Tuesday, August 22, 2006

This should have been a comment...

...But instead it came via email.

I read this from you this morning:

> >"Philanthropic dollars are not democratic. More important, philanthropic dollars are not enough to run anything. Even when there are a lot of them - and Gates/Buffett have plenty - they are not sufficient to address the problems of a democratic society. We must recognize the downsides and shortfalls of philanthropic dollars. And it is the public sector, and the choices it makes, that allow philanthropic dollars to accumulate and direct how they function. This regulatory relationship has lots of room for improvement. But its more important that we don't ever confuse the private funds for - or expect them to replace - public responsibilities."

Exactly! But what suggestions do you make for regulatory improvements?"

So, some initial thoughts:
1) We currently regulate philanthropy post hoc - that is, we monitor what happens after it happens (if at all). Regulations that give preference to community input on the front-end would be a good start. For example, tax breaks currently favor gifts to community foundations over those to private foundations.

2) Second, the regulatory system for organized philanthropy (foundations) relies heavily on penalties (see the post hoc note above). The problem with this is that no one really suffers from penalties on foundations. No CEO loses his/her job, staff aren’t docked salary, and the donor has already given over the funds to the organization so the money isn’t coming out of her pocket. The only ones who might suffer are potential grantees. Once the penalty fee is assessed the likely response is to decrease the grants budget (not cut salaries or jobs at the Foundation). So the community suffers, but these organizations have no power vis-à-vis the foundation to begin with so their pain is not a very effective deterrent.

3) Which leads me to the next consideration. If penalties assessed don’t actually penalize anyone in a decision-making role, perhaps we need a new approach. Incentives work for donors when they are in the initial stages of setting of a foundation – hence the community foundation preference noted above.

Simply encouraging more philanthropic gifts may not be the goal (remember we were talking about the relationships between philanthropic and public resources). Perhaps there are incentives to be considered that would actually defer some of the philanthropic dollars BACK into the public system, but leave the potential donor with more say than he/she has now. We can direct some of our tax dollars (electoral funds at the federal level and some municipalities/states allow funds to be checked for the arts).

More thoughts to come. What do YOU think?

1 comment:

Anonymous said...

The tax preference for community foundations over private foundations is indeed a good place to start. Understanding how the political decisions that regulate foundations create a set of incentives for behavior is the right place to begin.

Why not graduated incentives for giving to certain kinds of recipients or for certain kinds of processes -- bigger incentives for gifts to the poor or where community control over the assets is in place?

At a basic level, it seems to me that we need to understand why we provide tax breaks in the first place. It's one thing to vigorously protect the liberty of people to give money away; it's another thing for the citizenry to subsidize the liberty of wealthy people to create foundations for their pet causes.

Carnegie didn't need tax breaks in order to give money away, did he?