Check-Up Clinic: Foundation Giving

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Wealthy Donors to Congress: Make Us Give More to Charity

by Alex Daniels

A group of wealthy donors has a message for Congress: Make us give more to charity.

Spearheaded by Scott Wallace, the co-chairman of the Wallace Global Fund, the group will send a letter to House and Senate leaders requesting a 10 percent minimum annual payout requirement for foundations and donor-advised funds for three years.

Currently, foundations must distribute 5 percent of their assets to charity, including some overhead expenses. There is no payout requirement for donor-advised funds.

Doing so, they argue, would result in a nearly $200 billion stimulus for nonprofits over three years.

The group hopes Congress will consider the proposal in an upcoming emergency spending bill. Central to their case is that lawmakers will not have to tap the federal budget to cover the expense, unlike the hundreds of billions of dollars it has already directed in response.

“Everyone is worried about where on earth all this money is coming from and how much debt we are saddling our grandchildren with,” Wallace said. “Here’s a way to tap into the wealthiest dynasties in America” without costing taxpayers.

Nonprofits that depend on grants from wealthy donors need more support to survive the pandemic and its economic fallout but risk upsetting relationships they have with their benefactors if they are too vocal, Wallace said.

“They want us to man up during this crisis and increase spending, but they are too pragmatic and hamstrung from being too outspoken about this,” he said. “So it is up to us as a foundation community to step up and do it ourselves.”

The Wallace Global Fund decided to increase its payout to 20 percent in response to the crisis, and Wallace implored Congress to raise the minimum to 10 percent in a USA Today opinion piece on May 4. Since then, it has been joined by Patriotic Millionaires, a group of wealthy donors concerned about the concentration of wealth in America, the Institute for Policy Studies, and Voices for Progress in calling for the policy change.

The group does not plan to make the names of the signers of the letter public until next week, but Chuck Collins, who directs the Charity Reform Initiative at the Institute for Policy Studies, said more than 140 people, about evenly split between foundation leaders and donor-advised-fund account holders, had added their names.

Saving for the Future

As nonprofits clamor for more cash from foundations in a time of need, grant makers must determine whether they can afford to increase grant making, even if it means dipping into their endowment funds. For some, the choice is easy, and extra grant money was sent out the door. But for many foundations, particularly ones that are chartered to exist in perpetuity, liquidating assets after the market has been battered could make it harder to sustain giving into the future.

The Hewlett Foundation recently announced that its current grant making level will be maintained, but it could not guarantee there won’t be cuts if the market performs poorly. (The Hewlett Foundation is a financial supporter of the Chronicle of Philanthropy.)

And the Open Society Foundations got in hot water with its own employees for redirecting unallocated money in its budget to cover emergency grants, rather than culling from its endowment.

In April, nine philanthropy organizations called upon foundations to increase grant making even if it means liquidating endowment assets when their values have sunk.

Wallace doesn’t expect every foundation to adopt a 20 percent payout policy like the Wallace Global Fund, but he said given the market’s historical performance, 10 percent didn’t seem too much to ask.

“Ten percent seemed to be a sweet spot where perpetuity would not be endangered, but substantial additional funds could be injected” to serve in response to the crisis, he said.

The payout effort is not the only example of wealthy donors, being “traitors” to their class, as Patriotic Millionaires describe themselves. For instance. Kat Taylor, a philanthropist and wife of failed Democratic presidential contender Tom Steyer, has championed an effort in California for donor-advised funds to submit to greater regulation. And others, like Bill and Melinda Gates and Warren Buffett, have led by example by pledging to give away most of their fortunes to charity.

Ellen Dorsey, executive director of the Wallace Global Fund, said that power imbalance between donors and grantees made it impossible for nonprofits to aggressively push foundations to give more. “It really requires a peer-to-peer discussion,” she said.

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