Philanthropic gestation – Tobacco funder takes shape

By Cindy Stiff

GREENSBORO – Giving away billions of dollars will be a big challenge for North Carolina’s giant new Golden Leaf Foundation.

First, though, the foundation finds itself on both ends of a microscope as it looks to other funders for guidance – and is watched by other states as it creates itself from wholecloth.

The foundation’s job will be to distribute money to communities in the state hurt by the decline in the tobacco industry.

Over the next 25 years, 46 states will share an estimated $206 billion from a settlement with the tobacco industry.

North Carolina will get $4.6 billion. Half of those dollars will go to the new foundation, with the other half split between two trust funds — one for public health and the other for tobacco growers.

Researchers say that the Golden Leaf Foundation is the only one of its kind in the U.S. — an endowment set up by a state with money won by the state to benefit people in the state for as long as the state exists.

The foundation has a dual public-private role that makes it different from yet similar to other funders.

It will operate much like a nonprofit, private charity that makes grants to fund social causes, but it will do so in open meetings after public debate.

The foundation is run by a 15-member board appointed by Gov. Jim Hunt, House Speaker Jim Black and Senate President Pro Tem Marc Basnight.

Board members serve two terms and have been urged by Attorney General Mike Easley to think of themselves as “answering to no one.”

Despite its public nature, the foundation has little outside oversight. If the board makes a decision about a grant, no entity has been designated to overrule it.

The way the Golden Leaf’s dual roles eventually play out may well be determined by the courts.

Courts issued a consent decree to set up the foundation, and Wake Superior Court Judge Donald Stephens has denied a suit that sought to stop a non-elected board from spending state funds, saying the interests of North Carolina citizens were fairly represented when the foundation was formed.

The foundation’s origin and dual personality are two factors that foundation lawyer David Kyger says make it unique and of such great interest to many of the 46 states trying to figure out how to distribute billions of dollars from the tobacco settlement.

As the Golden Leaf organizes itself, it has looked to some of the state’s strongest foundations as models.

At a recent meeting of the new foundation’s board, Tom McGuire, executive director of the A.J. Fletcher Foundation in Raleigh, and Valeria Lee, program officer of the Z. Smith Reynolds Foundation in Winston-Salem, talked about their grant-making process.

Lee said it was important to meet face-to-face with people whose projects have a real chance of being funded.

“There is an intangible element that I cannot minimize to you,” she said. “What it is, is their passion for the project.”

McGuire advised board members to function like venture capitalists for the nonprofit sector.

“Don’t assume you can solve problems single-handedly,” he said. “To use a worn-out word, be a catalyst. Put resources where others are doing things.”

He advised the board to “be a little daring” like venture capitalists who put money in today’s high-risk technology companies.

“The challenge,” he said, “is to find, examine and implement those partnerships.”

Lee suggested that board consider funding an organization over a long-enough time to enable the group to learn from its experience.

She also told the board that it cannot avoid disappointments if it is willing to take risks.

“Know you will have failures,” she said. “Learn from the investments you make and make changes. What you decide now will be in ink, not in granite.”

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