July 24, 2003 | Read Time: 5 minutes
The conflict between the right and left in philanthropy has taken some bizarre twists as the House of Representatives considers whether to increase the amount foundations are required by law to give to charities.
For months, several grant makers have apparently been spreading the word that the House is considering the idea because right-wing activists want to force progressive and mainstream foundations to spend so much of their endowments that they will have to shut down. What started out as a whispering campaign has now become more intense, even though there is no evidence that conservatives are making a concerted effort to get rid of foundations that don’t share their views.
What’s more, nonprofit groups of all political leanings report that they have come under pressure to speak out against the pending change in foundation giving or at least keep quiet about their support for the measure.
The Council on Foundations — which represents more than 2,000 grant makers — and the large philanthropies, led by foundations such as Ford, Carnegie, Robert Wood Johnson, and Lilly, are waging war with a frenzy and determination not seen in Washington since the 1969 Tax Reform Act, which forced foundations to limit their involvement in political action and to devote a minimum percentage of their assets each year to charitable purposes.
More than three decades later, the foundations are trying to defeat a measure that is far smaller in scope. At issue is legislation that would forbid foundations from counting rent, salaries, trustee fees, and other administrative costs as part of the federal requirement that they distribute a minimum of 5 percent of their assets annually. The change would produce $3-billion to $4-billion in new dollars for charities each year, but would mean little for foundations.
However, that is not the picture foundations paint when they accuse supporters of the measure of wanting to force them to deplete their assets so they couldn’t possibly operate in perpetuity.
To be sure, the legislation, included in a comprehensive House bill to stimulate charitable giving, was drafted by a leading conservative and the third-highest ranking Republican in the House, Rep. Roy Blunt, of Missouri. However, he was joined by Rep. Harold Ford Jr., Democrat of Tennessee, and eight other Democratic cosponsors.
Not only were Democrats with long ties to liberal causes involved in shaping the legislation, but many nonprofit groups with progressive views have long wanted foundations to give away more — and have come to the conclusion that so few foundations will ever do so voluntarily that they need to be forced by federal law to step up their giving. Many organizations and foundations, including the National Committee for Responsive Philanthropy, support the Blunt-Ford measure, while several conservative groups aren’t taking a position, largely out of a fear, they say privately, that foundations will retaliate by giving them less money.
Even though some of the big foundations are complaining about the influence of the right in proposing the legislation, that didn’t stop them from hiring one of the leading conservatives in Washington to lobby on their behalf.
A group of 18 foundations, led by the Ford Foundation, has enlisted Bill Paxon, a former U.S. congressman from New York and a close ally of the former House speaker Newt Gingrich, to persuade House members to vote against the foundation provision.
No member of the group would say how much Mr. Paxon is receiving for his work. Even though such information should be a matter of public record, a spokesman for the Ford Foundation said the lobbying expense was a “private matter” and should not be discussed. Still, The New York Times reported that the cost would be between $100,000 to $200,000, and it is likely that it will be closer to $200,000 than to $100,000. Of course, these expenses will be eligible for inclusion as administrative costs within the current 5-percent payout requirements.
The hypocrisy of the nation’s grant makers apparently knows no bounds.
The hard-hitting lobbying campaign has assumed some other ugly overtones as well. Some foundation executives and program officers have told their grantees that if they speak out in support of the foundation payout provision, they might not get any additional grant money, according to several grantees who did not want their names used publicly.
One organization that scheduled a public discussion about the bill received an angry call from one of its major donors. To its credit, the organization refused to change its plans for the event. Other nonprofit groups across the country have told me that they are scared to support a higher payout publicly for fear of foundation retribution. Some foundation program officers have confirmed to me the calculated efforts at intimidation by their organizations.
For years foundations have managed to conduct their business quietly with friendly legislators and regulators and have not been the subject of public hearings or other public discussion. The efforts by grant makers to stifle the voices of nonprofit groups and reach a deal with legislators that allows them to avoid giving more to charity is a continued reflection of foundations’ desperate desire to maintain control over their operations and to keep the public, which is supposed to benefit from the work done by tax-exempt foundations, out of the picture.
Whatever the reason, foundations may have hurt, not helped, their case by their blunderbuss approach. They have already alienated many legislators, journalists, and those nonprofit groups that, not having the courage to openly support a higher payout, nevertheless resent the pressure exerted on them.
In making a mountain out of a molehill, foundations are creating an image of philanthropy gone wrong. Their assertions that the provision threatens the perpetuity of foundations would be laughable if it weren’t so pitiful. Foundations won’t go out of business if they have to increase their giving by what are relatively small sums, given the $495-billion in assets held by the nation’s foundations.
Instead of fighting the House measure, foundations should simply agree to a small increase in the required payout amount. It is a much better deal than they deserve.
Pablo Eisenberg is senior fellow at the Georgetown University Public Policy Institute and a member of the executive committee of the National Committee for Responsive Philanthropy. He is a regular contributor to these pages. His e-mail address is pseisenberg@erols.com.
