Business of News

Weighing different paths to funding local news

April 16, 2021

As discussions on how to help save local news continue, new bills and ideas have come to the fore. Independent newspapers are coalescing around the Local Journalism Sustainability Act which proposes direct subsidies (in the form of tax credits) for news subscribers, local journalists and small business advertisers. Sweden has a similar news subsidy system. 

Large media outlets are backing the Journalism Competition and Preservation Act which will allow outlets to band together to negotiate with Google and Facebook. In some ways this is like Australia’s recent News Media and Digital Platforms Mandatory Bargaining Code

Economists tend to prefer another idea, which is giving citizens vouchers they can use to pay for news subscriptions. Economist Julia Cagé has led some of the discussion on this topic. But the overall feeling among progressive economists is that it’s better not to get the tax system involved and that vouchers are more equitable. Media activist and scholar Robert McChesney discusses with Steve Waldman, founder of Report for America, the question of whether we should all push for a New Deal for Journalism or a current proposal that would use tax credits to support local news, while economist Andrea Prat weighs in in favor of vouchers. All the plans share the idea that local communities and people make decisions about which outlets to support. 

Robert McChesney: I am despondent about the state of journalism reform at this point in the United States. We need to put forth a bold vision that will actually solve the problem—a Green New Deal for journalism, if you will—if we are going to have any hope of getting the popular awareness and support to actually get programmatic change. I am pushing for the federal government to include in its budget $200 per adult citizen that would be allocated towards local media, through county elections, with the whole project run by the US Post Office. We’re calling it the Local Journalism Initiative. Am I missing something? Do you see a different route to success?

Steve Waldman: I share your pessimism about the state of local media, but am more optimistic about prospects for bold legislative action. We almost got $600 million into reconciliation for local news. There’s more discussion about positive policy remedies than I’ve seen in ages.

My thinking on this has simplified: we should all mobilize around the idea of a $250 refundable tax credit that Americans could use to buy local news subscriptions or donate to local nonprofit news organizations. Ideally, we would also have a jumbo tax credit for hiring and retaining journalists too [as Canada has done].

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This is spiritually similar to the voucher idea, but much more likely to happen rapidly. It could eventually lay the groundwork for a voucher approach, if it works reasonably well. It would pump much more money into local news than most of the other ideas out there.

The refundable tax credit, without much effort, already has seventy cosponsors including nineteen Republicans. It appeals to Dems because it would pump billions into local news (many times the level for the Corporation for Public Broadcasting) and it’s tolerated by Republicans because it’s the residents making the decisions rather than a government agency. Of all the ideas I’ve seen, it’s the closest in spirit to the postal subsidy and mimics the benefits of the charitable deduction. Let’s unite around it!

There are limitations. How do you get people to actually use it? How do you keep it from just being used by people who already are donating to nonprofit news or subscriptions? Those are real issues. But my vote is that we put our brains toward trying to improve the refundable tax credit scheme to answer those issues.

What do you think?

Robert McChesney: Your refundable tax credit plan deserves more than a casual response. I agree it is a positive sign that it is making headway on the Hill. Thank you for your hard work. On the surface though, it seems that if it passed, it would provide resources to get us back to where we were in around 2015 or 2016—maybe 2011—and that seems hardly the stuff that will inspire anyone, except the people who manage to collect some of this money. How do we get the resource level back to where it was for most of US history, or at least to 1980s levels?

This is the public policy imperative facing the United States regarding journalism in 2021: we need the funding to support independent, competitive, professional local news media. That money must come from the government, but we cannot allow the government to pick and choose who gets the money. The policy must be like the postal subsidy of newspapers: large enough to get the job done, and it cannot discriminate on the basis of ideology or political viewpoint. Censorship is entirely unacceptable. It must allow the people to make of it what they will, and trust them in the process of self-government. 

The Local Journalism Initiative would be a government-funded program to spend $32-35 billion annually to two ends: first, to provide immediate and significant relief to the beleaguered local commercial news media sector to stop the bleeding, and allow a grace period of up to five years to find a workable long-term commercial model or convert to non-profit status; second, to provide the resources to provide permanent support to the emerging independent non-profit journalism sector, so it can spawn a vigorous competitive and dynamic Fourth Estate.

The recipients of LJI money would be selected in an annual vote to pick winners at the county level who would choose up to three non-profit outlets they want to support in their county. This is a purely democratic, transparent mechanism for the allocation of public money to support the production of local journalism. The core idea is simple. Every resident over eighteen with a social security number or a tax identification number would be entitled to vote. Voters in more populous counties might have more than three votes, but that can be determined later.

The Local Journalism Initiative would get money into communities to provide the sort of resources not seen in local journalism for many decades. It solves the resource problem and simplifies the administration. It would be, without question, the most empowering racial justice legislation concerning the media ever by a wide margin. In effect, communities of color would have the resources for quality community news and people in those communities would determine who gets the money.

True, the plan I helped author might get dismissed categorically in a committee meeting on the Hill right now, but publicize it and generate widespread public support and, at the least, it will give you an army of loud enthusiastic supporters such that you might be able to generate $6 billion rather than $600 million for the refundable tax credit plan.

Waldman: My very back of the envelope calculation is that if the uptake was strong, the tax credit could put about $1.0- $1.5 billion into the local news economy (compared to the entire CPB budget of $500 million). It’s structured as an entitlement, not as a discretionary grant tied to appropriations. So the upside is quite enormous. The key variable is whether people actually use it. If they don’t, it’s a minor factor. If they do, it’s transformative.

The other advantage of the tax credit is that it’s, in effect, an entitlement rather than a set amount determined through appropriations. Given that Congress has never gone above $500 million or so for CPB, it’s hard for me to imagine that they’d do a $5 billion or more annual discretionary appropriation for local news. On the other hand, I could easily see them approving a tax credit––this year––that would get $5 billion into the local news economy quickly.

I’m open to persuasion that a voucher-style plan could be done quickly, and at a $5 billion level. But I’d like to ask that you also consider the possibility that the best tactic right now is to try to improve the refundable tax credit and rally around it. 

Andrea Prat: Both Robert McChesney’s Local Journalism Initiative and Steve Waldman’s refundable tax credit are highly promising plans for two reasons. First, political news is a crucial and underprovided public good especially at the local level. There is abundant evidence that better information empowers voters to keep government accountable and leads to better public services. Both plans are likely to inject substantial additional resources for the provision of this important public good.

Second, the other key issue in this area is information inequality. As my recent paper with Charles Angelucci shows, some US voters have relatively good political information, while others—about 40 percent of the population—are often unaware of major recent political events. Any public intervention in this area should aim to reduce this gap. Some proposals—like tax rebates for news organizations or journalists—do not do much to reduce information inequality because funds are distributed in proportion to the current unequal news consumption patterns. That is why most economists support a “voucher system” that will give each individual a voice in how news is produced. Both proposals include a one-person-one-vote component. McChesney’s plan does so with community votes to allocate local funding to the tune of $200 per resident, while Waldman’s operates through a $250 tax credit for every citizen.

Where the two proposals differ is in the allocation mechanism. One advantage I see in LIJ is that it guarantees that funds go to local news sources and they are evenly distributed across the country. Otherwise, an unrestricted tax credit may end up being lavished on national media like the New York Times or the Wall Street Journal, that are already well funded. [this is unlikely to happen under the Local News Sustainability Act as eligible outlets need to have a local audience.] Another advantage of LIJ is that it allocates $200 to every (adult) citizen. Instead, the $250 tax credit would only be used by people who have a sufficiently high income to pay tax and because they have enough information to take advantage of this mechanism. 

The advantage I see in Waldman’s proposal is that the allocation mechanism is extremely simple and provides a strong individual incentive to participate. Instead, LIJ’s voting approach risks being manipulated by local government in the same way it manipulates other elections. The risk is that many voters will not participate in the vote and the allocation will be decided by the same socioeconomic groups that are disproportionately represented in US elections. 

These are two promising proposals. The pitfalls I identify are serious but not terminal. There are a number of ways to deal with them. 

Julia Cagé: I do agree with Andrea Prat and also in general support vouchers for several reasons when compared tax credits.

A US voucher could happen through the IRS; in fact, this is essentially the proposal we made with Anya Schiffrin, Andrea Prat, Guy Rolnik and others for the Stiegler Center in 2019 and so could be implemented as quickly as the tax credit. This is how the funding of religious organizations has worked in Italy for decades, as well as the funding of political parties (since 2014). I favor a similar reform for the funding of political campaigns in France and other Western democracies. In my book The Price of Democracy, I describe the Italian “due per mille” system and discuss mechanisms —for example, through a block-chain to guarantee the anonymity of the allocation—that could be implemented if one were to introduce “democratic equality vouchers.”

One of the main advantages of the voucher is that you can limit how many vouchers each outlet can receive and so ensure media pluralism. For example you can say no outlet can receive more than one percent of all the vouchers. You also avoid the problem (as in the case of a tax credit) where only people who already subscribe to a media outlet might take advantage of it. There is a very high risk with tax credits for subscriptions that they will benefit only those citizens who were already consuming news, and not increase the demand for other media. Were this to happen, at the local level, there would be a cost for the State without any welfare improvement in terms of how-well informed citizens will be.

Further, with a voucher system, one can make sure that all citizens benefit from it: if one does not check the “media voucher box” at the time of filling her tax form to allocate the voucher to the media outlet(s) of her choice, then the government will allocate the corresponding amounts depending on the preferences expressed by others (again, this is how it has worked for decades for the funding of religion in Italy). This could be done just straight up through the IRS – it’s similar to what happens at the time of an election!

The Journalism Crisis Project aims to train our focus on the present crisis, tallying lost jobs and outlets and fostering a conversation about what comes next. We hope you’ll join us (click to subscribe).

EXPLORE THE TOW CENTER’S COVID-19 CUTBACK TRACKER: Over the past year, researchers at the Tow Center have collected reports of a wide range of cutbacks amid the pandemic. Now there’s an interactive map and searchable database. You can find it here.

CONTRIBUTE TO OUR DATABASE: If you’re aware of a newsroom experiencing layoffs, cutbacks, furloughs, print reductions, or any fundamental change as a result of COVID-19, let us know by submitting information here. (Personal information will be kept secure by the Tow Center and will not be shared.)

Below, more on recent media trends and changes in newsrooms across the world:

  • SUBSTACK GOES LOCAL: Substack announced a local news initiative, with one million dollars in stipends divided among as many as thirty local reporters (if you do the math, that’s around $33,000 per writer, if split evenly; the announcement refers to a “cash advance,” though it’s unclear how exactly the money would be distributed). The announcement also indicates that writers—selected by a panel of judges—will receive mentorship, design services, and subsidized access health insurance. Critics of the project have noted its lack of explicit focus on equity and its dependence upon a gig worker model. For Vox, Peter Kafka spoke to Substack’s co-founders about the initiative, writing “Substack, to its credit, doesn’t argue that it can single-handedly save local news, just that it thinks there is an audience that will pay to read it and journalists who can make a living selling it.”
  • DISRUPTION, OPPORTUNITY, AND NONPROFIT MODELS: For CJR, Gabby Miller wrote about Isthmus, a 45-year-old alt-weekly in Wisconsin that switched to a nonprofit model after COVID-19 led to layoffs of the entire staff. “Isthmus converting into a nonprofit is just one of many instances of journalists using the disappearance of local news—exacerbated by industry-wide newsroom cutbacks during the coronavirus pandemic—as an opportunity to rethink what news looks like in their community,” Miller writes. Elsewhere, NiemanLab reported that philanthropic support for The Guardian reached $9 million in 2020. And independent newspaper DigBoston produced a short documentary about their year weathering the pandemic.
  • BUYING NEWSPAPERS INSTEAD OF YACHTS: Though billionaire philanthropists often encounter well-deserved skepticism for their pointed generosity—as inequality continues to increase and rich donors exert power by choosing what to fund and what not to fund—many wealthy philanthropists can still gain praise by investing in local journalism, Nicholas Kulish wrote for the New York Times. “From Utah to Minnesota and from Long Island to the Berkshires, local grandees have decided that a newspaper is an essential part of the civic fabric,” Kulish writes. “Their track records as owners are somewhat mixed, but mixed in this case is better than the alternative.” (Elsewhere, a Reuters Institute podcast asks how to create journalism that reaches beyond wealthy, powerful, well-educated audiences.)
  • TO PRINT OR NOT TO PRINT: For RQ1, Mark Coddington and Seth Lewis reported on a study examining the value of print media through the eyes of readers across the world. Longstanding print habits are tied to rituals, culture, traditions, and “non-news practices,” the study found. “For media both old and new, by shifting attention away from content and technology features and instead looking at the broader experiences and understandings of people, we can pick up on cues that media-centric research may have missed about the essential features of media in everyday living,” Coddington and Lewis write. Elsewhere, for Second Rough Draft, Dick Tofel argued that Tribune Publishing—under any ownership—ought to eliminate print and move fully to digital.
  • TRIBUNE IS ALREADY STRUGGLING: Tribune Publishing’s news capacity is already drastically diminished, Rick Edmonds reported for Poynter. Pennsylvania’s Morning Call has no editor dedicated to sports, business, or politics. At the Baltimore Sun, only three of last year’s eight Pulitzer-winning reporters are still at the paper. “In the many reports on the fight for Tribune Publishing, the damage already done to the newsrooms at its nine metro papers may have been overlooked,” Edmonds writes.

  • MORE LAYOFFS, CLOSURES: Lee Enterprises laid off nine reporters at the Roanoke Times in Southwest Virginia. BuzzFeed shut down their UK news desk.
  • HOW THE CITY AIMS TO BUILD A TWO-WAY STREET: THE CITY’s Open Newsroom initiative holds community gatherings to ensure that its journalism is part of a conversation, a “two-way street” that benefits from the expertise of both reporters and community members, Melissa DiPento, educational coordinator at the Newmark School for Journalism wrote on Medium. Partnering with local public libraries—a “natural partner” for the work of engaged journalism—THE CITY learned “that most people were not learning primarily from news outlets, but from an informal network of local information sources and personal connections.”
  • A HYPER-LOCAL PLATFORM IN INDIA MONETIZES SHOUTOUTS: Lokal, a hyper-local community-based information app in India, made $60,000 in March on shoutouts and classified ads, services that newspapers in India typically offer, NiemanLab reported. Lokal is available in Tamil and Telugu, two of India’s most widely-spoken languages. “Apart from the shoutouts, it’s about needs,” Jani Pasha, one of the app’s co-founders, told Hanaa’ Tameez. “If a business posts a job opening in a newspaper, he said, the job might take 30 days to fill. On Lokal, ‘it’s happening in less than seven days.’”
  • PUBLISHER SEES MORE READERS AFTER LEAVING FACEBOOK: In New Zealand, Stuff, the country’s largest news publisher, stopped publishing on Facebook or Instagram and increased its readership, NPR reported. Feeling “uneasy” with Facebook’s lax editorial standards around misinformation and hate speech, Sinead Boucher, the company’s chief executive, took a risk by ceasing to rely on the social media platform, which drove a quarter of Stuff’s traffic before the shift. Though the publisher lost some social media traffic, its overall traffic increased, and reader donations also increased. Stuff’s success, Boucher says, shows that there is life for publishers beyond Facebook.
  • DOUBLING DOWN ON HOUSING COVERAGE YIELDS VIEWERS: WSOC-TV in Charlotte, North Carolina improved ratings by diving deep into coverage of affordable housing, BetterNews reported. “We had to unite people and empower them to make a difference through their work,” WSOC executives said. “That meant using new language. We started using terms like ‘our neighbors’ when referring to people facing housing issues. We also used phrases like ‘a safe place to live’ when appropriate, to get away from the phrase ‘affordable housing crisis.’”
  • LOCAL PUBLISHER EXPANDS IN UK AFTER JOB CUTS: In the UK, Reach—one of the largest regional news publishers in the country—has announced its commitment to having a local news publication in every county in England and Wales by the end of the year, PressGazette reported. (The company cut 550 jobs in the summer of 2020). 

JOURNALISM JOBS AND OPPORTUNITIES: Poynter has put together a list of places to search for journalism jobs and internships. MediaGazer has been maintaining a list of media companies that are currently hiring. You can find it here. The Deez Links newsletter, in partnership with Study Hall, offers media classifieds for both job seekers and job providers. The Successful Pitches database offers resources for freelancers. The International Journalists Network lists international job opportunities alongside opportunities for funding and further education.

––Lauren Harris

This post has been updated.

Dr. Anya Schiffrin is the director of the Technology Media and Communications specialization at Columbia University’s School of International and Public Affairs.