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Foundations need to help bail out nonprofits

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Pablo Eisenberg

Pablo Eisenberg

Pablo Eisenberg

In the face of growing demands by nonprofits for a federal bailout, Republican U.S. Sen. Charles Grassley, minority chair of the Senate Finance Committee, recently urged foundations and other private donors to take the lead in providing the support nonprofits need to survive financial hard times.

The drumbeat for federal assistance has become louder as all sorts of charities and their support groups are pushing for federal assistance to beleaguered organizations.

Independent Sector, a coalition of about 600 of our largest nonprofits and foundations, has recommended a federally funded $15 billion loan pool for groups in need.

A working group of representatives of universities, colleges, hospitals and medical centers has forwarded a paper to the Department of Housing and Urban Development suggesting it allocate substantial funds to enable their institutions to undertake urban community and economic development programs.

Calling themselves the anchor institutions in urban areas, they claim a unique capacity to revitalize their communities.

Arts organizations are also clamoring at the portals of federal resources, as are social service, health, community development and grassroots organization — all in desperate need of more money.

What Grassley did was simply to point out that philanthropy, for no understandable reason, has been left out of the mix of potential solutions to our nonprofit sector’s
financial crisis.

It is, after all, the responsibility of foundations to support nonprofit organizations; they should be the latter’s frontline of defense.

To date, they have done little or nothing to offer a helping hand, let alone take a leadership role in bailing out the sector.

Sitting on an asset base of some $600 billion, despite their losses in the market, foundations have the wherewithal to make a significant difference.

Yet only a few of the large foundations are planning to disburse more money than they did last year.

The Council on Foundations, the largest foundation trade association, didn’t even have the courage or common sense to encourage its members to increase their payout in a recent letter sent to the membership about the dire fiscal state of their grantees.

The council and its members continue adamantly to oppose an increase in the minimum payout foundations are legally required to distribute every year, an amount that after almost 20 years remains at 5 percent of net investment returns.

An increase to at least 6 percent, all in grants, could add billions of dollars annually to the coffers of nonprofits.

Grassley has it right: Foundations and their donors, who receive substantial tax benefits, have an obligation to taxpayers and the public to take the lead in stabilizing nonprofit organizations and programs without waiting for a federal infusion of funds.

The latter will come as federal programs and projects are financed and expanded through the federal grantmaking process.

That loan fund promoted by Independent Sector, if really needed, could be financed by a consortium of the large foundations. Small at-risk nonprofits throughout the U.S. could be supported by passing them money through intermediary organizations.

All foundations should feel a responsibility to raise their payout in these tough times.

Now is not the time for them to worry about the perpetuity of their assets. It is a time for less conservative approaches, speedier grantmaking and less bureaucracy.

There was little or no mention during the Obama transition of the role philanthropy should play in easing our financial crisis and meeting the priorities of the new administration.

President Obama and his aides now need to push the foundation community to do a lot more than it has done.

Grassley deserves our kudos for stressing the foundations’ responsibility in these hard times.


Pablo Eisenberg is a senior fellow at Georgetown’s Public Policy Institute and a founder of the National Committee for Responsive Philanthropy.

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