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How Public Is Private Philanthropy?

I usually focus on the “benefit” side of philanthropy—what can we do and how we can make sure our efforts have the greatest impact. That’s why I have so much interest in measuring the effectiveness of nonprofits—how can nonprofits get better and serve more people?

But what “obligations” do funders have? That was the subject of another interesting and provocative discussion last Friday, sponsored by the Bradley Center for Philanthropy and Civic Renewal in Washington, D.C., and moderated by Bill Schambra, the Center’s director. You’ll soon be able to read a transcript of the event. The event was also the occasion for the release of a new report funded by the Philanthropy Roundtable and written by Evelyn Brody and John Tyler. You can get a copy of the report. It is an interesting monograph worth reading.

The subject of the debate was the seemingly simple question “[are] philanthropic assets public money” and therefore subject to government and public oversight and/or controls? The monograph lays out three ways this argument is made: 1) philanthropies have public rather than private purposes and are subject to broad government oversight; 2) because philanthropies exist under state charters they are “quasi-public” bodies; and 3) since governments forgo tax revenue, the assets of charities are public money, or as some have been saying, a giant earmark. Should they be considered exemptions, subsidies, or passive subsidies?

Presenters on Friday were monograph co-author John Tyler, general counsel of the Ewing Marion Kauffman Foundation; Glenn Lammi of the Washington Legal Foundation; Ray Madoff of Boston College School of Law; and Ralph Smith from the Annie E. Casey Foundation (and also chairman of the Council of Foundations). Both Tyler and Lammi made strong arguments that the federal and state governments were trying to impose inappropriate controls on philanthropy. Adam Meyerson and Sue Santa from the Philanthropy Roundtable argue in the introduction to the monograph that “such changes could significantly affect the ability of philanthropies to continue to play their role in supporting and nourishing American pluralism.” Madoff and Smith pushed back. Madoff pointed out that even private entities have stakeholder obligations and the need to show public good. It seems reasonable for society to ask if there is appropriate oversight and whether we are getting what we need from these institutions.

I felt uncomfortable as the debate drifted more toward charges of government over-reaching. I personally don’t see this as one of the bigger threats to philanthropy at the moment, compared to the problems of personal benefit and general sector ineffectiveness. Smith clarified this issue for me when he observed that the debate was mixing the term government with public. I am comfortable with the notion that philanthropic institutions have a “social contract” with society with certain privileges and obligations. The monograph makes a more narrow point: “Our analysis does not defend philanthropies from government involvement by saying, ‘You can’t do this to us.’ Instead, it says, … ‘You can’t do this to us on grounds that our assets are public.’ … proponents of increased government or public mandates must put forth other grounds for imposing on the purposes, structure, and operations of foundations and other charities.”

We’ll be hearing more about this issue. My thanks to the Hudson Institute and the Philanthropy Roundtable for raising it.

Topics: Communications