An Emerging Legacy

One year ago, the nonprofit world changed forever. In a stunning announcement, Warren E. Buffett,

the billionaire investor from Omaha, said that he would give roughly 85 percent of his vast wealth to charity.

The gift, worth $43.5-billion at the end of 2006, went to the Bill & Melinda Gates Foundation, three charitable funds operated by Mr. Buffett’s children, and a foundation set up by his late wife, Susan.

The organizations received their first payments last year and will receive 5 percent of the balance of the pledge each year until the investor’s death.

Mr. Buffett set no parameters on what charitable causes he wanted the money to support, preferring that the foundations continue to pursue the same causes they did before the infusion of money.

But he did stipulate he wants the annual gift to the Gates foundation to be spent the same year it is awarded, instead of sitting idle in the grant maker’s coffers. He put no such restriction on the other foundations, though he did encourage his three children not to build large reserves, since the cash flow from his gifts should be rising.

In the 2006 annual report for Berkshire Hathaway, the holding company he runs, Mr. Buffett offered an explanation of his reasoning.

He says he disagrees with “perpetual foundations” because in the future, the next generation of wealthy Americans will be the ones to fight social problems. “These funders can then judge firsthand which operations have both the vitality and the focus to best address the major societal problems that then exist,” he writes. “In this way, a market test of ideas and effectiveness can be applied.”

The Gates foundation is the primary recipient of the Buffett gift, expecting to receive $36.1-billion. Mr. Buffett gave the foundation a four-year grace period to fulfill his decree that his money be spent in the same year it is received.

The fund will increase its giving to $3.2-billion by 2009, roughly double what it gave last year, and to do that it has hired more than 150 new employees.

Melinda Gates says there are challenges to such rapid growth, such as making sure new employees understand and appreciate the Gates family’s values.

“For the foundation overall we have to make sure that we stick to our roots,” she says in an interview with The Chronicle. “And that means that every single person we hire, that comes in the door, has to understand what we’re about.”

The other Buffett beneficiaries — the Susan Thompson Buffett Foundation, Howard G. Buffett Foundation, Sherwood Foundation, and NoVo Foundation — are also expanding their staff sizes, but on a smaller scale than Gates. Each fund has added a handful of new employees.

After the announcement of Mr. Buffett’s high-profile gift, experts in philanthropy expected it to indirectly benefit other nonprofit groups by triggering acts of generosity.

There is anecdotal evidence of this. Some business schools report that a larger number of students say they are considering careers at foundations because of the pledge. And the Gates foundation has received requests from a broad range of Americans, including children and rich business executives, who want to follow in the investor’s footsteps and donate to the fund. So far Gates has received $38,334 from the Buffett emulators.

Raising Money

While Mr. Buffett’s pledge last year represents the bulk of his lifetime philanthropy, he continues to support charitable causes in smaller ways.

This week, for example, eBay is auctioning a “power lunch” with him for charity. The winner and six friends will eat with the so-called Sage of Omaha at a fancy New York steak house to discuss stock tips.

As for his multibillion-dollar gift, Mr. Buffett says he has no second thoughts. “He couldn’t be happier with what all five foundations are doing and he would do the exact thing today,” says Debbie Bosanek, Mr. Buffett’s assistant, in an e-mail message to The Chronicle.

But, of course, only a year after the pledge, key questions cannot be answered. Among them, what has the money accomplished?

Indeed, it may take decades for the five beneficiaries of the Buffett gift to show how the billions of dollars have helped them attain their goals — improving the lives of needy and sick people, assisting failing schools, providing clean drinking water for the poor, and aiding foster kids.

Only when that is known will Mr. Buffett’s charitable legacy truly be secure.

Noelle Barton contributed to this article.