associate state director.

But Abercrombie contends AARP is anything but an advocacy group. He claims:

  • AARP is a business, operating as a front for insurance companies
  • It made $300 million in profit last year
  • It’s undemocratic
  • Its members are disconnected from leadership, to the point that the president of the organization is unknown

Are Abercrombie’s claims accurate? We’ll take them one by one.

AARP and Insurance — Is There a Difference?

What Abercrombie Said: “And take a look at their ads — in the small print on TV — they’re representing these insurance companies. They made $300 million last year. Check it out. I give the insurance companies credit — they’re smart, because they figure, ‘Why fight them? We’ll join up with them, right? We’ll collaborate with them and we’ll all make money.'”

He continued: “They are a 501(c)(4), right? They’re a business, is what they are. Everybody thinks, ‘Oh, they’re like the YMCA or the Boys and Girls Club or something like that. Or the Lions Club or the Rotary Club.’ No, they’re not. They’re a business.”

Earlier, he told the Honolulu Star-Advertiser’s Derrick DePledge, “People are going to catch on to what the AARP is pretty soon, and I’m going to help them do that. I mean the AARP is a business. It’s essentially a front for insurance companies.”

The Facts: Based on AARP’s 2009 financial statement — (a representative told Civil Beat 2010 reports have not yet been completed) — it’s clear that royalties from insurance companies are the single most significant source of revenue for the organization.

Memberships in 2009 hauled in about $250 million, publication advertising brought in $112 million and grants about $105 million.

But royalties paid to AARP from insurance companies using the AARP logo earned the organization $657 million in 2009, more than all other sources of revenue combined.

It’s this connection between AARP and insurance companies that could add weight to Abercrombie’s argument.

But David Certner, legislative counsel for the AARP, says there is no connection between collecting revenues from royalties and acting as a business, or front for insurance companies.

“First of all, (Abercrombie) is completely off base because AARP does not sell insurance,” Certner said. “We get royalties, as many nonprofits do, for branding or lending our name to different products. I will tell you it’s a large portion of the revenue that comes into AARP. I won’t mislead you on that. But we don’t sell any insurance products.”

Abercrombie isn’t the first to attack the AARP for its relationship with insurance companies.

On GOP.gov, the official website for the Republican majority in Congress, an article entitled, “AARP: Just Another Greedy Insurance Company?” leaves little doubt about its take on the debate.

The article was published in November 2009 when President Obama’s health-care bill was being vetted by Congress.

The article states: “Even as AARP teams up with Democrats to challenge a recent study demonstrating that premiums would rise under Democrats’ government takeover of health care as an ‘insurance industry hatchet job’ that’s not ‘worth the paper it’s printed on,’ an analysis of the organization’s operations reveals that it functions as a de facto insurance company — one that has participated in ethically questionable dealings…”

In an op-ed published in the Wall Street Journal in January, Karl Rove, former senior adviser and deputy chief of staff to President George W. Bush, took a similar stance.

Rove said that because AARP was such a staunch supporter of “ObamaCare,” the organization will be rewarded with tax exemptions.

“It won’t pay any of the estimated $14 billion in new taxes on insurance companies, though according to its 2008 consolidated financial statement, it gets more money from its insurance offerings than it does from dues, grants and private contributions combined,” Rove wrote.

Finally, GOP representatives produced an entire Congressional report, entitled, “Behind the Veil: The AARP America Doesn’t Know,” published in March. Part 1 of the report has the headline: “AARP The Insurance Company.”

An excerpt from the executive summary of the report states: “As the facts set forth in this report reveal, AARP is not simply a non-profit entity claiming to advocate on behalf of America’s seniors. AARP is in fact a large, complex and sophisticated organization with over $2.2 billion in total assets and had revenues in excess of $1.4 billion in 2009 alone. When measured by the products it endorses and profits it derives from those deals, AARP is one of the nation’s largest insurance companies and by far the largest provider of Medicare plans to seniors. AARP is also one of the most powerful and active lobbying groups (in terms of dollars spent) in the country…”

AARP defended itself against the report here, offering numerous links to arguments as to why the findings were incorrect. It calls on its members to weigh the evidence for themselves.

“While AARP is no stranger to political attacks, we wanted to put the information sent to Congress since the fall of 2009 in one, easy-to-find place so you can check for yourself,” it says.

Abercrombie, a liberal Democrat, by joining Republicans in attacking the organization, is adding a bipartisan element to the debate.

The governor and the Republicans who share his views are of course entitled to their opinions, but the AARP is not a business, it’s a nonprofit organization.

And while it’s clearly supported by revenues from insurance companies, at least in the case of taxing pensions it’s difficult see how arguing against the proposal would be carrying water for insurance companies — which is what front organizations do.

A front, according to Merriam-Webster, is “a person, group, or thing used to mask the identity or true character or activity of the actual controlling agent.”

AARP Is Making the Big Bucks

What Abercrombie Said: “And take a look at their ads — in the small print on TV — they’re representing these insurance companies. They made $300 million last year. Check it out.”

The Facts: According to AARP’s most recent financial statement, revenue in 2009 totaled $1.4 billion.
The total expenses for AARP that year came to about $1 billion.

So, AARP “made” close to $400 million in 2009. Judging by these figures, it seems reasonable that the $300 million figure Abercrombie cited for 2010 could be accurate.

The only problem is that AARP, legally speaking, can’t “make” a cent.

“AARP is a nonprofit,” said Certner. “We’re a 501(c)(4) so we don’t have any profits… All the income we bring in, we plow back into the AARP mission. And our mission is to serve the 50-plus population.”

That said, some Republicans have argued that AARP should lose its tax exempt status as a nonprofit.

In March, the GOP lawmaker report argued profits AARP was poised to make after its support of Obama’s health-care law essentially made the organization a business.

Another excerpt from the executive summary of the report says: “What is less known is the extent to which AARP operates as a massive for-profit enterprise and how that conflicts with its legal requirements to ‘primarily operate to promote the common good and social welfare of a community of people.'”

University of Hawaii Law Professor Randy Roth tells Civil Beat that AARP’s 501(c)(4) status does mean it can’t make a “profit”.

“Any kind of nonprofit organization, it’s not unusual that they would bring in more money in any particular year than they expend,” Roth said. “Generally, it’s not considered a profit.”

Roth said tax exempt statutes can be challenged on occasion, particularly for 501(c)(3) organizations, if there is too much of a certain type of income. For a 501(c)(4), however, it’s more difficult to lose the status.

“A (c)(4), the rules are more liberal,” Roth said. “A (c)(3), you give money to it, and it is subject to a variety of complicated rules with lots of exemptions. You’re able to deduct whatever you contribute to the (c)(3). The (c)(4), you can’t deduct what you contribute. So the rules to get and keep tax exempt status are a little bit more liberal with the (c)(4) than they are with the (c)(3).”

Abercrombie is correct that AARP is doing well financially. But as a 501(c)(4), that money can’t be distributed to shareholders or owners, it has to be put back into the organization.

AARP Ain’t No Democracy

What Abercrombie Said: “This is not a democratic organization. They don’t have votes.”

The Facts: AARP is not a “democratic organization” in the sense that a democracy is comprised of officials elected by the public or all the members of an organization, each with an equal vote.

AARP has a volunteer board. The board is split into three classes on two-year cycles. As one class leaves, the board will appoint new members to take their place. The volunteer board also appoints and evaluates the executive board, which is compensated.

“We have two leaderships,” Certner told Civil Beat. “We have the leadership for AARP nationally and then we have the leadership of AARP in Hawaii… Our leadership, generally speaking, comes from our board of directors, which is an all-volunteer group composed of people from around the country who basically apply for the position to be on the board and then are selected. Once you get on the board, then the board selects its officers. So they, the board themselves, would vote for the AARP national president.”

Abercrombie is right that members don’t get to vote for AARP’s representatives the way, for example, Sierra Club members do.

He’s correct that AARP leadership is not elected in the traditional sense of a democracy.

Who’s the President?

What Abercrombie Said: “This is not a democratic organization. They don’t have votes. Who’s the president? That’s all settled inside with the big shots.”

The Facts: Step one — Visit www.aarp.org. Step two — Scroll to the bottom of the screen and click on the link, “About us”. Step three — Click on the link, “Our Leadership”.

The president of AARP is W. Lee Hammond. You can find out more about him by clicking on his name, where viewers are greeted with a video introducing him. You can read an article on his “life perspectives.” There is also information explaining his educational credentials, his professional experience and expertise, his volunteer experience and his honors.

For information on all members of AARP’s board of directors, click here.

It’s true that AARP’s president is selected by a small group. But the “big shots” are unpaid volunteers. Information on the board is available to all AARP members and members of the public. Members may not get a say on who sits on the board, but there’s no secret about who the organization’s leader is.

Conclusion

Abercrombie’s gripe with AARP is rooted in the organization’s efforts to derail his pension tax. For all intents and purposes, AARP was his political opponent on that issue.

This isn’t an easy fact check to give a grade, because there are so many elements to Abercrombie’s case against the organization and because so many of his claims are a matter of opinion.

Now that we’ve explored his charges against the organization, what grade would you give the governor? Have we missed anything in our analysis of his claims?

We’ll be standing by, listening to your thoughts on the issue, ready to answer any questions you might have.