This article is adapted from a speech given by Rick Cohen at the recent Southeastern Council of Foundations 41st Annual Meeting in Mobile, Alabama.
It’s freshman orientation on Capitol Hill, and the larger-than-usual class of 2010 is getting a crash course on how to navigate the next two years – trading the loftiness of campaign speeches for mundane lessons in how to do their new jobs.
As more than 100 new members of Congress – 85 Republicans, a meager nine Democrats – seek out new apartments and directions to the nearest Capitol restrooms, foundations have to be concerned with the messages and implications of this year’s midterm elections.
Philanthropy sometimes sees itself as insulated from electoral concerns, but to believe that foundations, philanthropy, and the nonprofit sector at large aren’t going to be affected by the sea change that happened this November is self-delusional. With the shift of control of the House of Representatives to a conservative, Tea Party-heavy group of new members, there will be issues percolating to the surface that affect not just foundations, but the nonprofit sector as a whole. Here are our top seven issues and lessons.
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- The incoming class of new members of Congress has a scant range of experience with philanthropy, in fact even with the formal 501(c) part of the voluntary sector. For foundations – primarily the big leadership foundations, whose attachment to the nonprofit sector has sometimes waned in the face of a “sector agnostic” approach to grantmaking, it’s time to return to a foundation role that many have eschewed – building healthy, sustainable nonprofits. At this moment with a Congress that doesn’t particularly know or potentially value nonprofits, foundations should be rededicating themselves to strengthening the sector of which they, as 501(c)(3)s, are part.
- The ascendancy of the Tea Party demonstrates a feeling that elites of one sort or another have abandoned many “regular people,” don’t care about their needs, and are willing to write them off. For all the small nonprofits that occupy the bulk of the nonprofit sector, I daresay they feel largely the same toward philanthropy. The fascination of some foundation leaders with scale – investing more money in fewer organizations under a strategic notion of scaling up – leaves much of the sector cold. People are concerned that the elites don’t care. Foundations have to reconnect with the regular people in the nonprofit sector and demonstrate that they get the message about elites afflicted with tin ears.
- Many of the incoming members of the freshman class of Congress are rural. Those that have nonprofit backgrounds frequently point to membership in 4-H or various agricultural 501(c)(6) trade or business associations. Welcome to the consequence of philanthropy giving lip service but scant commitment to rural grantmaking. In the current national infrastructure of the philanthropic sector, the leadership organizations have often substituted public relations for substantive action. There is no better example of this than philanthropy’s grossly embarrassing response to the call of Max Baucus for an increase in rural grantmaking. As a result, the nonprofit sector may well see philanthropy as disconnected from their needs and issues.
- I’ve never bought into the notion that the nonprofit sector is a swath of organizations whose federal tax status qualifies them for the title “independent sector.” I do think that there is value in thinking of nonprofits and foundations as a third sector, existing as a counterpoint to government and business, despite obvious interrelationships and co-dependencies. But since 2008, organized philanthropy has grown overly cozy with its role as an implementer or cosponsor of federal government initiatives. The names on the White House visitors list are a good indication. Some foundation sector leaders might want to pay rent for all the time they’re camping out at the Executive Office Building. While some might say that this gives them policy access, others might say that this coziness results in a less public and more non-confrontational role with the Obama Administration. One obvious example was the foundation sector’s silence when the Administration left out nonprofits from health care subsidies in health reform. A consistent pattern emerging in this administration is its tendency to overlook or deemphasize potential nonprofit design and implementation roles in federal programs. Nonprofits tell me that they have to fight to get this administration to insert nonprofits into some programs where nonprofits would seem to logically fit. Foundations should be remembering that partnership is fine, but they have to stand apart from government and help those who would watchdog and criticize government.
- This past election was hardly a paragon of transparency. Tea Party activists to their credit have called for no more back room deals, notwithstanding their scarfing up anonymous donations through 501(c)(4)s such as the Tea Party Express and Crossroads GPS, hardly unleashed but certainly boosted by the legal effect of the Supreme Court’s Citizens United decision. Yet foundation decision-making is itself hardly a paragon of transparency and openness. Relying on foundations as implementers of public policies such as the Social Innovation Fund, as the Obama Administration is doing, simply adds another layer of murkiness in public decision-making, undermining the cleansing effects of increased sunshine. This is a moment in history in which foundations should reexamine what they might do to make themselves more publicly accessible. It is also the time for the entire sector to rethink and shed some of what has been an archaic concept of donor confidentiality to 501(c)(4)s and perhaps 501(c)(3)s, a remnant of liberal fears of Congressman Istook’s attacks on nonprofits and conservative fears of an over-energized Clinton Administration IRS. The 19th century origins of the confidentiality issue notwithstanding, times have changed, and we have to rethink what broadly construed confidentiality means for American democracy.
- What qualifies as tax exempt foundation grantmaking? I remember one foundation executive whispering to me long ago how obvious it is that they should ask themselves regularly whether their foundations warrant their tax exempt status, not by virtue of whether they follow the IRS rules, but by whether they are delivering a social value that justifies the billions of dollars in their tax exempt endowments from which they spend. The name of Antonio Becerra, the congressman from Los Angeles, brings shudders to many foundation leaders because he asked whether the public’s granting a tax exempt status to philanthropic and charitable contributions is worth the sacrificed tax revenues. Becerra asked a very important question, that isn’t answered by surveys of foundation grantees, about whether they like their foundation grantmakers and what they might improve in the way foundations operate. Becerra from the left, and the Tea Partiers from the right might be asking questions of substance as opposed to process, and foundations have to be prepared to answer those questions forthrightly.
- If the Tea Party tells us much about what foundations might want to remember about grantmaking, it is the need to fund grassroots organizing. Regardless of how much the Tea Party movement was funded by the Koch family or controlled by Dick Armey’s FreedomWorks organization, the growth of the Tea Party should tell us that there is a hunger in this nation for a revival of grassroots democracy. But the democratization of philanthropy isn’t responding the way it should. How can democratization occur within philanthropy? It certainly isn’t occurring with the increasing prevalence of foundations that don’t accept unsolicited grants and increasingly fund themselves through foundation-sponsored initiatives. The message from many big foundations is increasingly that foundations know the answers, and that the groups on the front lines of social change had better listen up and learn rather than lead.
Many of these concerns for philanthropy obviously predate the creation and growth of the Tea party movement. The message from the November elections need not be melodramatic warnings replete with “at their peril” advisories to foundation trustees and executives. It is rather a message that suggests to foundations that they may be displaying a tin ear to the communities they fund. Simply because resource-desperate nonprofits proffer effusive thank-you’s for foundations’ “generous” grant support doesn’t mean that foundations are accurately grasping what is happening in many communities. With their self-defense lobbying muscle, foundations will likely traverse the looming Senate Finance Committee and House Ways and Means Committee hearings with minimal need to change. Although foundations might not suffer at the hands of House and Senate legislators, they had better be cognizant of what they might hear from the disaffected American public whose populism of the right and of the left doesn’t find foundations to be much engaged in or supportive of their needs and concerns.