Policies and Regulations: The State of Play

Polices and Regulations: The State of Play

Senators and congressional representatives, as well as national and state policymakers, are considering a variety of bills and policy revisions to support local news. Dana Miller Ervin, an award-winning journalist for “60 Minutes” and “Nightline” and staffer on Capitol Hill for over a decade, reviews what has been proposed and each plan’s current status.

If the pandemic is decimating local news, it’s also prompting lawmakers to consider how to help the struggling industry. “It’s as if for the first time, people on the Hill care about newspapers,” says Seattle Times publisher and Capitol Hill watcher Frank Blethen.

“Before the pandemic, journalism was seen as a pet interest on the Hill,” says Viktorya Vilk of the news advocacy group PEN America. “That perception has shifted now. We’re finally at a moment when conversations [about assistance] are absolutely happening.”

The shift is apparent both in the number of concerned lawmakers and in the breadth of their proposals. Before the pandemic, congressional efforts were narrowly tailored. None called for direct spending. Today there are several serious proposals to direct funds to local media, and hundreds of lawmakers from both parties have written to House and Senate leadership expressing their support.

“I get the sense there’s more support,” says seasoned lobbyist Paul Boyle, “but will that translate into meaningful relief quickly?” As of this writing, only one industry-specific stimulus measure has become law: a $75 million appropriation for public broadcasting. And much of that will go to public television stations, which produce very little local news.

News advocacy groups are optimistic that Congress’ newfound concern about expanding news deserts not only will result in short-term assistance, but also create momentum after the COVID crisis subsides, perhaps bolstering support for long-standing proposals. But that hope is tempered by the election year reality that congressional business will slow as campaigns intensify, so proposals that don’t get adopted soon will wait until January.

Concern about their local papers has galvanized many Republicans to support immediate COVID-19 assistance for local outlets, but they may be less willing to support many broader longer-term measures because of opposition from their base. The Coronavirus Aid, Relief and Economic Security (CARES) Act’s $75 million for public broadcasting is a case in point. It was slammed by a Tea Party leader, Rep. Jim Jordan, R-Ohio, as “a liberal pet project,” and conservatives lambasted the aid on Facebook. “They don’t like the media, but they care about their local paper and its coverage of them,” News Media Alliance’s Boyle explains.

Given the hostility to journalists fomented by the president’s “enemy of the people” trope, it’s likely that any longer-term assistance be narrowly-tailored, perhaps like some of the proposals discussed in this chapter.258 Some already have bipartisan and bicameral support.

This review highlights a number of current proposals, those now in play because of the pandemic and others that are currently before Congress or have achieved some measure of success. Although this review necessarily focuses on the 116th Congress, many of the proposals are long-standing and will likely be reintroduced next year.

Direct Government Support: SBA Loans

There is so far no data on the number of newsrooms that have received stimulus loans from the Small Business Administration. The Paycheck Protection Program (PPP), a COVID response initiative, allows small businesses that need immediate capital to borrow up to eight weeks of payroll costs.259 Recipients that maintain payroll will have their loans forgiven.

The Tampa Bay Times, The Seattle Times and the National Enquirer say they’ve received loans, but chain-owned newsrooms reportedly have been unable to qualify for assistance, barred because of the size of their parent companies. There is irony that consolidation, with its closures and layoffs, is now preventing emaciated newsrooms from getting relief.260 261

On April 20, Sen. Maria Cantwell, D-Wash., took to the abandoned floor of the Senate to call for a waiver of SBA’s “affiliation rules.” The waiver would allow local newsrooms owned by larger parent companies to qualify for the PPP loans. Restaurants and hotels received a similar waiver in an earlier stimulus bill, but that carve-out turned controversial when the public learned large companies like Shake Shack and Ruth’s Chris Steak House received the loans before funding ran out, so smaller businesses went without help.

Lobbying efforts by Cantwell and a bipartisan group of senators were matched by those of a similar bipartisan group of over 100 representatives in the House, and Democrats included the measure in their proposal for a coronavirus relief bill, the Health and Economic Recovery Opportunity Omnibus Emergency Solutions Act (HEROES Act).262 263

Republicans say the House bill, crafted without Republican input, is dead on arrival in the Senate. Sens. Cantwell; Amy Klobuchar, D-Minn.; John Kennedy, R-La.; and John Boozman, R-Ark., continue to lobby for a waiver, but convincing Senate Leadership may be difficult because of the outcry over the restaurant waiver.

The availability of PPP loans seems to be altering a long-standing debate among journalists about the desirability of government aid. Even before the pandemic, the former dean of the Columbia Journalism School, Nicholas Lemann, argued that the local news crisis had become so severe that only direct government support could save it.264 Many journalists opposed the idea, worrying that government funding would compromise editorial independence.

But concern the pandemic has become an extinction event has now softened, though not stilled, those voices. After some journalists argued against taking the PPP loans, Los Angeles Times correspondent Matt Pearce tweeted, “I appreciate the discussion, but if journalists don’t get their oxygen masks on first, we’re not gonna be around to help the people around us.”265

Direct Government Support: Public Service Ads

News advocacy groups believe an increase in revenue from public-service ads could help some newsrooms survive the pandemic. They’d like to see the administration place more ads with local news outlets, and a lot of congressmen agree. On April 20, nearly 250 House members wrote to the president, asking him to direct more of the government’s $1 billion ad budget to local media. They also want the administration to “incentivize” expenditure of stimulus funds on local ads.266

There are no estimates of how much of the government’s current ad budget could be redirected, and it’s up to the administration to decide whether it will heed the request. Given the current administration’s attitude toward journalism, that could be a tough sell. But the letter is important because it was signed by members of both the right-wing Freedom Caucus and the left-wing Progressive Caucus, underscoring broad support for local journalism.

The proposal could receive legislative support. Democratic Congressman Tim Ryan of Ohio is sponsoring a bill that would, among other things, require that 50 percent of current government advertising be placed with local news outlets.267 268 Ryan and eight House Democrats unsuccessfully lobbied Speaker Nancy Pelosi to include this and other proposals in the Democrats’ HEROES Act. It was only after the Democrats’ stimulus bill passed the House without their inclusion that Ryan filed his local media bill, indicating he’ll continue to lobby for assistance.

A number of news lobbyists want the government to go further and have asked Congress to appropriate additional money for the ads.269 The most powerful of these, the National Association of Broadcasters and the News Media Alliance, have asked for $5-$10 billion for additional ad spending. 270

Journalists who worry about the influence of government money have yet to voice the same objection to spending on ads. Perhaps that’s because papers have always relied on government-funded postal subsidies and legal notices. But local governments have been accused of pulling ads from papers with critical coverage.271 That’s why those who argue that local news cannot survive without government support usually advocate for some form of firewall between legislators and journalists.

Legal Fixes: Pension Debt Relief

Unable to pay its $125 million pension bill, the 160-year-old McClatchy Co. filed for bankruptcy earlier this year. The country’s second-largest newspaper chain had long struggled under the weight of its $800 million pension debt. Now the federal government will likely assume responsibility for the underfunded plan.272

McClatchy is not the only paper to grapple with an underfunded pension plan. Like other businesses with legacy plans created when defined benefits were common, many have found it difficult to come up with the cash to pay off pension shortfalls.

Now the COVID recession is exacerbating those problems. Stock market losses have reduced the value of plan assets, so the shortfalls are greater. Because current low interest rates reduce plan earnings, they also push up the amount of quarterly pension contributions plan administrators must make to cover those shortfalls. The combination may be disastrous for many already-struggling news outlets with underfunded plans.

The timing is awful. Pension payments were already set to increase next year as statutory interest rate modifications begin to be phased out. The American Benefits Council, a trade association for large employers, says the cumulative effect of the COVID recession and the rule modifications is a perfect storm. It estimates that pension bills could double next year, increasing payments owed by as much as $24 billion.273

The stimulus bill called the CARES Act (Coronavirus Aid, Relief and Economic Security) gave employers some temporary protection from increases by delaying required payment of 2020 bills until 2021. Gannett CEO Mike Reed told investors that this will increase liquidity this year by $50 million. 274

But the CARES Act omitted more extensive relief contained in the HEROES Act, including a provision specific to community newspapers. 275 Both business and news advocates are lobbying hard for adoption of these protections.

Business lobbyists want Congress to allow employers to calculate their payments using higher interest rates and allow payments over 15 years instead of seven.276 Newspaper lobbyists want a more-generous break. They want Congress to expand a provision in last year’s budget that lowered pension payments for a limited number of newspapers so more can take advantage of the relief.

That measure – the brainchild of Seattle Times publisher Frank Blethen – allowed family-owned, community papers that operate in only one state to reduce quarterly payments by assuming high interest rates. It also allowed them to stretch out payments over 30 years.

It took Blethen five years to get congressional approval for his bill. “We were told you can’t get special-interest legislation anymore, but we were desperate, so we just kept trying.” He didn’t think anyone would help large chains, so he narrowly tailored the bill.

The Congressional Budget Office said the measure would add slightly to tax revenues, since papers would have more taxable income.277 But some conservatives opposed the measure, arguing that papers are more likely to go belly up during the longer payback window, so their pension debt would be assumed by the taxpayer.278

The provision ultimately succeeded because Blethen enlisted the support of both Democratic and Republican members of Washington state’s congressional delegation and encouraged other community papers to lobby their members. “It helped that Chuck Schumer realized he had two to three family-owned papers in New York,” Blethen says, and he “tweaked” the bill to include them. McClatchy papers lobbied to be included. “We heard they were in, but then they weren’t,” Blethen says. “No one knows what happened.”

Newspaper lobbyists succeeded in getting the expansion of Blethen’s bill in the Democrats’ HEROES Act, but the measure will likely have a tougher time in the Senate, where its opponents have worked hard to prevent its passage.

Blethen estimates that his provision in the 2020 budget will help 20 papers. The newspaper trade association, the News Media Alliance, says the HEROES Act expansion will help at least another five or six chains or publishers, including McClatchy.279 McClatchy is mum on whether revised pension rules can still help the bankrupt chain, with the sale slated for July.

Ironically, the McClatchy bankruptcy may help persuade some lawmakers to give more papers pension relief. The federal agency responsible for bailing out pension plans - the Pension Benefit Guaranty Corporation - announced it may inherit McClatchy’s pension plan.280 That’s a costly result that might have been forestalled had Congress approved pension relief last December.

Indirect Government Support: Tax Credits for Newsroom Employment

In posts that read like obituaries, a Poynter Institute list of newsroom layoffs, furloughs and closures details the toll of the COVID recession.281 The loss of those jobs is a deepening crisis. Newspapers lost half their newsroom employees between 2008 and 2019, leaving behind many emaciated newsrooms unable to adequately cover their communities.282

Journalist groups are pressing for a variety of measures to slow the newest round of cuts. The NewsGuild labor union and the advocacy group PEN America have both written to congressional leadership asking for emergency funding to prevent more layoffs. Another advocacy group, Free Press, is lobbying both for direct financial support and for tax credits aimed at maintaining and growing newsroom staff.283

So far Tim Ryan’s Protect Local Media Act is the only congressional measure to contain a news-specific employment tax credit.284 It would create a credit of up to $20,000 for each new journalism hire. Ryan unsuccessfully urged Pelosi to include this in the HEROES Act. However, the Democrats’ bill includes two broader job support programs that could benefit some journalists.

The bill would expand the Employee Retention Credit, introduced in an earlier stimulus measure.285 It would allow struggling businesses to reduce their employment tax bills by up to $36,000 per employee.

The HEROES Fund also creates a $13/hour bonus for “essential workers” who continued to report to work and could not telework. Essential work includes news gathering and dissemination.

The News Media Alliance, which says it supports both measures, believes there is some Republican support for expansion of the Employee Retention Credit. So far, Mitt Romney of Utah is the only Republican senator to support bonus pay for essential workers.286 His Patriot Pay proposal creates a 75 percent refundable payroll tax credit for a bonus of up to $12 an hour for essential workers in critical industries. Congress and the Department of Labor would designate those industries deemed to be critical.

Legal Fixes: Helping Newsrooms Become Nonprofits

The Great Recession, responsible for the demise of hundreds of papers, also inspired journalists to create nonprofit newsrooms, more reliant on donations than ad revenue. The Institute for Nonprofit News last year reported that new sites have launched at the rate of one a month for 12 years. Some, like ProPublica, produce national news, but half of the institute’s 240 members are state or local news sites.

Nonprofits seem better prepared to survive the COVID recession than do for-profit outlets. The institute’s director, Sue Cross, says donations to many organizations increased during the first months of the pandemic as interest in news drove traffic to their sites. Revenue from live events declined, however, and Cross worries that a protracted downturn will hurt foundation endowments, thus limiting available grant funding.

Some journalists want Congress to make it easier for commercial news outlets to transform themselves into tax-exempt organizations.287 Rep. Mark DeSaulnier, D-Calif., has sponsored a bill to ease the conversion, and Rep. Tim Ryan, D-Ohio, recently filed a similar proposal.288

DeSaulnier’s bill, the Saving Local News Act, amends the Internal Revenue Code to clarify that entities which are organized and operated exclusively for publishing written news articles can qualify to become tax-exempt organizations. The bill also exempts any ad revenues from taxation and requires the IRS to rule on news applications within 12 months.

The bill has made little progress since it was filed a year ago, and some news advocates question whether there’s a significant constituency for the bill. Sue Cross says her members have had little difficulty winning tax-exempt status. Last fall, the first large commercial paper to become a nonprofit, The Salt Lake Tribune, found the transformation surprisingly easy.

The Tribune successfully argued to the IRS that it qualified to be a nonprofit organization under current law because it is owned and operated exclusively for educational and charitable activities, both of which are already listed as tax-exempt purposes. The IRS signed off on the application in only five months.289

But IRS actions may not always be so quick or favorable. In approving tax-exempt status for The Tribune, former Columbia Law School Dean David Schizer says, the IRS moved away from past rulings that denied the applications of news outlets. A 1977 IRS ruling that is still on the books could be invoked to again make the conversion difficult. 290 If the IRS returns to this approach, DeSaulnier’s clarifying amendment could be helpful.291

It is worth noting that nonprofit newsrooms, like all tax-exempt organizations, cannot endorse political candidates. The Salt Lake Tribune says it was willing to trade endorsements for an additional source of revenue. It points out it can continue to publish editorials on actions by officeholders. But others may be hesitant to forgo this important community service, which is especially important as voters make decisions about local races, many of which receive less coverage.

Direct Government Support: Corporation for Public Broadcasting

The Corporation for Public Broadcasting received an annual appropriation of $465 million in the fiscal 2020 budget, but most of the support for the nation’s 1,500 public broadcasting stations comes from donations and corporate sponsorships, which reportedly hace declined because of the pandemic. CPB received $75 million to help small and rural stations compensate for the losses, but that amount won’t make up for the lost income, and news advocates think CPB could receive an additional supplement.292

Some journalists see CPB as a model for the distribution of government aid because it successfully functions as a political firewall between funders and stations.293 They think the agency should be tasked with distributing emergency pandemic assistance to news organizations outside the public broadcasting system.

Free Press believes Congress should create an emergency fund for local news jobs, and that CPB should distribute money to both nonprofit and for-profit newsrooms.294 Steve Waldman of Report for America argues that CPB should help fund all nonprofit news outlets, not just public broadcasters.295 He’d also like Congress to rewrite the statutory formula that governs most of the corporation’s funding decisions, directing more money to public radio stations trying to improve local news.

But many journalists think CPB should be revamped altogether to address the crisis in local news. They argue that corporation’s original mission is outdated. Americans today no longer need an alternative to the “vast wasteland” of commercial television.296 297 Television is in a “Golden Age” in which audiences can stream award-winning entertainment from around the globe. Audiences need news about their communities, they argue, not reruns of “Downton Abbey.”

Former CPB board member and self-described conservative Howard Husock is the most prolific advocate of this refocusing. He points out that public television - which receives about three-quarters of CPB’s appropriation - produces almost no local news, while many public radio newsrooms are underfunded.298

Husock’s argument is supported by data from a survey conducted jointly by the Radio Television Digital News Association and Hofstra University. It shows only 13 of the country’s 169 public television stations run a daily local newscast.299 Two-thirds of public radio stations broadcast local news, but the survey’s author, Robert Papper, says budgets are so tight that many struggle to support just a single reporter.300

Husock’s proposal, which he’s pitched to House and Senate commerce committees, would rewrite CPB’s statutory funding model. 301 It would eliminate the requirement that radio stations spend a large percentage of their grant on national programming. He believes that NPR could be self-sufficient, although the national syndicator has announced it may cut staff positions because of the pandemic. Husock would also end the requirement that funds be used for the infrastructure of television distribution. He says these and other changes would allow stations to expand their investments in local journalism without increasing CPB’s annual appropriation.

Whatever the merits or deficits of Husock’s idea, it has never been translated into bill language, and there is no visible support for amendment of CPB’s authorizing legislation. And amending the statute is perilous at the current time when journalism-bashing is a popular political tactic.

But some point out that CPB can receive additional funding without an amendment of the law. The corporation received an additional $20 million for infrastructure in its FY 2020 budget as well as the $75 million stimulus supplement. They argue that Congress should give CPB additional funding for local news, which can then be used by station managers as they see fit.

Market-Based Relief: Increasing Advertising Revenues From Digital Sites

More than half of the country gets its news from the Internet, so it’s no surprise that businesses have been spending less on print and broadcast ads and more on digital marketing.302 Last year the research company eMarketer forecast that spending on digital ads would outstrip outlays on traditional ones, and much of that increase would come from amounts previously spent on print advertising. 303

The shift has been disastrous for newspapers; advertising revenues dropped from $49 billion in 2005 to $25 billion in 2012, and the Pew Research Center estimated they dropped again to $14 billion in 2018.304 Even traditional news outlets with digital sites say the loss of advertising revenue has been crippling. Part of the reason for the decline, publishers say, is that platforms like Facebook and Google - which together earn more than half of all digital ad dollars - share only a fraction of the ad revenue.305 Publishers pay the cost of reporting the news, and they want a larger share of the profits.

Google says that news outlets receive more than 70 percent of the revenue generated from ads on their sites and that news outlets benefit when search engines send readers to their sites. If publishers were getting a raw deal, some tech analysts say, they would hide their content behind a paywall.

Newspapers counter they receive substantially less than 70 percent of the revenue and repeat a News Media Alliance study that found Google earns $4.7 billion from news content. 306 They also worry that a single algorithm change will obscure their sites, putting them out of business.307 308

Few individual news organizations have the power to negotiate with the digital behemoths for better compensation, so the News Media Alliance drafted a measure allowing publishers to combine efforts without the threat of prosecution for violating antitrust laws. The bill is sponsored by Rep. David Cicilline, D-R.I., chairman of the House Judiciary Committee’s Anti-Trust Subcommittee. His Journalism Competition and Preservation Act gives publishers a four-year safe haven while they negotiate with large platforms.309

Cicilline first filed the bill in 2018, but the measure didn’t gain traction until last year, when a bipartisan group of co-sponsors signed on, and Sens. John Kennedy, R-La., and Amy Klobuchar, D-Minn., filed a companion bill in the Senate.310 311 Libertarian Sen. Rand Paul, an opponent of antitrust laws, agreed to co-sponsor the bill. According to the News Media Alliance’s Danielle Coffey, Paul “loved the market-based approach.”312

The bill’s prospects were immeasurably improved earlier this year when Senate Majority Leader Mitch McConnell agreed to become a co-sponsor, reportedly after speaking with a friend who runs Kentucky’s Bowling Green Daily News.

Support for the bill also has been buoyed by “techlash,” the growing public sentiment that tech giants must be held responsible for privacy violations and disinformation as well as their impact on local media.313 Rep. Cicilline’s antitrust subcommittee, the Federal Trade Commission, state attorneys general and the U.S. Department of Justice are all conducting investigations, and lawsuits against Google reportedly are imminent.314 315

International pressure is mounting as well. After several ill-fated European attempts to force Google to pay publishers, France’s competition regulators have ordered the tech giant to negotiate with local publishers over licensing fees. Australia will soon require Google and Facebook to compensate publishers to reuse their content.316

Cicilline’s staff reports that it will wrap up its investigation later this year and expects that the congressman will strengthen his bill by ensuring local media have a seat at the negotiating table.317 318 As currently written, the bill is silent on negotiation details, and local outlets worry that large national organizations could dominate.

There’s a real question of how much local news outlets will benefit if the bill passes. Walter Hussman, who publishes the Arkansas Democrat-Gazette and over a dozen other local papers, says digital marketing changed the business. “There used to be a limited number of places you can run a print ad. Now there are hundreds of places that sell ads at cheaper rates.” Competition has pushed rates so low that advertising revenues simply can’t sustain a newsroom. As a result, Hussman says, negotiations with the platforms won’t yield enough to make a significant difference to most newsrooms.

Some industry analysts, including Nieman Lab’s Ken Doctor, think success will be limited because publishers need the platforms more than tech giants need news. According to Doctor, around 85 percent of publishers’ external traffic comes from Google or Facebook, but only 4 percent of Facebook’s News Feed posts include news.319 So even if publishers get together and tell the platforms, “Give us x cents for every story,” big tech will say, “No deal; we don’t need your content.” Then some publishers will break ranks rather than lose search engine audiences.

Still, Doctor believes tech dollars could make newspapers both more viable and more valuable, potentially more inviting to investment firms.320 The president of Alden Global Capital, a company known as the “Destroyer of Newspapers,” recently announced he’d like some of those tech payments. In a letter shared on Twitter by New York Times correspondent Ben Smith, Alden’s President Heath Freeman comments without irony, “Fees from those who use and profit from our content can help us continually optimize our product as well as ensure our newsrooms have the resources they need.”321

Broadcast Consolidation and Diversity: The Federal Communications Commission

While local newspapers have been struggling to survive, television stations have been thriving – at least up until the pandemic. Stations have been the beneficiaries of a seemingly limitless supply of spending on political campaigns, thanks in part to the Supreme Court’s decision in Citizens United. That revenue is so significant that it’s bolstered the value of stations in markets with highly contested races, particularly those in swing states.

Stations also earn hefty retransmission fees—payments from cable and satellite companies that carry their programming. According to Robert Papper, who conducts a station survey, these account for nearly 40 percent of station revenue.322

Flush station coffers have been good for local news. Papper’s survey finds local television news production is at an all-time high.323 But the profitability of some stations has also made them attractive acquisitions for large media companies like Sinclair Broadcasting, Tegna Inc. and Hearst Corp., and the Federal Communications Commission has given the go-ahead to a number of mergers and consolidations.

Proponents of consolidation, including current FCC Chairman Ajit Pai, argue that the mergers create economies of scale, helping broadcast and print outlets survive in the digital age. Pai says “cross-owned” television stations produce more local news than comparable “noncross-owned stations” and argues that less-stringent ownership rules will allow TV stations to bail out struggling newspapers.324

Pai believes more consolidation would be even better. The FCC has tried to loosen ownership rules several times over the past two decades, but its rulings have been overturned in court.

Former FCC Commissioner Michael Copps says the commission has encouraged hundreds of deals, but the consolidations have “cut the muscle out of deep-dive reporting” and closed newsrooms.325 He worries that FCC’s desire to bless acquisitions has compromised its mission to protect localism, diversity and competition.

Journalists and publishers are divided over the issue. It’s true that large stations produce more local news than smaller ones, and the News Media Alliance says broadcasters can help save papers. But advocacy groups say consolidation means small communities won’t be covered. They also worry about editorial independence of acquired stations; it’s hard to ignore Sinclair Broadcasting’s now infamous corporate mandate requiring all its anchors to read the same conservative political script.326

The FCC’s most recent rule change occurred in 2017. In a politically controversial move, the commission’s Republican appointees overrode objections by the Democratic minority, paving the way for more common ownership of television and radio stations as well as increased common control of stations and newspapers. The FCC also relaxed restrictions on ownership of top-four television stations within the same market.

The Third Circuit Court of Appeals again vacated the changes, saying the FCC had not adequately considered the effect its “sweeping rule changes” would have on ownership by women and racial minorities. Chairman Pai announced he would appeal the ruling, and on April 17, the solicitor general petitioned the Supreme Court to hear the case.327

Several broadcasters and newspaper publishers joined the FCC in requesting Supreme Court review.328 The News Media Alliance and the National Association of Broadcasters are among the petitioners. So is Sinclair Broadcast Group, which reportedly now hopes to purchase papers in many major markets where it owns stations.329

While the saga of FCC’s rule changes plays out in court, several members of Congress are trying to influence the FCC through legislation. Rep. Jared Huffman, D-Calif., wants to limit consolidation by curtailing the reach of any given broadcaster. His Local and Independent Television Protection Act eliminates the FCC’s so-called UHF discount, an accounting rule that allows a company to double the number of these stations it controls.330

The discount was once necessary because the UHF signal was typically less powerful than VHF. The discount took this into account, allowing companies to own more UHF stations before hitting a national cap on the number of households they could reach. The conversion from analog to digital eliminated the distinction between signals, and the Obama FCC eliminated the discount. Chairman Pai reintroduced it, making critics worry that he was paving the way for Sinclair Broadcasting to merge with Tribune Media Co.

Huffman first introduced his bill in 2017, after Pai’s FCC reintroduced the discount. The FCC ultimately rejected the Sinclair merger, however, and the bill never made it out of committee. Huffman reintroduced his bill in the 116th Congress, but it hasn’t moved.

Several representatives are worried about the lack of diversity among station owners, and they’ve sponsored bills to force the commission to better address the issue. 331 Late last year, the House Energy and Commerce Committee held hearings on the diversity bills, and it looked like the committee was ready to move forward.

The most expansive proposal, sponsored by Rep. G.K. Butterfield, D-N.C., re-establishes a tax certificate program that allows owners to defer taxes when they sell their stations to women and minorities.332 A similar certificate program was in place from 1978 to 1995, and was credited with growing minority ownership.333 But the program also encouraged sham sales, designed to take advantage of the tax breaks. Congress canceled the program just as Viacom was set to receive deferrals worth millions and the U.S. Supreme Court struck down race-based initiatives.334

Butterfield’s staff says his bill avoids the problems of the earlier tax certificate program. It says his bill is narrowly tailored to steer clear of constitutional problems, and it requires purchasers to hold stations for two years, thus discouraging fraudulent transactions. But Butterfield’s office acknowledges that the bill has yet to attract needed Republican support.

Several of the bills, including Butterfield’s, require the FCC to increase its reporting on diversity among station owners. The Enhancing Broadcaster Diversity Act, introduced by Rep. Yvette Clarke, D-N.Y., requires the commission to collect and analyze data on diversity. It also directs the FCC to complete its rulemaking on equal employment opportunity rules, which has been on hold for over two decades.335 The MEDIA Diversity Act, introduced by Rep. Billy Long, R-Mo., requires the commission to report on barriers to ownership by socially disadvantaged individuals.336 His is the only bill with Republican support.

A House Energy and Commerce Committee subcommittee advanced all three measures in early March. But they’ve been stalled while Congress focuses on COVID response. Staffers now think the bills are unlikely to get much attention for the remainder of the year.

Efforts to Slow or Reverse Consolidation

The Great Recession ushered in the era of a new kind of media baron: private investment entities whose primary goal was the maximization of return on investment.337 As newspaper advertising and subscription revenues dropped, private equity firms and hedge funds snapped up distressed properties, consolidating ownership. By the end of 2014, six of the 10 largest newspaper chains were investment firms, which owned 1,039 papers, including 348 dailies and 691 weeklies. Those numbers began declining in 2017, as two of the smallest private equity firms sold their newspapers.

Today, four large firms own 15 percent of the country’s papers: the private equity firm Apollo Global Management, hedge funds Chatham Asset Management and Alden Global Capital, and Fortress Investment Group, a diversified firm that manages both private equity and hedge funds.

The era of consolidation has been marked by shuttered papers and hollowed-out newsrooms. Alden Global Capital earned the nickname “Destroyer of Newspapers” for selling off assets, cutting staff and loading papers up with so much debt that bankruptcy becomes inevitable. Alden insists it is saving newspapers already in decline, but according to The Washington Post, it manages to eke out profits that are substantially higher than those of other newspaper chains.

Several members of Congress have called out the hedge fund. “Alden has pursued a strategy of acquiring newspapers, cutting staff and then selling off the real estate assets of newsrooms and printing presses at a profit,” Senate Minority Leader Chuck Schumer, D-N.Y., wrote, publicly demanding to know what Alden would do if it acquired Gannett.338 “Alden Global Capital must reverse course and put an end to policies that have hollowed out local newspapers,” wrote Illinois Democratic Sens. Dick Durbin and Tammy Duckworth earlier this year as the hedge fund prepared to take over Tribune Publishing.339

Steve Waldman of Report for America wants to “uproot” chain-owned papers and “replant” them as locally owned nonprofit news organizations.340 To do this, he would offer large tax deductions to companies willing to divest themselves of newspapers, then ease the paper’s transition to nonprofit status.

Waldman would also create a well-endowed “deconsolidation fund,” which would offer bankruptcy lawyers and transition capital to foundering newsrooms. Funding would come from Congress, philanthropy or some combination.

Sen. Elizabeth Warren, D-Mass., last summer filed a bill to curtail the ability of private equity firms to force debt onto their target companies while laying off workers. The Stop Wall Street Looting Act includes provisions that, among other things, require firms to share responsibility for the debts of the companies under their control and prevents them from sucking capital out of target firms by delaying capital distributions. The bill also increases bankruptcy protections for employee pay and severance.

Warren’s staff was unavailable to comment on her bill, but an economist who analyzed the bill for her office believes it will have a limited impact on newspapers.341 Eileen Appelbaum, the co-director of the Center for Economic and Policy Research, says increased bankruptcy protections for workers apply regardless of ownership, but many of the bill’s other provisions apply only to private equity funds, not hedge funds like Alden. “Hedge funds are governed by other rules,” she says. “If the company is governed by rules covering publicly traded companies, then the Stop Wall Street Looting Act won’t help.” 342

Private equity firms launched an advertising campaign against the bill, and the U.S. Chamber of Commerce, Washington’s biggest lobbying shop, says it will cost millions of U.S. jobs.343 Neither Warren’s bill nor its companion bill in the House has moved since they were filed last summer. One Bloomberg Law analyst noted, however, that if Democrats win big in November, many of the bill’s provisions will likely earn serious consideration.344

Direct Government Support: State Funding

“Things are so bad, we need an all-of-the-above approach,” says PEN America’s Viktorya Vilk. “It can’t just be federal funds; we’re pushing governors to include financial support for local media in their pandemic plans.”

Vilk is not alone. The Colorado Media Project, a community foundation-funded effort, wants Colorado to support public-private partnerships that will give grants to local news outlets. Both Vilk and the Colorado Media Project look to New Jersey’s Civic Information Consortium as a model of state engagement.345

The forum was the brainchild of Free Press’ Mike Rispoli. But, as Rispoli can tell you, getting state aid is difficult in the best of times. He worked for years to persuade New Jersey to fund local journalism, then watched as his ambitious initiative was whittled down to 2 percent of its original size. After years on the drawing board, the Civic Information Consortium finally got its start earlier this year. Then its funding was frozen when New Jersey’s revenues fell victim to the pandemic.346 But despite all the setbacks, Rispoli succeeded in persuading lawmakers to create the forum, and his experience is instructive.

“New Jersey is a news desert,” Rispoli says, explaining how he became a community activist for local news. The state was once reliant on community papers, but then Gannett went on a shopping spree in 2016, purchasing many smaller chains, including the News Jersey Media Group, which owned The Record and three dozen smaller papers in New Jersey. People were hungry for good information, but they asked, “Why should I pay for this paper when Gannett stopped covering my community?”

When Rispoli learned New Jersey would receive a billion-dollar windfall from the 2017 sale of unused television spectrum, he lobbied lawmakers for $100 million to fund a nonprofit grant-making organization to support local journalists. To prevent funders from influencing the projects, Rispoli designated five state colleges and universities that would work together to create the charitable organization. The nonprofit would have its own staff but would be governed by a large board whose members are variously appointed by the governor, the legislature, community organizations and institutions of higher learning, so no group would have an inordinate influence.

The legislature approved the project. Rispoli attributes its success to a groundswell of community support for local news, fostered during his years of advocacy. The Senate majority leader backed the bill, perhaps because her local paper, The Record in northern New Jersey, was decimated by layoffs after it was purchased by Gannett.

The spectrum sale ultimately netted only $332 million, however, and Gov. Chris Christie used all but $10 million to plug holes in the state budget. So Rispoli revamped the proposal so that it called for only $5 million. By the time the legislature approved the revised project, the money was gone. Finally, late last year, a new governor found $2 million, and a board was formed. Rispoli expected funds would begin to flow. Then the pandemic again emptied state coffers.

Rispoli hopes the organization will eventually receive an annual appropriation. But as his experience has shown, state funding can be unreliable. That’s especially true now as the COVID recession wrecks state budgets, forcing dramatic cuts. State shortfalls, projected at 15 percent this year, will likely be worse in the 2021 fiscal year.347 348 New Jersey has frozen all discretionary spending, and Colorado expects its revenues will fall by almost a quarter. Since almost all states have balanced budget requirements, there will likely be hard-to-make cuts even if federal help arrives.

Rispoli is philosophic. “The pandemic is accelerating structural problems with local news ... There is no amount of 'please subscribe to this paper' that will help … Right now public funding at the state and municipal level is a real hard ask. It’s going to require some kind of federal government intervention; the problem is way too big.”

Next: The Path Forward: Reinventing Local News