NEW YORK (Jun. 10)
A controversial bill to clean up the charitable foundation world is stirring mixed reactions among Jewish philanthropists.
Under the House Charitable Giving Act, the nation’s 64,000 foundations, including 7,000 Jewish family funds, would not be allowed to include their annual administrative costs as expenses.
Foundations currently are required to give at least 5 percent of their endowments to charity, but can claim overhead such as staff salaries, office maintenance and travel expenses as part of that mandatory giving.
Mark Charendoff, president of the Jewish Funders Network, which represents some 800 Jewish family foundations, said he found members split over the reform bill.
Still, considering that the bill would require more charitable giving in tight economic times, “I was surprised to find such mixed reactions,” Charendoff said.
The bill surfaced in response to an April report in the San Jose Mercury News that one of the nation’s wealthiest patrons, the James Irvine Foundation, awarded lavish salaries and compensation packages to its president while slashing grants as its assets fell sharply.
The bill has divided the foundation world, which has grown rapidly in recent years. Foundations across the country are worth a total of $480 billion. Jewish foundations, which have doubled in number in the last decade, make up about $30 billion of that.
On one side are groups like the Council on Foundations, a professional association that calls the bill a “danger” to its membership.
On the other are reformists such as the National Committee for Responsive Philanthropy, which wants more annual giving and maintains that the 100 wealthiest foundations would distribute $900 million more each year under the new law.
Charendoff said JFN members also remain divided.
“This is a highly nuanced issue that does not appear to enjoy a consensus among our members,” he said.
While the JFN will not take sides in the debate because its membership does not entirely support one side, Charendoff long has encouraged Jewish foundations to give more than the required 5 percent.
But he acknowledged “the leap between saying that and wanting Congress to legislate that.”
“I don’t believe there’s a deep understanding in the pending legislation of the philanthropic world,” Charendoff added.
Charendoff instead wants to encourage Jewish foundations “to do better, rather than trying to force them through legislation.”
In fact, many already reach higher standards of tzedakah, or charity. The Charles and Lynn Schusterman Family Foundation of Tulsa, Okla., whose assets reached some $80 million in 2002, gave away $14 million. Of that, 75 percent went to Jewish causes such as birthright israel, which sends young people to Israel.
Had their patron, Lynn Schusterman, adhered strictly to the 5 percent baseline, the foundation would have given away only $4 million.
One critic of the proposed law told Charendoff that the legislation is really a partisan conservative effort to “sunset” foundations, or force them to spend down their entire endowments and go out of business, because many benefactors have died and left their funds to more liberal overseers.
“We’re not so concerned about the issue of foundations spending themselves out of existence, because money is available to us,” said Sanford Cardin, executive director of the Schusterman foundation.
But Cardin also is a board member of the Council on Foundations.
From that group’s perspective, “we don’t think the bill makes a great deal of sense,” he said. “The 5 percent number is the right number to ensure the long-term viability of foundations’ assets.”
Cardin said the bill would force foundations to cut back on staff, whose site visits to help assess how grants are made and used actually make foundations more efficient, he said.
In 1994, for example, the Schustermans hired staff to oversee their money because “they felt they could award more if they had professionals handling their assets,” he said.
In “many cases, money is not the issue for not-for-profits trying to do a better job: It’s governance, management, strategic planning and implementation,” Cardin said.
Jeffrey Solomon, president of the Andrea and Charles Bronfman Philanthropies, said the proposed law would not affect many Jewish foundations, since an estimated 85 percent remain small outfits run by the families themselves and do not rely on professional money managers.
But some $1 trillion is expected to change hands in the coming decades, and the second, third and fourth generations of wealthier Jews whose families run foundations would be affected by such a law, Solomon added.
Still, Solomon said he was “not troubled” by the idea.
“This is not going to mean the demise of foundations,” he said. Instead, “we should be encouraging foundations to be putting as much as is reasonable into community needs.”
The Bronfman fund, which actually is a holding company of five foundations, has assets of more than $100 million and last year gave out $21 million.
The foundation is considered an “operating foundation,” Solomon said, or a fund that operates its own grant projects, and so would be exempt from the law.
Meanwhile, Charendoff said he doubts most foundations would have opposed the bill in better economic times, when many foundations were seeing returns of 10 percent to 20 percent on their investments.
“You wouldn’t have seen such an uproar,” he said.
Others saw silver linings in the bill. Despite his own opposition to the bill, Cardin said the foundation world will benefit from the debate.
One donor remarked to Charendoff that the bill says it aims for “change” — which is precisely what foundations are supposed to effect.
“Why is everyone so hysterical?” he wondered.