By Ret Boney
ROCKY MOUNT, N.C. – Formed five years ago to use money from a lawsuit against tobacco companies to help North Carolina make the transition from its dependence on tobacco, the Golden LEAF Foundation has awarded $104 million in grants to nonprofits and government entities throughout the state.
The $400 million-asset foundation, created by state lawmakers, also has sparked criticism, mainly because of its board of political appointees, and its investment in biotech venture capital.
Still, those involved in creating the foundation say it is living up to its original intent.
“I really think, in a half-century of watching public life, there’s never been an opportunity before the people for as creative leadership as this foundation provides,” says Bill Friday, the foundation’s first board chair and former president of the University of North Carolina system.
Brainchild of Gov. Mike Easley, then attorney general, the foundation was created to receive and distribute half the funds due North Carolina as part of legal settlement between tobacco companies and 46 states, a perpetual funding stream projected to yield about $2.3 billion over 25 years.
Those funds are “to be used to provide economic impact assistance to economically affected or tobacco-dependent regions of North Carolina,” according to the consent decree settling the suit, a charge that was echoed in the legislation creating the foundation.
“As I understood, it was to be a fund for the future of the state,” says Valeria Lee, foundation president. “It was to provide grants and other kinds of support to help us move to a new economy that didn’t so much depend on tobacco.”
So the foundation has focused its grantmaking on job creation, workforce training and new options for agriculture, including research, farmer retraining and market expansion, she says.
“Over the course of the past four years, we’ve become more focused on our grantmaking,” she says. “We’ve honed in on what the Golden LEAF Foundation can do. We had to look at what seemed to be most critical needs, which appeared to be job creation and a workforce prepared to take those jobs.”
Grants, awarded in every region of the state, have ranged from a few thousand dollars to over a million, and include funding a tourism and environmental center in Lumberton, providing college scholarships for students from tobacco-dependent communities and training farmers in 12 counties to work in the nursery and greenhouse trades.
For its largest grant, in 2003, the foundation decided to dip into its assets to invest $60 million in the state’s biotechnology industry, with the money going to the state community college system for worker training and to two state universities to provide education and training and to set up research centers.
“There were several vacuums in the biotech sector,” says Lee. “One was skilled workers, another had to do with facilities to research, and the other had to do with capital, a void of venture capital between research and going to market.”
In 2002, the foundation committed $40 million to be invested in biotech venture capital to help companies take their products from the research stage to the marketplace, a move that sparked criticism.
Funding start-up companies was risky, said critics, who also questioned the decisions to place those funds with a firm with ties to Easley, and to allow some of them to be invested outside North Carolina.
“We are treating these investments as we treat other investments,” says Lee. “We made it to make money.”
Proceeds from the investment will be funneled back into North Carolina, she says.
Friday says change requires taking risks.
“You have to gamble on some ideas and be unafraid of failure,” he says.
“That’s one of those places you’re taking great risk…but there’s a risk facet to any organization where, if you’re going to make any change come about, you have to take some risks.”
The board spent a year-and-a-half studying how to make a substantial mark on the biotech sector, Lee says, and continues to look for opportunities that can have a big impact on the state’s economy.
Unlike most foundations, Golden LEAF’s board is politically appointed, named by the governor and leaders of the state House and Senate, a structure that has been criticized for being subject to political will instead of citizens’ needs.
“There’s an inherent problem in the structure of that board,” says Tom Lambeth, retired executive director of the Z. Smith Reynolds Foundation and an early advisor to Golden LEAF.
“The foundation’s board is politically appointed,” he says. “Political institutions are so involved in it, it means that it’s always subject to some second guessing.”
But the board has looked beyond politics to the communities in need, Lee says, adding she has not been aware of any political pressure.
Lambeth says the board has tried “to demonstrate they are a statewide organization, and that is good,” and to set “a broad definition of tobacco-impacted communities and that has been wise.”
If the foundation in its early stages “can establish a reputation for real public service and responsible grant making,” he says, “that will make it harder for the worst kind of interference in the future.”
The foundation is now looking at other sectors that hold growth-potential for the state, including expanding agri-tourism, boosting the growing motor-sports industry and helping entrepreneurs Lee says are key to the survival of small towns and communities.
“We’re standing at a door, looking to see which of these places we’ll step into in a major way,” she says. “It’s awesome to have the opportunity to think about using the public’s money for making a better future.”
Ret Boney is the Assistant Editor of the Philanthropy Journal.