This article is from the Nonprofit Quarterly’s spring 2016 edition, “Strategic Nonprofit Management: Frameworks and Scaffolding.”
Once upon a time, the superwealthy endowed their tax-exempt charitable foundations and then turned them over to boards of trustees to run. The trustees would spend the earnings of the endowment to pursue a typically grand but wide-open mission written into the foundation’s charter—like The Rockefeller Foundation’s 1913 mission “to promote the well-being of mankind throughout the world.” Today’s multi-billionaires are a different species of philanthropist; they keep tight control over their foundations while also operating as major political funders—think Michael Bloomberg, Bill Gates, or Walmart heiress Alice Walton. They aim to do good in the world, but each defines “good” idiosyncratically in terms of specific public policies and political goals. They translate their wealth, the work of their foundations, and their celebrity as doers-of-good into influence in the public sphere—much more influence than most citizens have.
Call it charitable plutocracy—a peculiarly American phenomenon, increasingly problematic and in need of greater scrutiny. Like all forms of plutocracy, this one conflicts with democracy, and exactly how these philanthropists coordinate tax-exempt grantmaking with political funding for maximum effect remains largely obscure. What follows is a case study of the way charitable plutocracy operates on the ground. It’s a textbook example of the tug-of-war between government by the people and uber-philanthropists as social engineers.
The Case of Bill Gates and Washington State
This story begins in 1995, when the Washington State House of Representatives first considered legislation that would enable private individuals and organizations to obtain charters to create their own K–12 schools. These were to be taxpayer-funded schools, but privately run and exempt from many of the regulations governing district (regular) public schools. The funding would come from the resources of regular public schools: each student would “carry” his or her per-child funding out of the district system to a charter school.
The bill died in the state senate, so supporters went directly to voters with a ballot initiative to enable charter schools. The campaign attracted little money on either side, but turnout was high because the vote took place on the same day as the 1996 presidential election. Washingtonians rejected charter schools decisively: 64.4 percent against, 35.6 percent in favor.1
State representatives kept trying. They proposed new bills in 1997, 1998, and 1999, but got the same results: success in the lower chamber, failure in the senate.2
Wariness of charter schools didn’t mean that Washingtonians were completely satisfied with existing schools or feared change. Voters had legitimate concerns. Charter schools, they worried, would divert tax revenue from already underfunded district schools, especially those serving low-income and minority students. In addition, schools under private management might be less transparent and less accountable to the public than Washington’s district schools, which were overseen by locally elected boards.
Charter supporters tried another ballot initiative in 2000, and, for the first time, attracted the backing of a multi-billionaire philanthropist. Paul Allen had cofounded Microsoft in 1975 and The Paul G. Allen Family Foundation in 1988.3 The state places no limits on individual campaign contributions for ballot measures, so Allen was able to give $3.275 million of the total $3.4 million raised by the pro-charter side. Opponents raised only about $11,000. Outspent 309 to 1, they still defeated the initiative, although the millions given in support of charters shrank the margin of victory. The vote was 51.8 percent against charters and 48.2 percent in favor.4
In the next four years, the national context shifted. The debate around public education intensified as a controversial market-based education-reform movement grew stronger. “Ed-reformers” claimed that U.S. public schools were failing; that the culprits were bad teachers, teachers unions, and government bureaucracy; and that the private sector, using public resources, could run better schools. They promoted competition among schools to force out the weakest and measuring educational success via students’ standardized test scores.
The education-reform movement in general, and charter schools in particular, attracted a new wave of philanthropists, many of whom had made fortunes in high-tech industries and finance. Although they had no experience as educators, they aimed to “disrupt” and rebuild public schooling for urban low-income and minority children. They embraced the idea that giving grants to K–12 reform projects corresponded with investing capital in a business. They described their philanthropy in terms of strategic investments to maximize returns and data collection to verify results. Having succeeded in business, they reasoned, they would succeed in education. They came to see funding education-reform candidates and ballot initiatives as part of the same effort.
The Washington legislature finally passed a charter school law in 2004. Opponents responded by petitioning for a ballot measure to repeal the law. Mobilized by the teachers unions, League of Women Voters, state Democratic Party, and the Seattle School Board, they raised $1.3 million for the campaign. The unions contributed the most: the Washington Education Association gave $601,000, and the National Education Association gave $500,000.5
Charter school supporters raised three times as much—$3.9