March 7, 2002 | Read Time: 4 minutes
Since the September 11 terrorist attacks, generous Americans have given more than $2-billion for relief and recovery. That includes $172-million from 34 private foundations.
Drastic needs call for unusual measures, and these foundations have responded generously to the terrorist attacks. Yet, while that is a step in the right direction, foundations should not stop there.
Some philanthropists believe that the most meaningful legacy they can leave is a nest egg that will last forever. But the best legacy is making a charitable contribution count in tackling the most pressing social demands of today.
In other words, philanthropists should loosen their purse strings and permanently increase their yearly giving. Here’s why:
By law, foundations must distribute at least 5 percent of their investment assets a year to retain their nonprofit status. That percentage includes overhead and administrative costs, so real giving is often much lower.
Few foundations give much beyond this minimum requirement, fearful that their assets will erode and leave them empty-handed on a rainy day.
Yet among the many lessons we have learned from September 11 is that foundations must not allow their funds to lay dormant, gathering interest when need is staring them in the face.
A recent study by the National Philanthropic Trust found that donations related to the terrorist attacks accounted for one-fourth of total giving in October. That surge came mostly at the expense of nonprofit groups that work in health, advocacy, and the arts.
The government, too, has spent billions on much-needed relief efforts and the war on terror. In this recessionary economy, social and human-service needs are escalating as giving is declining. History has shown that Americans don’t stop giving when war or political conflict arises, but they do cut back when the economy weakens. In this climate, foundations must step forward.
In that regard, philanthropy has much to learn from a seemingly unrelated source: news organizations. Since September 11, networks and news publications have suffered tremendous financial losses, not only in advertising but because news executives rightfully increased their operating budgets to give the terrorist attack and its aftermath ample coverage.
They had no choice. In times like these the demands for news and analysis peak, and media reputations are made.
Foundations, too, have a charge to keep, and not only during times of extreme hardship. They don’t have to go bankrupt to do it. Most foundations’ stock holdings mushroomed with the bull market. After 20 years of strong performance, when the Standard & Poor’s 500 returned 17.6 percent a year on investments, whose gains are tax-free to philanthropies, foundation assets grew to more than $330-billion.
Those figures may have dipped recently, but this larger truth remains: Since 1981, the value of American foundations has tripled. Yet at the same time, the rate of grant making has dropped from about 8 percent to less than 5 percent of assets today.
That is why some of us within the philanthropic world are urging Congress to increase the minimum percentage of assets that foundations must give to 10 percent annually.
If the more than 50,000 charitable foundations that make grants were to increase their giving to 10 percent, nonprofit groups could reap $15-billion more annually. That would give organizations the boost they need to gain additional sources of money, which translates to better public education, more after-school programs, more job training, and more families with food on the table.
This year, the Richard & Rhoda Goldman Fund will give 10 percent of its assets away. In addition, the fund will dissolve 10 years after my death, with the remaining assets distributed to the funds of my three children, who, I trust, will wear the mantle of responsibility in their individual ways.
My fund’s actions are consistent with the words of Julius Rosenwald, founder of Sears, Roebuck & Company, who said Americans must have faith that “wisdom, kindness of heart, and goodwill are not going to die with this generation.” His words are no less true now than they were when he wrote them in 1929, on the brink of the Great Depression.
The events of the past few months have taught us that life is too short for philanthropists to lock their money away for a future they cannot know. It’s time to have faith in the perpetual goodwill and generosity of Americans, and less so on the entombed dollars of perpetual endowments.
Richard N. Goldman is the co-founder and president of the Richard & Rhoda Goldman Fund, in San Francisco.
