Redrawing the Map of Philanthropy

Friendships, personal contacts, reputations, visibility, access, and poor judgments too often serve to undermine the fairness of foundation giving.

So does geography. Many of the poorest areas of the country, often home to large minority populations, are grossly underserved by foundations. States in the South, Southwest, Great Plains, and non-coastal Northwest — and rural areas everywhere — have relatively few foundations and philanthropic dollars to deal with enormous social and economic problems.

By contrast, states in the Northeast, the Midwest, and on the West Coast house 31,428 of the 44,146 foundations in the country, or 71 per cent, according to the most recent statistics compiled by the Foundation Center. Grant makers in those three regions gave approximately $12-billion of the $16-billion expended in grants in 1997 — fully three-quarters of the total.

As a rule, foundations tend to give to charities located in their own regions. When you consider the paucity of foundations in certain regions — and combine that with the fact that foundations everywhere provide scarce few resources to rural areas — the inequities of distribution are magnified.

And there is no sign that that imbalance is changing. Of the 9,158 new foundations created in the 1990s, the same share — 71 per cent — are located in the Northeast, Midwest, and West Coast. Foundations in those regions account for 72.5 per cent of the total giving of new institutions.

While those figures indicate a very slight narrowing of the gap in giving between regions, the expected explosion in the next 30 years of large foundations worth trillions of dollars is likely to continue the geographic maldistribution of foundations and giving, if not exacerbate it.

The recent addition of $6-billion to the assets of the Bill & Melinda Gates Foundation, in Seattle, is a case in point. Although the fund has a global reach in areas such as technology and health care, it also plans to focus much of its giving on charitable causes in the Pacific Northwest, where the Gateses live. As other new high-tech millionaires in Silicon Valley and elsewhere pursue their philanthropic interests — and as the older, established foundations receive new infusions of money and reap the benefits of the soaring stock market — the greatest expansion of foundation assets and foundation giving will undoubtedly take place in the three already dominant regions. Simply put, that is where the big money is.

The growth also will take place predominantly at large institutions, and that does not augur well for local or state charities in underserved regions. Most large foundations resist channeling funds to local or regional non-profit groups, preferring instead to give relatively big grants to large, national non-profit organizations. For most large grant makers, the increased cost of making smaller grants to local communities, including the need to expand the size of their staffs to serve more grantees, has proved to be a serious deterrent to more decentralized grant making. And it is unlikely that the new large foundations will be any different.

To be sure, the assets of community foundations, which tend to support local charities, are growing impressively in many regions of the country, including underserved ones, and there has been tremendous growth of new wealth in states like Colorado, Florida, and Nevada. But the greatest growth still is taking place at large institutions in the states and regions that already benefit the most — meaning that the current geographic gap is likely to widen.

To make matters worse, foundations in the South and Southwest tend to be very conservative, reluctant to support grassroots organizations and social change. Texas, for example, boasts 2,181 foundations, but only a relative handful of them support serious efforts to attack problems of poverty, race relations, community development, and the environment. Disproportionately poor and burdened by transportation problems, rural areas are in desperate need of assistance to build a working system of non-profit organizations, to stimulate economic development, and to improve their educational programs and social services.

A few national foundations have given blocks of money to smaller foundations like the Foundation for the Mid-South, in Mississippi, as well as to a few large non-profit organizations to then distribute to local grant applicants. That practice, however, is still in its infancy and is running into considerable opposition from many foundations.

What’s more, underserved regions do not need “pass-through” foundations, or those that operate their own programs. They require foundations with large asset bases that can distribute a great deal of money to local and regional groups.

What, then, can be done to remedy this inequitable distribution of foundations and their assets?

Most foundations executives merely throw up their hands and shrug their shoulders. Yet with some creativity and boldness, the large foundations could easily create several new major philanthropic institutions for regions like the South and Southwest, and for rural areas.

Just recently, the David and Lucile Packard Foundation gave away $1.6-billion — 11 per cent of its assets — to endow a foundation, the Packard Humanities Institute. There is no reason why many of the large foundations like Ford, Rockefeller, MacArthur, Kellogg, Lilly, and Pew couldn’t create similar entities to concentrate on philanthropically neglected areas of the country.

Alternatively, those and other large foundations could pool their resources to create new institutions with large endowments. With the growth of their assets far outpacing their grant making, the big foundations are in an excellent position to make long-term investments to benefit a large population that currently is beyond the reach of philanthropy’s benevolence.

Foundation officials talk a great deal about collaboration. Here is a wonderful opportunity for them to “walk the talk.”

Pablo Eisenberg is senior fellow at the Georgetown University Public Policy Institute and vice-chair of the National Committee for Responsive Philanthropy. He is a regular contributor to these pages.