Despite commitments to the contrary over the past few years, America’s foundations have consistently shortchanged rural communities.  But, now something is developing between the Council on Foundations and Capitol Hill that might have important and troubling  implications for rural philanthropy and government policy, an idea for federal subsidization of rural community foundation endowment building. So we are asking you to weigh in with your opinions.

NPQ’s latest critique of the shortage of foundation grantmaking for rural areas didn’t address what the Council on Foundation has been doing to promote rural grantmaking beyond the trade association’s rural philanthropy conferences and promotional materials. In this month’s “Foundations on the Hill” lobbying effort by the Council, participating foundations were encouraged to pitch an idea called the Rural Philanthropy Growth Act.

The Council’s position, into which this proposal neatly fits,  has been that the best route for helping rural areas would be to build new philanthropic endowments in rural communities, tapping what the Council contends is the rural part of the “massive” intergenerational transfer of wealth. In a September 18, 2009 memorandum to Dallas Tonsager, the Under Secretary for Rural Development in the Department of Agriculture, the Council pitched three priorities in the following order:

The Council, Congress, and the USDA should:

1.     Move forward a public initiative to build philanthropic rural development endowment funds and capacity in and for the underserved communities of rural America.

2.     Organize a coordinated approach: Philanthropy can use to convince policy makers of the need to invest a significant portion of the $7 billion in broadband funds (part of the stimulus funding) for the benefit of rural communities and families.

3.     Encourage philanthropy to provide intentional, specialized support for players on the ground, intermediaries, and foundations so they can educate rural communities about protecting their resources.

The proposed legislation, emerging from the energetic Nebraska Community Foundation, contained two key provisions that would require federal appropriations to spur the creation of new rural endowments:

1.     Providing challenge grants to qualifying community foundations to build community-based unrestricted endowment funds to benefit one or more economically distressed counties. Grants may range from $100,000 to $500,000 (to be matched 2:1 by the community).

2.     Provide capacity building grants to qualifying community foundations. Grants may range from $250,000 to $1 million (to be matched 1:1 by the qualifying community foundation).

Not surprisingly, the Under Secretary, in remarks prepared for the Council’s 2009 rural philanthropy conference in Little Rock, Ark. seemed to envision existing foundations putting money into the Obama Administration’s rural initiatives rather than the other way around:

“To make us a better country, we must build on our assets. What we need today is cooperation. I’d like to challenge you to use your resources to help build a more inclusive society, one that includes rural America. And to consider the role that your foundations can play. You have the ability to help us make our programs better, to make our knowledge usable, to become better users of our findings and to grow access to new capital and credit funding. You can help us create a generation of young people that can use and preserve our natural resources.”

The Council’s position has long been that tapping the intergenerational transfer of wealth rather than asking existing foundations to ante up more for rural would be the best approach to take, building the resources that rural community foundations could generate and put into rural communities. Building endowments from scratch is fine, but it is excruciatingly slow and not likely to generate any kind of substantial resources going to rural nonprofit budgets.  Raising an endowment of, say, $100,000 would generate $5,000 in grants. Not much to wait for. 

But there has always been an undercurrent of thinking about USDA involvement, including an early discussion of using rural extension to help build rural endowments for community foundations. Given the widespread concerns of NPQ readers representing rural and small town nonprofits that philanthropy hasn’t responded to rural needs the way it should, we ask readers to weigh in on the following:

1.     Federal subsidies: Probably no one at USDA was surprised by the foundation sector itself asking for subsidies. Everyone asks for federal subsidies, even the wealthiest institutions in the nation (see the federal subsidies for the oil industry as an example). But are federal challenge grants and capacity-building grants for rural community foundations a good idea? The Council suggests that perhaps this idea might be included in the debates around the upcoming farm bill. Million dollar capacity-building grants for rural community foundations? What kinds of distinctive capacities are community foundations lacking that the federal moneys would address?

2.     Rural endowments: Raising philanthropic resources in local communities is not to be rejected, but does it answer the needs? If community foundations go about raising local endowments, it takes time to raise the funding. Community foundations are trying to raise money all the time. They are public foundations, they know the game. And they know how slow it is to generate sums large enough that the 5 percent devoted to grantmaking will have any impact. Can rural endowments do the trick given how long it takes to raise the money? Experts have found rural endowment grantmaking more difficult in poorer rural counties. Also, increasingly, with donors interested in directing their funding through donor-advised funds rather than putting money into community foundations’ unrestricted pools, will this strategy work?

3.     What wealth? Although the Council on Foundations called for community foundations to conduct intergenerational transfer of wealth studies, many of these studies had actually been completed by the time the Council was calling for them to be done. That means that most were started and completed before the depths of the recession in which much wealth simply evaporated. Presumably, some of the rural wealth to be tapped is in land and natural resources, so perhaps rural wealth did not disappear quite as fast as other kinds of assets. Is the intergenerational transfer of wealth really the massive transfer some imagine? And is it leading to new millions and billions devoted to philanthropy? Will it? 

The Council knows that its conferences and glossy brochures were not an adequate response to rural nonprofits.  Rather than pressing big foundations to give more money, its answer was to suggest a new federal funding program aimed at assisting community foundations – sort of a federal stimulus for community foundations – at a time of budget cutbacks and deficits. We find it a less than compelling solution. We would love to hear NPQ readers – rural and urban – weigh in with their reactions and analyses.