Gift Makes Gates Fund No. 1 in U.S.

$6-billion donation pushes value of assets to more than $17-billion

The world’s richest man has created America’s wealthiest philanthropy.

Microsoft founder Bill Gates and his wife, Melinda, this month upgraded the assets of their Seattle foundation by $6-billion, bringing its total worth to $17.1-billion.

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That puts the foundation well ahead of the nation’s second-largest foundation, the David and Lucile Packard Foundation, in Los Altos, Cal., which holds $13-billion in assets.

Even so, the Gates Foundation does not yet hold the title of the largest foundation in the world. The Wellcome Trust, in London, has assets of $19.2-billion.

But the Gates fund could soon climb to the top — especially if its benefactors continue the pattern of giving they have established so far this year. Patty Stonesifer, a former Microsoft executive who co-chairs the newly renamed Bill & Melinda Gates Foundation, notes that the couple’s most-recent gift — about 70 million shares of Microsoft stock — is the third multibillion-dollar infusion from the Gateses to their foundation in 1999.

“Bill and Melinda have made a gift of about $5-billion every quarter,” she says. While she would not say whether the couple plans to make yet another gift of similar size before year’s end, she said she expects that the general pattern of giving “will continue.”

With those donations, the Gateses have given far more money than any other living Americans.

Charles F. Feeney, the Irish-American entrepreneur who built his fortune with duty-free stores, has devoted about $4.1-billion to charity. Walter H. Annenberg, the former ambassador and publishing magnate, has given away over $2-billion during his lifetime, including gifts to his foundation, as has the financier George Soros. And Ted Turner, who created CNN, has given or promised $1.3-billion to charity.

Mr. Gates and his wife, who have long pledged to give away almost all of their fortune, still have plenty of reserves to draw on: Last month, the Gateses’ stock holdings reached nearly $100-billion.

The $16-billion the couple have put into their philanthropy since January will lead to a huge increase in new grants. To meet the federal requirement that private foundations spend a minimum of 5 per cent of their assets each year on charitable activities, the Gates Foundation will have to give away some $855-million next year — or $2.3-million a day — based on its current assets. By comparison, the foundation has approved just over $225-million worth of grants so far this year.

The growth in assets is also pushing the foundation to become more professional and to pay more attention to its public image.

This week, Ms. Stonesifer and Mr. Gates’s father, who is also known as Bill Gates and who co-chairs the foundation with Ms. Stonesifer, are scheduled to meet in New York with representatives of the 40 largest foundations to discuss ways in which their giving programs might complement one another.

Vartan Gregorian, president of the Carnegie Corporation of New York and a board member of the Gates Learning Foundation (which has been incorporated into the Gates Foundation), arranged the gathering. “The Gates Foundation is still not known, in a sense,” says Mr. Gregorian, who also is a philanthropic adviser to Mr. Annenberg and Mr. Turner. “People know what it does but not why it does what it does, and so forth, because it has been shy about publicity.”

Despite the big jump in assets, the foundation does not plan to expand the types of causes it supports.

Its primary focus is, and will continue to be, looking for ways to insure that technological advances in global health and education reach the people least able to afford them.

“When you look at the size of the problems in areas of children’s diseases or education, there’s way more to do than we will ever have money to do,” says the elder Mr. Gates, whose formal name is William H. Gates, Jr. (His son’s formal name is William H. Gates III.)

Major grant programs have included research to develop new vaccines against infectious diseases, programs to reduce the mortality rates of mothers and children, and programs to equip local libraries with Internet-connected computers and people who can show others how to use them. As of this month, the library program has helped 1,745 libraries in 32 states gain access to the Internet.

But the foundation also operates much like a community foundation, supporting arts, social-service, education, and other groups in the Pacific Northwest, where the Gateses live and Microsoft has its headquarters. Already this year the foundation has approved almost $22-million in such grants. Those grants vary greatly in size and scope. For example, the foundation has given $500 to a local chapter of the American Cancer Society as part of a fund-raising race, as well as $5-million to the Trust for Public Land and the Seattle Art Museum to turn an old city lot into a sculpture garden.

The foundation also hopes to continue making the kind of very large grants it has made in the last two years, which included:

* $100-million to the Program for Appropriate Technology in Health — or PATH — to help speed up the time it takes vaccines that prevent four diseases to reach children in economically depressed countries (The Chronicle, December 17, 1998).

* $50-million to Columbia University’s Joseph L. Mailman School of Public Health for a program to look for ways to prevent women in developing countries from dying or becoming permanently disabled from complications during pregnancy or childbirth.

* $25-million to the International AIDS Vaccine Initiative to help accelerate the development and human testing of an AIDS vaccine.

* $20-million to establish an institute at the Johns Hopkins University’s School of Hygiene and Public Health to study population control and reproductive health.

The foundation also says that it is interested in finding ways to link its efforts with those of other foundations. For example, the Gates Foundation and the Pew Charitable Trusts recently made a joint announcement of $3.5-million in grants to aid ethnic Albanians who were forced to flee Kosovo.

Ms. Stonesifer says that those grants — to the American Red Cross, CARE, and the International Rescue Committee — came about at the suggestion of Pew’s president, Rebecca W. Rimel. “She called us and said, Maybe we should do this at the same time, maybe we might be able to draw more attention to a really critical area of giving,” Ms. Stonesifer recalls. “We didn’t know exactly what we could or should do in that situation at that time with the escalating problems with refugees in Kosovo. But it was an area that Pew has done a great deal in. And so her willingness to pick up the phone and suggest a way to cooperate was great.”

The foundation hopes that such cooperative efforts will help it maintain its lean administrative staff and its reputation for quick responses with a minimum of paperwork.

Of the foundation’s 130 employees, only 30 are involved in grant making and administration, while the remaining 100 provide hands-on technological support to libraries and other educational institutions that have received grants. Ms. Stonesifer says the foundation plans to continue to rely on “outside experts” as advisers.

The number of employees is unlikely anytime in the foreseeable future to approach the size of well-established grant makers, like the Ford Foundation, which has just over 600 employees.

Still, the elder Mr. Gates says the foundation will have to add some program officers and other employees to help keep things moving. He says that in the last month he has devoted about two-thirds of his time to foundation activities. “And I’m supposed to be retired,” quips the former lawyer. But while he is spending more time than he originally intended, Mr. Gates is quick to point out he is not complaining too much. “I’m having the time of my life,” he says.

Interest in the foundation is escalating along with the foundation’s assets. While foundation officials say they cannot quantify the total number of requests they have received, they say the numbers have steadily climbed.

Even foundation grantees are feeling the pressure of being in the spotlight as the Gates Foundation becomes a major grant maker.

Verne Stanford, president of the Children’s Museum, in Portland, Ore., says he receives about six calls a day from people asking him how he managed to get money from the Gates Foundation.

He insists that there was no magic trick involved. He says he simply mailed a one-and-a-half-page proposal on his plans to construct a new facility with interactive exhibits for tourists in the Pacific Northwest, in which he emphasized the need to foster creativity in children. Less than three weeks after sending the proposal, Mr. Stanford’s request was answered with a $600,000 check.

The $6-billion gift announcement coincides with two other changes: a new foundation name and location.

Until now, Bill and Melinda Gates’s philanthropic interests had been split between two foundations. The William H. Gates Foundation, which had $9.8-billion in assets, concentrated on global-health issues and on helping charities in the Pacific Northwest. The Gates Learning Foundation, which had assets of $1.3-billion, focused on bringing new technology to educational institutions, such as libraries and schools.

Those giving programs have been combined into a single entity named the Bill & Melinda Gates Foundation. Ms. Stonesifer says the move was designed to reflect the overlap that had already been occurring, as well as to cut down on unnecessary confusion.

The foundation is also moving into a 60,000-square-foot office in the East Lake neighborhood of Seattle. The headquarters will include computer classrooms for training sessions with up to 100 librarians, educators, and others. Before the move, Mr. Gates’s father did all of his foundation work out of the home office in his basement or at a nearby hamburger shop. Ms. Stonesifer’s offices were atop a pizza parlor.

But the new two-story office building will not have any signs outside to alert passersby to the foundation’s identity. In part, the foundation wants to insure privacy and security for its very high-profile donors. The decision is also in keeping with the foundation’s preference for staying out of the spotlight, at least to the extent it can, given its size.

Bill Gates’s philanthropy has always been a magnet for controversy, and this latest $6-billion gift is sure to be no exception.

In the past, some people have criticized him for giving away too little as a percentage of his wealth. Others have speculated about his motivations, wondering if the big splashes of money this year are aimed at softening the images of Microsoft and its founder, which have taken a public-relations beating as part of the federal antitrust trial brought by the U.S. Justice Department. Still others have wondered if Mr. Gates might be cashing out some of his company stock out of a concern that its value could tumble in coming years — or that he might need the charitable tax breaks associated with the gifts.

None of those motivations are grounded in reality, insist officials of the Gates Foundation.

Mr. Gates’s father says the antitrust trial “is totally irrelevant” to the gifts his son and Melinda have made. “They simply liked the things that the foundation was doing, and they decided, Let’s do a lot more of the same,” he says. “They feel really strongly about using their wealth in these constructive ways.”

Mr. Gates especially bristles at suggestions that his son is getting a big tax break for his gifts. “Anybody who understands the rule about tax deductions knows that the one thing that works against you is to make a lot of big gifts all within one year.”

He says that because federal law limits the amount of charitable deductions a person can claim to a percentage of his or her adjusted gross income, his son “will never be able to claim the full deductions” for this year’s $16-billion worth of gifts to the foundation.

In addition to adding money, Bill and Melinda Gates plan to increase the time they spend working with the foundation in the coming year. Ms. Stonesifer says Mrs. Gates is involved on a weekly, and sometimes even daily, basis with the foundation, and both she and her husband are involved in approving all major grants.

Mr. Gregorian of the Carnegie Corporation says past board meetings with the Gateses have convinced him how serious they are about their philanthropy. “Whenever we have board meetings, neither of them take any phone calls or any intermissions,” he says. “They spend all day with the board seriously discussing how effectively, scientifically, they can affect various segments of public interests, such as education, libraries, and health.”

Mr. Gates’s father, however, cautions that his son and daughter-in-law will have to continue to limit their involvement. “They are very excited about what’s being done, but at the same time they need to avoid having this flood their lives as it has mine,” he says. “Because they have family responsibilities and Bill, of course, has serious responsibilities to his company, they really can’t let themselves spend the kind of time they might like doing this.”

By all accounts, Bill and Melinda Gates, ages 43 and 34, respectively, are still at the early stages of their philanthropic endeavors. While it is impossible to predict the future value of Microsoft stock, it is not unrealistic to think the Gates Foundation could reach $50-billion, or even $100-billion in assets.

Their ultimate plans for their foundation, however, remain unclear. For example, foundation officials say the couple have not yet decided if they want to spend out the foundation’s assets within a set number of years or create an endowment that will award grants in perpetuity.

“They’re still making their plans for how to give out their wealth appropriately in the coming decades,” says Ms. Stonesifer. “But the wonderful thing is, they do have decades. There are many years ahead for them to shape their giving and determine their long-term approach. We’re very much at the beginning of this process.”

Marina Dundjerski contributed to this article.