More than five

Apr 27, 2020

All foundations, but especially conservative ones, should consider annually spending substantially more than the five percent of their corpus now required by federal tax law.

We are big fans of the recent “Call to Action” now endorsed by some 700 foundations, championing a dramatically different approach to grantmaking in the wake of the coronavirus pandemic. As readers of The Giving Review know, that’s largely because what is “dramatically different” for most foundations is pretty much standard operating procedure for conservative philanthropy. The awarding of long-term grants for general operating support along with minimal reporting requirements and no grantor interference—all these recommendations in the “Call” have long been practiced on the right, and with considerable effectiveness, according to conservatism’s critics. (We do not, by the way, support others’ calls to craftily widen the definition of the actual “Call’s” actions to include more progressive advocacy.)

We’d now like to endorse another proposal making the rounds in the wake of the pandemic. All foundations, but especially conservative ones, should consider annually spending substantially more than the five percent of their corpus now required by federal tax law—even if that means, in a rocky Dow Jones stretch, a reduction in the size of their principal.

Fixation on the future

Here’s why this should be more attractive for conservative philanthropy. Most grantmakers on the left tend to have their eyes fixed firmly on the future, because, in their view, there’s a great deal wrong with the present. Mainstream liberal foundations look to professional expertise to design sweeping changes to public policy, based on the dictates of the natural and social sciences. Foundations further to the left similarly demand sweeping changes to public policy, though reflecting not narrowly technocratic concerns, but rather fundamental dissatisfaction with the racist, patriarchal, unequal, and unjust structure of American society. Utopianism is future-oriented.

One way or the other, these two views foresee prolonged, arduous and expensive campaigns to change the way things are, lasting no doubt many decades. Foundations with those orientations would be inclined to spend in such a way that resources will be available for the long haul. That is, they’re less likely to spend so much that the corpus is eroded, which has come to mean willy-nilly not spending more than the required five percent. Given the enormity of their missions, they’re unlikely to think that massive present spending will bring solutions to the massive, long-term systemic problems they seek to address.

Conservative philanthropy, by contrast, isn’t as fixated on the future. Some of us previously have lamented too much of a “presentism” in giving, yes, including conservative giving. A “short-term” worldview, perhaps especially including one defined by the electoral calendar, recklessly risks ineffectiveness and mission jeopardization, we think. It’s seems often borne of both ahistoricism and institutional, or personal, pride; “our time,” or “my time,” is more important than that which is to come. 

If this kind of presentism is bad, however, there is a kind of permanence that can be just as bad, or maybe worse. The right kind of humble, conservative philanthropy harbors no grand utopian expectation for fundamental transformation of our systems, or of our human nature. It shies away from elite-driven social experimentation, and tends to be satisfied with what everyday citizens come up with by way of solutions to problems, working within the marketplace, or within society’s “mediating structures,” like family, neighborhood, house of worship, and ethnic and voluntary association. Conservative grantmakers have no reason to hoard resources for a long-term struggle to enact distant utopian reforms, but rather find ample opportunities for funding modest and practical approaches to problems within an imperfect but basically sound present.

Pandemic putting pressure on preferences

Right now, the everyday civic institutions valued by conservatives are doing amazing work, as they seek to deal with the consequences of the pandemic. They are checking in with and shopping for the home-bound elderly, serving free meals to health care professionals, manning food banks, and improvising medical protective gear. They’re supplying indispensable social connective tissues in a time of mandated physical distancing.

It’s typically very easy for progressive philanthropy to overlook and underfund the concrete, mundane services supplied by front-line, grassroots nonprofits. After all, philanthropy has higher aspirations, with its focus on an ideal future, where truly just social systems will make these kinds of merely charitable activities unnecessary. 

But conservatives are unable to argue that we need to withhold resources on behalf of a grand struggle for future utopian reform. We insist that we patiently and persistently prefer the immediacy, flexibility, and cost-effectiveness of approaches generated by markets and mediating structures.

The pandemic is putting that preference to the test. The institutions to which we look for social solutions are under intense pressure right now. So are conservative philanthropists who insist civil society still has the capacity to organize and focus public energies to solve our problems.

So this is the time for conservative philanthropy to step up to the plate, and consider spending well more than the minimum five-percent payout requirement to support civil-society organizations in this critical time. Let’s say six percent at the least.

Looking back on this time five or 10 years from now, which would we prefer to say? Our foundation declined to spend more in 2020 so we still have a substantial corpus? Or, our local civic organizations weathered the coronavirus storm and met its most pressing human needs, thanks in part to our willingness to take a hit? We hope we will be able—and proud—to say the latter.

1 comment

  1. The second foundation I worked for considered the minimum spending requirement as a floor, not a ceiling. The board decided what to spend based on the quality of proposals they faced. A higher voluntary level or even 6% would not have encouraged them to grant more support. They might or might not now be convinced to grant more based on the reasoning in above statement.

    Two other points are worth adding;
    1. The law allows foundations to forward for 5 years any excess( to the minimum required) contribution which can be applied in future years to a year’s required contribution.
    2. Aiding spending so that grantmaking can increase in real terms is a competent, successful investment program with the best professional help, a investment objective ( ours was 5% plus inflation) , a diversified asset management program beyond stocks and bonds that is keyed to the investment objective ( we modeled several scenarios) , and a professional outside evaluation so corrections can be made. This foundation has exceeded its minimum requirement most years and has grown substantially so more grantees can be helped and more funds awarded. The board accepted that problems and opportunities would exist in the future and wanted to be able to help.

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