Among the many trends in giving we have seen advancing over the last decade is a shift toward entertaining shorter time frames for the philanthropic spending of personal fortunes. Now, a new report from Rockefeller Philanthropy Advisors suggests the number of time-limited foundations, sometimes referred to as “spend-down foundations,” is gaining on those organized to give in perpetuity.
The rationales behind spending down are as varied as the founders of the foundations that advocate it. Spending now, they say, not only helps current beneficiaries, but many others down the road. For example, philanthropist Chuck Feeney, who has led Atlantic Philanthropies as a spend-down foundation, emphasizes, “If you give while living, the money goes to work quickly and everyone gets to see the action and the results.” That’s true in theory, of course, but the value of this position depends upon the aims and methods of the donor.
Marnie Thompson, cofounder of the much smaller Greensboro, North Carolina-based Fund for Democratic Communities (F4DC), also has followed spend-down philanthropy. In her case, it’s because a perpetual foundation seemed ill-suited to a mission of addressing climate change and extreme wealth inequality in the South.
“We weren’t even sure how extended a period of time humans really had to sort this stuff out,” Thompson notes. “We decided to spend out all our resources over the next ten years by putting our ideas and money to work in the Southern communities in which they were most needed, at the rate that the communities could productively absorb them.”
As Thompson’s comment makes clear, context and motivation matter. In general, we take the advice of Dr. Francie Ostrower, who researched the planned lifespans of foundations in an extensive study in 2003, 2007, and 2008, in reserving judgement about the intrinsic value of a shorter or longer lifespan.
We question assumptions about the impact of perpetuity as an organizational characteristic per se and call for refining and reframing the debate. Lifespan generally appears to be less a predictor of foundation practice than a reflection of the values and norms of the trustees and donors making decisions about lifespan. Likewise, the impact of a decision to forego perpetuity is not direct or automatic, but is deeply shaped by why and how foundation leaders approach the decision to sunset and its implementation.
Not everyone believes that the perpetuity question is value neutral in the shaping of practice and results. In 2008, NPQ published an article by longtime civil society advocate Buzz Schmidt, who makes the case for what he called “deliberative deployment.” At what was the start of the Great Recession, he observed that the foundation norm of perpetuity interfered with thinking more systematically about strategies with the potential for longer-term results. It discouraged the accountability of foundations and eroded the real value of philanthropic assets by salting money away when there is no evident need for it.
In light of our current depressed economic conditions, shouldn’t we perpetually warehouse philanthropic capacity to ensure that we have resources to provide grants to future generations or to deploy resources on a rainy day? No! Even if we ignore the cumulative social cost of waiting to solve long-standing problems, deferral is a valid strategy only if future generations become less philanthropic or the philanthropic capacity of the economy declines. Over any meaningful time period, however, neither condition has presented itself. In practice, individuals have become increasingly philanthropic, and society has always expanded its philanthropic capacity.
But that was then, this is now, and we emerged from the recession with an even greater wealth gap. Our current conversation about philanthropy includes worries about living donors of unimaginable wealth who are not only willing to forego perpetuity in greater numbers, but also are involving themselves in public systems where their wealth equals social influence to an extent many see as a threat to democracy.
This latest study emerges in a different social context that was present ten years ago. Is this trend toward electing an endpoint for foundation spending a positive or negative shift?
This latest study from Rockefeller Philanthropy Advisors and NORC (National Opinion Research Center) at the University of Chicago examines far fewer foundations than Ostrower and in far less detail. Nevertheless, the authors’ findings suggest a marked increase in foundations with limited lifespans. By their reckoning, which comes from a survey of 150 foundations across four continents, the decade has seen a significant increase in the number of limited-life foundations, with most of those starting out with that intention. Fewer foundations have converted from perpetuity to limited life. Although foundations with a perpetuity timeline still comprise 70 percent of all foundations, of the newly established foundations they surveyed, almost half were time-limited, as contrasted to 20 percent ten years ago.
The surveys indicate that the decision to set a deadline does have an effect on the organizations, but perhaps not as profound of one as may have been hoped for. Are they more accountable? Nothing here indicates that. In fact, the study indicates the choice of timeline is most often driven by the funder, followed by the board. There is no indication of other accountability drivers.
Time-limited foundations appear to give larger grants to a smaller number of groups, and they do differ in some ways regarding management considerations. But, do these spend-down foundations have a greater, more positive impact overall? That’s another question entirely.
In the end, should we celebrate more rapid spending by philanthropy? Put in context, the same questions remain, ones that have been raised repeatedly over the years about who controls philanthropy as a whole, at what public cost, and what effects they have on our democracy.
As much virtue as we see in the calls for more immediate spending of resources that might have otherwise been held by foundations in perpetuity, the drive and intensity behind plutocratic billionaire spending in this extractive and divided economy is about as far from democratic accountability as you can get.