History As A Teacher: The Interactions Of Foundations And Legislators

In foundation circles, it is an oft-repeated truism that McGeorge Bundy, when he led the Ford Foundation, and his foundation colleagues botched their relationships with Congress when they testified against federal regulation and specifically what led to the 1969 Tax Act’s controls on private foundations. Though their dire predictions of the collapse of foundations after the Tax Act hardly came to pass—in fact, foundations boomed in numbers and assets following it–Bundy and his big foundation colleagues have morphed into philanthropic archetypes of how not to handle elected state or federal legislators.

The performance of some California foundations on May 12th may be instructive for philanthropic leaders eager to avoid becoming New Millennium protégés of McGeorge Bundy. On that day, the California Senate Committee on Business, Professions and Economic Development met to discuss pending legislation that would have required large California-based foundations (with assets over $250,000,000) to report on the racial/ethnic composition of their grantees, their grantees’ target communities, and the foundations’ own staff and board leadership.

The funders all pretty much knew that they had struck a deal with the legislation’s sponsor, Assemblyman Joe Coto, to pull the bill. In fact, at the end of the hearing, Coto asked his Senate counterparts not to vote on AB624 while he and the foundation leaders wrapped up negotiations. The resulting deal committed 10 foundations to an unspecified “comprehensive set of grantmaking activities….in the multi-million dollar range…over several years, to begin in 2009” that “will lead to increased funding for capacity building and technical assistance targeted to minority-led and grassroots community-based organizations” and “support for leadership development activities that will bolster and train a diverse pipeline of executives, staff, and board members for the nonprofit and philanthropic sector.”

With the legislation pulled off the table, one foundation executive noted in his personal blog that he could now “sleep well at night.”

But that pending deal didn’t stop the hearing, which was part of the scheduled process for the California legislature. What was surprising was that the legislators took the deal at all, especially after the performance of the foundation executives. Therein lies the story of whether philanthropy has made much progress since the days of Mac Bundy in understanding how to deal with elected legislators—or perhaps in how to deal with the legislative process itself.

Questions and Difficult Answers

The questions and comments from Senators at the May 12th hearing clearly suggested that to a man they didn’t buy the foundations’ arguments and in fact were rather nonplussed by the answers or non-answers they received. There are lessons for foundation execs working state legislatures or perhaps their national congressional counterparts.

For example, one foundation executive expressed surprise that the Senate Committee hearing was even being conducted, having expected the foundations’ discussions with Coto to have resulted in a stop of the legislative process, a sentiment that Committee chairman Mark Ridley-Thomas took with distinct umbrage. It’s probably not a good tactic for a foundation person to be seen as hinting that legislators, by considering legislation, are doing something that they shouldn’t be doing. In the measured tones of a disappointed schoolmaster teaching civics, Ridley-Thomas explained that any negotiations that foundations and their lobbyists might have been having with Coto did not mean that the legislative process in the Senate could not and should not move forward.

Another foundation executive assured a senator that he could quickly generate a figure on how much philanthropic money had gone to the senator’s poverty-stricken Central Valley area but didn’t have the figures at his fingertips. He might have, with some effort, been able to explain how much money his foundation put into the Central Valley, but for the philanthropic sector writ large, that answer rang disingenuous. Wouldn’t the nonprofit sector and government love to be able to plug in a census tract or zip code and calculate how much philanthropic money went into that jurisdiction. The committee members knew that they weren't going to be getting a sector-wide answer with the exec's commitment to meet separately with that senator to provide him with the answers.

One of the foundation speakers in opposition to the legislation, after characterizing the Community Reinvestment Act’s reporting requirements as having failed to end poverty, clearly not the purpose of CRA and not connected to the CRA focus on bank lending,suggested that instead of “mechanistic” and “mandatory” reporting, the foundations and the legislature would be better served by a full discussion with foundations for a partnership to “lift those families out of the poverty and inequity they deal with.”

Senatorial heads—most of them relatively liberal Democrats in the hearing room–must have snapped at the mischaracterization of the CRA, one of the nation’s clearly most successful regulatory acts that has undone the nation’s shameful history of bank redlining. The Senators responded almost in unison that the legislation such as AB624 and its call for foundations’ CRA-like repo