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§ 24.8 FUNDRAISING COST LIMITATIONSextends to the solicitation of contributions by an educational institution to its studentbody, alumni, faculty, and trustees, and their families. A few states exemptsolicitations by educational institutions of their constituency from the entirety oftheir charitable solicitation laws.Many educational institutions undertake some or all of their fundraising bymeans of related foundations. Some states expressly provide exemption, in tandemwith whatever exemption their laws extend to educational institutions, tothese supporting foundations. A few states exempt alumni associations from theregistration requirements.The rationale for exempting educational institutions from coverage underthese laws is the general rationale articulated above. These institutions do notsolicit the general public, there have not been any instances of abuses by theseinstitutions of the fundraising process, these institutions already adequatelyreport to state agencies, and the inclusion of these institutions under the charitablesolicitation statute would impose an unnecessary burden on the regulatoryprocess.Some states exempt hospitals (and, in some instances, their related foundations)and other categories of health care entities. Again, the exemption can befrom the entirety of the statute or from its registration and reporting requirements.Other exemptions for organizations may include veterans’ organizations; policeand firefighters’ organizations; fraternal organizations; and, in a few states, organizationsidentified by name. Exemptions are also often available for membershiporganizations, small solicitations (ranging from $1,000 to $10,000), and solicitationsfor specified individuals.Some of these exemptions are available as a matter of law. Others must beapplied for, sometimes on an annual basis. Some exemptions are not available orare lost if the organization utilizes the services of a professional fundraiser orprofessional solicitor.§ 24.8 FUNDRAISING COST LIMITATIONSOnce, the chief weapon for state regulators in this regard was laws that prohibitedcharitable organizations with “high” fundraising costs from soliciting in thestates. Allegedly “high” fundraising expenses were defined in terms of percentagesof gifts received. These laws proliferated, with percentage limitationsextended to the compensation of professional fundraising consultants and professionalsolicitors. The issue found its way to the Supreme Court, where all ofthese percentage limitations were struck down as violating the charities’ freespeech rights. This application of the First and Fourteenth Amendments to theConstitution stands as the single most important bar to more stringent governmentregulation of the process of soliciting charitable contributions.As noted, the states possess the police power to regulate the process of solicitingcontributions for charitable purposes. The states cannot, however, exercise thispower in a manner that unduly intrudes on the rights of free speech of the solicitingcharitable organizations and their fundraising consultants and solicitors.First, the Supreme Court held that a state cannot use the level of a charitableorganization’s fundraising costs as a basis for determining whether a charity 633