Philanthropy is facing a $13-25 billion annual drop off in capital inflow as a result of the estate tax repeal. This is the estimate provided by the Congressional Budget Office if the repeal at its 2009 scheduled level was in effect today.
So, where are we going to find $25 billion? Some will point to the "intergenerational transfer of wealth" and say "There! Over there! There it is!"
I don't think its quite this easy. Sure, some of the wealth built by the WWII generation and now passing to baby boomers goes to philanthropy. But this is actually the same river of revenue from which the estate tax repeal will be diverting resources. It seems a bit much to just sit back and hope the river is big enough that the dam doesn't really get in the way.
Starting now and continuing for the next few days, I'll give you a few other ideas on how to find and cultivate new sources of philanthropic revenue over the next 5-10 years. These are half-baked ideas. Most may be unworkable, but some might have some stickiness.
We know one thing - we need to keep growing philanthropic revenue, and the estate tax repeal is not likely to help that cause. So lets start brainstorming and maybe we'll get somewhere. Comments are more than welcome on these ideas, the need to address the issue, how to take it further - perhaps we can get a real conversation going or even real R & D on new philanthropic financial products.
1. Community Remittance Funds
Immigrant remittances from the US to countries of origin like Mexico, the Philippines, and China aggregate into the billions of dollars annually. These billions are made up of millions of small gifts, coming together at both the point of origin (the immigrant community) and the point of focus (the home towns). How can we capture the similar community commitment that exists between intra-national communities? Rural to urban migrants? Generational migrants?
What if we could focus on aggregating the millions of small gifts from the hundreds of thousands of people who leave small towns for big cities but want to come back? (or leave big cities for the suburbs and want to give back?)
Community foundations are in the right place to do this, but they can't pay their overhead when they focus on lots of small gifts. Commercial gift funds have the infrastructure to reach all the smaller givers, but aren't going to invest in marketing to them.
Perhaps we can package these little gifts into big gifts, where the economies of scale make sense for community foundations or commercial funds to support the aggregating of little gifts into big gifts. After all, investment banks package individual mortgages into big securities, lenders package credit card debt, and community foundations package local gifts with outside matches.
Can we package the small into the big, securitize the package, and move the resources to where they're intended to go? Can we create a fee structure to do so that supports the transactional process? Might the transactional process itself be some sort of new philanthropic resource?
Three good things to realize about smaller givers as a market - 1) they aren't now influenced by the estate tax, so the repeal won't change their behaviors, 2) they already provide the majority of philanthropic giving, and 3) they come in every shape, size, race, creed, denomination, and preference - they are everywhere, and we have more and more tools to find them and help them find each other.
Tuesday, December 14, 2004
Monday, December 13, 2004
Quantifying change
Imagine you could look into the future and see a time when a sum equal to the total amount of your work and that of all of your peers, would be eliminated by the stroke of a pen. Fanciful idea, eh? And depressing, too.
Yet that is precisely what institutional philanthropy faces five years from now with the estate tax repeal.
Philanthropy is very good at discussing how hard it is to quantify change. But this is an act we can measure quite accurately. The Congressional Budget Office estimated that if the law which goes into full effect in 2009 had been in effect in 2000, charitable giving would have dropped by $13-25 billion. The lower number in that range is very close to the total amount of corporate contributions in 2003; the higher number is actually greater than the total Foundation giving in 2003. You can read the full report here.
In other words, an amount equivalent to all of the gifts of all American foundations will disappear from the revenue stream for nonprofits in 5 years.
So now that we can see into the future, what are we going to do about it? I'll post a few of my thoughts over the next few days, as well ideas I know others are pursuiing. I'd welcome your input also.
Yet that is precisely what institutional philanthropy faces five years from now with the estate tax repeal.
Philanthropy is very good at discussing how hard it is to quantify change. But this is an act we can measure quite accurately. The Congressional Budget Office estimated that if the law which goes into full effect in 2009 had been in effect in 2000, charitable giving would have dropped by $13-25 billion. The lower number in that range is very close to the total amount of corporate contributions in 2003; the higher number is actually greater than the total Foundation giving in 2003. You can read the full report here.
In other words, an amount equivalent to all of the gifts of all American foundations will disappear from the revenue stream for nonprofits in 5 years.
So now that we can see into the future, what are we going to do about it? I'll post a few of my thoughts over the next few days, as well ideas I know others are pursuiing. I'd welcome your input also.
OK, so define "Anti-American"
The following is from the November issue of the Aspen Philanthropy Letter, an email newsletter sent out by Alan Abramson of the Aspen Institute's Nonprofit Sector Research Fund. Considering this morning's post on the Reece Committee, Rockefeller Foundation, and Alfred Kinsey, the following is remarkable (!)
"1. CONGRESS CALLED ON TO INVESTIGATE FOUNDATIONS FOR 'ANTI-AMERICAN FUNDING,' 50 YEARS AFTER REECE COMMITTEE
A Congressional investigation into foundation practices is needed to expose activities that "seek to de-legitimize the American regime," according to John Fonte of the Hudson Institute. Fonte led a discussion at Hudson's Bradley Center for Philanthropy and Civic Renewal Nov. 30 based on a working paper that documents his allegations of "anti-American" funding from foundations.
In arguing that foundations sometimes support regime-threatening initiatives, Fonte points specifically to foundation funding of organizations which feel that the American system is inherently racist and therefore illegitimate, and to foundation support of groups that reject the traditional notion of assimilation of immigrants in favor of group rights, consciousness, and advocacy. [EMPHASIS ADDED BY LB] ...Congress ought to help foster a debate within philanthropy about foundations' responsibility to "perpetuate the American regime."
Last time I checked, Americans were constitutionally guaranteed the right to NOT "perpetuate the American regime." At least this is how I would read - and how the Supreme Court has read - the following: "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances." This sentence, which Mr. Fonte may think doesn't apply to American philanthropic foundations, happens to be the First Amendment to the U.S. Constitution.
At the risk of ending the day by repeating myself from this morning, What can we learn from history?
"1. CONGRESS CALLED ON TO INVESTIGATE FOUNDATIONS FOR 'ANTI-AMERICAN FUNDING,' 50 YEARS AFTER REECE COMMITTEE
A Congressional investigation into foundation practices is needed to expose activities that "seek to de-legitimize the American regime," according to John Fonte of the Hudson Institute. Fonte led a discussion at Hudson's Bradley Center for Philanthropy and Civic Renewal Nov. 30 based on a working paper that documents his allegations of "anti-American" funding from foundations.
In arguing that foundations sometimes support regime-threatening initiatives, Fonte points specifically to foundation funding of organizations which feel that the American system is inherently racist and therefore illegitimate, and to foundation support of groups that reject the traditional notion of assimilation of immigrants in favor of group rights, consciousness, and advocacy. [EMPHASIS ADDED BY LB] ...Congress ought to help foster a debate within philanthropy about foundations' responsibility to "perpetuate the American regime."
Last time I checked, Americans were constitutionally guaranteed the right to NOT "perpetuate the American regime." At least this is how I would read - and how the Supreme Court has read - the following: "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances." This sentence, which Mr. Fonte may think doesn't apply to American philanthropic foundations, happens to be the First Amendment to the U.S. Constitution.
At the risk of ending the day by repeating myself from this morning, What can we learn from history?
What can we learn from history?
I went to see Kinsey yesterday. With all the hullabaloo about Liam Neeson's and Laura Linney's performances, the movie reviews missed at least three key points about this film. It may be the first Hollywood hit to feature a philanthropic foundation (Rockefeller). It is one of the few to use a congressional committee as part of a key plot twist (the Reece Commission, also known as The House Committee to Investigate Tax-Exempt Foundations, 1954). And the movie demonstrates that, when we talk about the impact of philanthropy, we need to extend our time horizon from 3 to 30 or 50 years.
Given the enormous sigh of relief that organized philanthropy breathed last week upon the end of the 108th Congress, now is a good time to think about what history has to teach us regarding philanthropy, risk taking, public opinion and public oversight.
Philanthropy provides private resources a role in public life. It can be used to advance democratically-supported decisions about public resources, as it often does in complementing health, family support, or educational programs. It also provides avenues for the pursuit of minority or alternative views, as it often has done in the arts, scientific research, exploration, and, yes, health, family support and educational programs.
Unfortunately, the balance between minority and majority opinion are not always in the forefront of public oversight or private action. Nor are we culturally predisposed to bring a long-term sensitivity or a historical understanding to how these balances shift over time.
It is much more likely that the catalysts to public interest in nonprofit action will be driven by immediate crises or opportunities. For example, the need for public revenue has definitely increased attention to exempt resources. At the state and municipal level, the assumption that large landholdings and enormous real property holdings will never contribute tax revenue to local communities is a constant source of "town/gown" or "town/church" frictions.
Of course, rational issues like public and private resources are not always the real cause of overseer's interest in philanthropy. In the throes of the McCarthy era, the Reece Committee's chair himself stated, "The Congress has been asked to investigate the financial backers of the institute that turned out the Kinsey sex report last August." ( Pomeroy, Wardell. Dr. Kinsey and the Institute for Sex Research. NY: Harper & Row, 1972, p. 375).
The interest in foundations writ large stemmed from moral outrage at the sex research of Alfred Kinsey and - following the money - to the foundation that supported him. Political and moral disagreements would reappear in Congressional interest in foundation support of voter drives a decade later and in funding for human rights in Palestine four decades later. The most recent presidential election brought this opportunistic attention behavior to a new level, as charges of anti-Americanism leveled against Teresa Heinz Kerry drew from politically-motivated "analysis" of the family foundation she heads.
This is not to say that investigations of philanthropy are only catalyzed by political differences or moral outrage. There are other reasons that regulators have turned (and should continue to turn) their attention to the nonprofit sector. Abuse of tax exempt status to cover up financial shenanigans, for example. Violation of the public trust. Tax fraud and self-enrichment. These actions should draw attention to a sector that fundamentally rests on the public trust.
Ideally, we would proudly support ongoing calibrating that protect both the public good and private rights. Finding the balance between them is tricky in the best of times. In times of great political division or on issues of morality (what issues are not?) or in times of great power inequities, such balancing acts require ongoing feats of circus-level acrobatics.
Of course, one key component of maintaining your balance on the high wire is to keep your attention on a fixed point in front of you. Successful acrobats don't look at their feet - they keep their attention out in front. As we navigate the high-wire balancing act of public and private rights in the here and now, we should remember to look up and ahead. Keeping our eyes on the horizon keeps our balance intact as we take small steps forward. History has taught us this - and Kinsey brings it the big screen: We need to take a long-term view when we act, both philanthropically and in public life. Change takes time and time brings changes.
For more on the accuracy of the movie, see the history of the Kinsey Institute. For alternative views of the movie, Google "Kinsey Rockefeller" and you'll find plenty of voices blaming the Foundation and the scientists for what they see as today's moral failures.
Given the enormous sigh of relief that organized philanthropy breathed last week upon the end of the 108th Congress, now is a good time to think about what history has to teach us regarding philanthropy, risk taking, public opinion and public oversight.
Philanthropy provides private resources a role in public life. It can be used to advance democratically-supported decisions about public resources, as it often does in complementing health, family support, or educational programs. It also provides avenues for the pursuit of minority or alternative views, as it often has done in the arts, scientific research, exploration, and, yes, health, family support and educational programs.
Unfortunately, the balance between minority and majority opinion are not always in the forefront of public oversight or private action. Nor are we culturally predisposed to bring a long-term sensitivity or a historical understanding to how these balances shift over time.
It is much more likely that the catalysts to public interest in nonprofit action will be driven by immediate crises or opportunities. For example, the need for public revenue has definitely increased attention to exempt resources. At the state and municipal level, the assumption that large landholdings and enormous real property holdings will never contribute tax revenue to local communities is a constant source of "town/gown" or "town/church" frictions.
Of course, rational issues like public and private resources are not always the real cause of overseer's interest in philanthropy. In the throes of the McCarthy era, the Reece Committee's chair himself stated, "The Congress has been asked to investigate the financial backers of the institute that turned out the Kinsey sex report last August." ( Pomeroy, Wardell. Dr. Kinsey and the Institute for Sex Research. NY: Harper & Row, 1972, p. 375).
The interest in foundations writ large stemmed from moral outrage at the sex research of Alfred Kinsey and - following the money - to the foundation that supported him. Political and moral disagreements would reappear in Congressional interest in foundation support of voter drives a decade later and in funding for human rights in Palestine four decades later. The most recent presidential election brought this opportunistic attention behavior to a new level, as charges of anti-Americanism leveled against Teresa Heinz Kerry drew from politically-motivated "analysis" of the family foundation she heads.
This is not to say that investigations of philanthropy are only catalyzed by political differences or moral outrage. There are other reasons that regulators have turned (and should continue to turn) their attention to the nonprofit sector. Abuse of tax exempt status to cover up financial shenanigans, for example. Violation of the public trust. Tax fraud and self-enrichment. These actions should draw attention to a sector that fundamentally rests on the public trust.
Ideally, we would proudly support ongoing calibrating that protect both the public good and private rights. Finding the balance between them is tricky in the best of times. In times of great political division or on issues of morality (what issues are not?) or in times of great power inequities, such balancing acts require ongoing feats of circus-level acrobatics.
Of course, one key component of maintaining your balance on the high wire is to keep your attention on a fixed point in front of you. Successful acrobats don't look at their feet - they keep their attention out in front. As we navigate the high-wire balancing act of public and private rights in the here and now, we should remember to look up and ahead. Keeping our eyes on the horizon keeps our balance intact as we take small steps forward. History has taught us this - and Kinsey brings it the big screen: We need to take a long-term view when we act, both philanthropically and in public life. Change takes time and time brings changes.
For more on the accuracy of the movie, see the history of the Kinsey Institute. For alternative views of the movie, Google "Kinsey Rockefeller" and you'll find plenty of voices blaming the Foundation and the scientists for what they see as today's moral failures.
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