Report Estimates Extended Benefits of Every Foundation Dollar Spent

Giving by foundations supports the economy of the United States, with $1 of every philanthropic contribution producing more than $8 in economic benefits, says a new study.

While the social effects of foundation giving are often examined, the study is the first extensive look at how philanthropy helps household incomes and the economy, says its sponsor, the Philanthropic Collaborative.

The collaborative is a new coalition of grant makers, charities, and elected officials, with a goal of educating federal and state lawmakers about philanthropy.

It plans to share its study with members of Congress, some of whom have raised questions about whether the tax exemption of foundations — and its subsequent drain on government revenue — needs to be re-examined.

“In difficult times, we have to resist the temptation of short-term thinking. It will cost us much more tomorrow if we undercut our investments in the foundations that support our communities today,” said David Cicilline, mayor of Providence, R.I., and a member of the Philanthropic Collaborative.

$368-Billion in Benefits

The study, which was produced by Sonecon, a research company in Washington, says the $42.9-billion the country’s 70,000 or so philanthropies awarded in 2007 produced $367.9-billion in “direct, economic welfare benefits.”

The findings include:

• For every $1 given to health-related efforts, $7.60 is produced. For example, a foundation that supports home care for the elderly or disabled people generates savings for the local health-care system by preventing hospital visits.

• For every $1 to human services, a $10.91 benefit is generated. A charitable fund, for instance, that makes a grant to train people in computer programming or other skills creates an economic benefit with the increased wages the participants receive thanks to getting a new job.

• For every $1 to arts and cultural institutions, $9.77 is generated by, for example, visitors to a foundation-supported museum who then spend money on gifts or food.

Robert Shapiro, an economist who produced the study, said it was difficult to measure how giving to religious and other causes contributed to the economy. Those causes were thought to create a $1 benefit for each $1 awarded by philanthropies.

Mr. Shapiro also said that foundation grant making creates substantial “indirect” economic gains, such as generating more than 900,000 nonprofit jobs.

While the tax-exempt status of foundations and charities is estimated to cost local governments between $8-billion and $13-billion every year, Mr. Shapiro said that lost revenue is far outweighed by the total economic gains grant makers help produce.

Some foundation researchers, however, questioned the data.

“This is a valiant but misguided effort to calculate the incalculable,” said Phil Buchanan, president of the Center for Effective Philanthropy, in Cambridge, Mass. “The authors assume, as economists sometimes do, that everything can be monetized.”

A report on the study, “The Social and Economic Value of Private and Community Foundations,” is available online.