Warren Buffett Says Foundations Should Spend More

The billionaire investor Warren Buffett told a key Senate committee that he believes private foundations are stockpiling money instead of distributing it to charity because of the federal requirement that foundations grant at least 5 percent of their assets annually.

Mr. Buffett, speaking at a recent Senate Finance Committee hearing on the estate tax, told lawmakers that he finds it “astounding” that 27 of the 30 nation’s largest foundations spend almost exactly 5 percent of their assets each year.

“If you set it at 3 percent, most of them would spend 3 percent,” said Mr. Buffett.

The 5-percent-rule, he said, encourages foundation leaders to think about preserving their organizations instead of pushing them to think creatively about how to fulfill their missions and solve problems.

Mr. Buffett, the chief executive officer of the investment firm Berkshire Hathaway has pledged roughly 85 percent of his wealth to charity – much of it to the Bill & Melinda Gates Foundation.

He has also stipulated that the foundation distribute the money in the same year that it is received so that will not simply sit in an endowment.

Video from the hearing is available through the Senate Finance Committee’s Web site.