June 26, 2003 | Read Time: 3 minutes
Two major associations that represent nonprofit groups have announced their opposition to legislation in the House of Representatives that would probably require many foundations to give more to charity every year.
Despite the opposition, one of the bill’s sponors says that he has substantial support for the proposal and expects it to be passed by the House before Congress adjourns for its August recess.
Independent Sector, which represents 700 nonprofit groups, plans to lobby against a provision in the Charitable Giving Act, introduced in the House in May by Roy Blunt, a Republican from Missouri, and Harold Ford Jr., Democrat of Tennessee, by meeting privately with Bush administration officials as well as members of the Senate and House, said Diana Aviv, the group’s president. The National Council of Nonprofit Associations, which represents 22,000 nonprofit groups in 36 states, said it felt that Congress needed to take more time to figure out how best to ensure that foundations are using their money effectively.
The move by Independent Sector, 20 percent of whose members are foundations, adds muscle to the lobbying efforts of the Council on Foundations, an association of grant makers that strongly opposes the legislation, and to a group of 18 large foundations, including the Ford Foundation and the Robert Wood Johnson Foundation, which has hired former Republican Congressman Bill Paxon to try to get the provision removed from the legislation.
Among the organizations supporting the Blunt-Ford proposal: the National Committee for Responsive Philanthropy, a watchdog group in Washington.
Spending Rules
The provision on foundation spending would require grant makers to exclude salaries, rent, and other administrative expenses in calculating the amount the federal government requires grant makers to provide to charities each year.
Since 1981, federal law has required foundations to spend a minimum of 5 percent of their net investment assets annually. Under current rules, foundations can include administrative costs to meet that standard. If foundations were no longer allowed to count such administrative spending as part of the payout requirement, the likely result would be that more money would be spent on grants.
But Ms. Aviv, the head of Independent Sector, says she and her colleagues have studied the proposal and found no conclusive evidence that the provision would cause grant makers to give more to charity.
“This provision is a bad idea,” Ms. Aviv said. “At best it is divisive and questionable, and ultimately it is not likely to get more money in the hands of nonprofit groups.”
“Nonprofits are in a funding crisis,” she added. “This is not the time to be having a technical conversation in an area where we don’t know what the conclusive results are.”
The growing contingent in opposition has not deterred Mr. Blunt, the third-highest-ranking Republican in the House, who said last week that more than 80 members of Congress have expressed support for the legislation.
Speaking to a group of grant makers gathered last week at the Hudson Institute’s Bradley Center for Philanthropy and Civic Renewal, in Washington, for a discussion about the proposal, Mr. Blunt said that his legislation was motivated by a desire to compel foundations to give more of their endowment assets to charity and to “build another wall against excess administrative expenses.”
After careful study, Mr. Blunt said, he determined that foundations could sustain a payout rate “closer to 6 or 7 percent” than the currently required 5 percent.
“Would our provision drive some foundations out of existence?” Mr. Blunt said. “It is our understanding that it would not jeopardize” foundations that wish to exist in perpetuity. But even if the legislation did force some foundations to spend themselves out of existence, he added, “that is not necessarily a bad thing.”
