Philanthropy & Government

There is an accepted level of tension between the two, but as government extends its reach deeper and deeper into work generally associated with private philanthropy—and without much programmatic success—the tension increases.

That is the subject of a new book—which I have just begun to read—Generosity Unbound: How American Philanthropy Can Strengthen the Economy and Expand the Middle Class reviewed in City Journal.

An excerpt.

“The past decade has been a disquieting one for private philanthropic foundations in the United States. Not in a pecuniary sense: while foundation endowments were hit hard in 2008 and 2009, the last ten years have brought plenty of new wealth and energy into philanthropy. On the regulatory front, though, foundations have faced years of uncertainty about heightened government intrusion.

“In 2004, the Senate Finance Committee raised the prospect of new regulations as part of its examination of accountability at philanthropic organizations. And in 2008, most significantly, a bill introduced into the California legislature would have required large foundations in the state to provide information on the racial composition of their boards, staff, and grantees. This episode, known as “Greenlining” after the organization whose work inspired the pending legislation, resulted in an extortive deal, whereby the largest foundations in the state set aside $30 million for minority-led nonprofits; the legislation then died.

“The next year, the influential National Committee for Responsive Philanthropy (NCRP), which receives funding from private foundations, issued a report claiming to outline “philanthropy at its best.” The substance of such grant-making, according to NCRP, requires that foundations dedicate 50 percent of their spending to organizations that help “marginalized” populations, and another 25 percent to social-justice “advocacy.” Many foundations expressed dismay, albeit quietly, that their grant-making in areas such as the arts and health care would not meet such arbitrary standards.

“Several state legislators around the country have expressed interest in pursuing their own “Greenlining” strategy. One California congressman articulated the worldview behind these episodes: foundation dollars, he asserted, are really just “earmarks.” Because foundations enjoy favorable tax status and are devoted to public benefit, their philanthropic funds are “public money.”

“This is quite the rhetorical trick. As Claire Gaudiani writes in her new book, Generosity Unbound: “There are great dangers in treating foundation assets as a piggybank. Foundation endowments are private property held for the public benefit according to the donor’s intent. Tax deductions for charitable donations were established to provide an incentive to sustain our tradition of citizen generosity. . . . Deductible contributions do not, however, make foundation endowments any more public than are the homes of citizens who have elected to deduct their mortgage-interest payments from their taxes.”

“Gaudiani’s book is a patient explanation of the enduring vitality of American philanthropy and an all-too-necessary reminder to policymakers and critics across the political spectrum that government is not, and never can be, a substitute for private philanthropy. Prompted to write the book by the Greenlining episode and the NCRP report, she seeks to ground philanthropy in the values of the Declaration of Independence and insulate it from efforts at government expropriation.”