February 9th, 2017
This post is NOT a political statement. Regular readers should be pretty clear where I stand on unfolding events so I feel it is important to begin with that clarification about the content of this essay.
As an advisor and educator about philanthropy, many have been asking me “what now for philanthropy?” I am aware that many of us whose opinions are taken seriously are being asked the same and some have already weighed in. Let me confess at the outset that those who are looking for the definitive articulation of how foundations and philanthropists should exercise our influence, spend our money, and respond to policies will be a bit disappointed. Frankly, even though much is already unfolding in twitter speed, there are still a lot of unknowns about the new administration policies and practices. We are, though, already getting some good sense of intentions.
What follows are a few thoughts:
1. Private philanthropy will matter more than ever. Unless the rules change radically, and that is always a possibility, private philanthropy will continue to have the opportunity that no other sector has: to voluntarily use our resources toward what we wish. The laws are agnostic about the values of our giving as long as it meets certain legal qualifications.
2. There is already a healthy difference of opinion in our field. Some look at society’s inequities, then look at the positions of this administration and believe that there is a growing moral mandate to give our resources to support those who are in greatest need. That group will grow if even a few of the proposals already being floated regarding health care, Medicare, social security, safety net, food insecurity, and education are implemented. Huge segments of American society will move from “making do” to “at risk” status. If our tax dollars won’t ameliorate these issues, people will turn to voluntary organizations. Some advocates feel that, whatever the law allows, there should be no question of philanthropic priorities. Relieving human hurt takes precedence; – objective need takes precedence over subjective preference.
3. For many, the emergent challenge to equity and social justice, though, has now risen for reasons that go beyond economic inequity. The rise of antinomianism and the surge of xenophobia [as manifest in overt acts of Islamophobia, anti-Semitism, anti-Latino, anti-immigrant, misogyny] not seen in decades has raised the mandate to fund for social stability and civic decency to a new level. Many funders are now repositioning their funding priorities to support organizations and initiatives to restore civility to the public square and in educational emphases. Those funders sense a level of urgency to these matters that even transcend the long term pervasive and destabilizing issue of economic imbalance.
4. Many argue [and I am among them] that the philanthropy world under-utilizes its advocacy rights. We know that voluntary giving can never replace what a government can and should provide and therefore believe that the wisest long-term use of philanthropy influence is to block cuts where possible, restore them soon if necessary, and work to reduce the need for safety nets wherever possible. The impact of maintaining or even expanding government funding for at-risk populations can never be overstated. The very nature of the voluntary giving system makes it simply impossible for voluntarism, no matter how generous, to replace it. [Here is the place to make sure that everyone understands that government funding is not the same as government provided services. The non-profit sector provides the majority of those services though many receive some percentage of financial reimbursables from city or state coffers. Medicare or the ACA are not government health care; they are government sponsored insurance programs to enable medical care by non-government providers.]
5. The plot thickens when the discussion expands to “quality of life” institutions such as museums. Whose responsibility are they? In most industrialized nations, the government is the primary funder of the quality of human experience of its citizens. In the USA, for many years, agencies such as NEA and NEH on the federal level, and their counterparts on the state and local level, have played an important but not exclusive role. Individuals and foundations have always played crucial roles in funding universities, museums, symphonies, ballets… but core funding would often come from government support.
However, we are now facing de-funding of these agencies. The current administration sees quality of life matters as the responsibility of voluntarism and not the government. Some funders argue that, while there are strong advocates even in congress for government social safety net funding, in the USA there is less of a consensus on who should fund cultural institutions. Therefore, they argue that philanthropy’s autonomy must make this a very high priority indeed. What kind of society doesn’t have art, music, dance? And what would be the long-term cost to society if the institutions that provide them were to be radically diminished or closed especially in a nation that claims to be the wealthiest in the world?
6. All of these reflect longtime and ongoing debates within the philanthropy sector. They are not new but there is an urgency to them not seen in 8 decades. There is, though, another area where much of the sector has already been outspoken; advocacy for the tax deductibility of gifts for charitable purposes. Indeed, some organizations in our sector have restricted their advocacy to this single issue.
It certainly seems reasonable: if the nation is to have increasing dependence on the voluntary sector, why not provide incentives for support of that sector? However, there are many within our sector who feel that such a single-issue position weakens us. After all, tax deductibility is a subset of a complex and ultimately inequitable tax system. Is it correct for the wealthy, the ones most likely to use this deduction, to support this particular tax benefit above all others? Even if one believes in maintaining this deduction, wouldn’t it be far more equitable for that to be built into tax reforms that are coherent and non-regressive?
7. Transparency and spending rates: Private foundations are required to have all grants identified and available to the public. Private foundations also have a minimum required distribution each year. Those rules don’t now apply to public charities, including the Donor Advised Funds, many of which have huge endowments. [In fairness, most do spend at least the 5% equivalent to private foundations, but they are not required to, nor is there any required transparency.] No one knows which proposals will ultimately make it to the floor of congress or be adopted by our current political morass, but it is fair to assume that both of these issues will not be far from the surface when voluntarism and charitable giving are discussed.
On another level, it would serve our sector well to take our own initiatives for demonstrable standards of transparency, accountability, and ethics. Our most treasured commodity, even beyond money, is our independence. It is built on confidence in the integrity of our sector – at least compared to almost every other institution. If the time comes that sentiment grows too cynical, that independence may be jeopardized. We should not wait for an imposed set of standards, but should model that, whatever deleterious changes are being made to banking or environmental rules, we take our public responsibility seriously enough that we choose to strengthen the best practice expectations of our own sector.
8. In recent years, the debate about foundation perpetuity has grown. It is not new; there are those who take the position that no private foundation should be allowed to exist in perpetuity or at least question the wisdom of doing so. The matter has risen for two reasons: a number of very prominent and influential foundations and philanthropists have committed themselves to spend-out, and the growing pressure on private support as discussed above.
In my role as a philanthropy advisor, I help funders choose whether or not to establish funds intended for perpetuity, I can attest that there are very valid reasons for either choice. However, given the potential for limiting the life span of endowments, a suggestion already floated by this administration, I currently suggest, even those who have chosen perpetuity should think through what they would do if the law does change and they need to make “end of fund” decisions.
9. A final caveat: we have been through disruptive events before. We learned from 9/11 or Katrina or Sandy or Haiti that funders need to balance the urgency of the moment with longer term perspectives. Even if one chooses to respond to disasters or human disruptions by redirecting funds immediately, one needs to remember that there are longer term needs that cannot always be anticipated. Moreover, we also learned that we must be cautious about sacrificing those organizations about which we have cared for a long time. There are responsible and ethical ways to switch priorities, but remember that those priorities emerged after real thought. We owe it to ourselves to honor our own processes even as we amend our priorities. [I have a document on “exit strategies” that I can share with those who request it.]
Our philanthropy world is being challenged no less than American society as a whole. It is up to us to set standards of responsible, ethical, thoughtful, forceful, and constructive ways to respond. We are the only sector with the independence to do so. Let’s model how.