Earlier this year, Thomas Perrin of the James Madison Institute visited the office of Florida state representative Greg Evers. As he pressed a copy of his think tank’s latest report into the hands of a legislative aide, Evers walked by. “I overheard what they were talking about,” says Evers, a Republican from the Panhandle. “So I put it in reverse and joined the conversation.” Within a few minutes, Evers had adopted a new cause. “When I learned of what was going on, I knew we had to take action.”
JMI’s paper was on philanthropic freedom — and specifically on an emerging left-wing threat to it. In California, the state assembly had passed a bill that pried into the operations of private foundations. It demanded that they publish the race, gender, and sexual orientation of their trustees and of the leaders of the charities they support through grants. In other words, program officers at foundations would have been required to ask soup kitchens to identify their board members who are gay.
The California legislation didn’t become a law — more on that in a moment — but it came close enough to set off alarms in the Tallahassee offices of JMI, a free-market public-policy group. “We keep an eye on Sacramento because that’s where a lot of bad ideas are born,” says JMI president Bob McClure. “We made it a priority to protect Florida’s foundations and non-profits from what almost happened out there.” Their efforts paid off: On May 27, Florida governor Charlie Crist signed a bill that explicitly bans the state from adopting regulations modeled on those almost enacted in California.
The fight is finished in Florida, at least for now. But the war over government control of philanthropies is set to break out in other state capitals as well as in Washington, D.C. As politicians seek to close budget gaps, many are turning their gaze to high-income givers and foundation endowments — and wondering how they can plunder the wealth that allows Americans to give more than $300 billion annually to support everything from churches to cancer research. President Obama has proposed slashing the charitable deduction for the richest Americans. So far, Congress has resisted. Yet some of its members would like to go even further than the White House. California Democrat Xavier Becerra, who sits on the House Ways and Means Committee, has referred to the tax-favored treatment of charitable donations as a “$32 billion earmark” because that’s the amount of revenue Washington supposedly forgoes each year. Becerra wants Congress to play a stronger role in overseeing philanthropy: “I have an obligation to make sure that those $32 billion that would have gone to the federal government are used for a . . . public good.”
The “public good” is in the eye of the beholder, of course. Last year, Becerra embraced a rather specific vision of it when he spoke at an event sponsored by the National Committee for Responsive Philanthropy. He praised the release of an NCRP report called “Criteria for Philanthropy at Its Best.” The document called on foundations to spend at least half of their grant dollars on “lower-income communities, communities of color, and other marginalized groups.” It also said grantors should spend at least a quarter of their donations on “advocacy, organizing, and civic engagement to promote equity, opportunity, and justice in our society.”
Foundations that want to abide by these standards certainly are free to do so. The point of the NCRP report, however, was not to encourage voluntary compliance but rather to build a consensus among political elites for a one-size-fits-all approach to philanthropy. “There’s a growing movement to limit the freedom of donors and foundations to decide where to give away their money,” says Adam Meyerson of the Philanthropy Roundtable, an association of grantmakers. “We are strongly opposed to the use of the political process to impose one set of preferences for philanthropy on the entire field.” Last year, the Roundtable felt threatened enough to put out a legal monograph on why tax exemptions for charity don’t transform private funds into public money.
Yet achieving this transformation is the goal of groups such as the Greenlining Institute, the Berkeley, Calif.–based organization that scored an astonishing success in Sacramento two years ago. It published a report claiming that California foundations didn’t spend enough on non-profits led by minorities. So its ally Joe Coto, a Democratic state assemblyman from San Jose, introduced a bill to require foundations to disclose the race, ethnicity, and sexual orientation of their staffs as well as their grantees. Supporters called for passage in the name of transparency, but the real motive was to exploit feelings of liberal guilt at large foundations and intimidate their boards and staffs into devoting more resources to an NCRP-style agenda. “This wasn’t about data collection,” says Wendy Garen of the Ralph M. Parsons Foundation, which concentrates its resources on disadvantaged populations in Los Angeles. “It was about generating political pressure.”
The state assembly approved the bill, but then Coto yanked it. He had struck a deal with nine California foundations, including the William and Flora Hewlett Foundation (the sixth-largest foundation in the United States) and the David and Lucile Packard Foundation (the ninth-largest). In exchange for Coto’s dropping the bill, the foundations pledged $30 million to “minority-led, community-based” groups. The political nature of the arrangement was obvious in the foundations’ euphemistic press release: It described the giveaway as the result of “productive discussions” with the chairs of the black, Latino, and Asian Pacific Islander legislative caucuses. “The big foundations are fooling themselves if they think they’ve bought off the activists,” says William Schambra of the Hudson Institute. “They’re going to keep coming back until they get their way. That’s how shakedowns work.”
The Greenlining Institute was anything but bought off. As the California foundations bartered with it, the organization set its sights on the Sunshine State. It pursued the same strategy, starting with a study claiming that Florida foundations weren’t giving enough money to minority groups. “The public expects foundations to serve the poor and needy,” said Al Pina of the Florida Minority Community Reinvestment Coalition, a local partner of the Greenlining Institute. “Unfortunately, foundations in Florida and around the United States have not held their end of the bargain.”
As in California, there were problems with the Greenlining Institute’s narrow-minded notion of how philanthropy benefits minorities. The group claimed that Publix, the grocery-store chain, gave less than 3 percent of its donations to minority-led organizations. Yet the company contributed almost $39 million to the United Way through an employee-giving program and its own charitable arm. In turn, the United Way supports everything from helping the mentally disabled to feeding hungry seniors — no matter the color of their skin. But because the United Way doesn’t fit Greenlining’s definition of a “minority-led” organization, Publix stands accused of exclusionary grantmaking. “How absurd,” says McClure of JMI. “This is the ‘ACORNization’ of philanthropy.”
When McClure learned about the Greenlining Institute’s success in California and its new report on Florida, he had his think tank launch a counterattack. It commissioned Matthew Vadum of the Capital Research Center, a Washington, D.C.–based group, to investigate the Greenlining Institute and explain its scheme. Vadum’s eight-page report, published by JMI last December, is what found its way into the hands of State Representative Evers and laid the groundwork for the legislation that now protects Florida foundations from the harassment that their California brethren have suffered.
It’s not clear where the Greenlining Institute will strike next. Figures in the philanthropic community have said they’re keeping an eye on New Jersey, New York, Pennsylvania, and Texas as possible targets. Meanwhile, the abuse continues among lawmakers who refuse to honor the intents of private donors. Earlier this year, Arizona’s legislature snatched a $250,000 bequest from the coffers of the Arizona State Parks Board. The politicians decided that the gift of Asta Forrest, a Danish immigrant who had wanted to support a park system that she had grown to love, instead would help close a budget gap. “She never would have given the money if she had known that the state was going to take it away from the parks board,” a friend told the Arizona Republic.
The next attack on foundations may occur in Washington. In February, CongressDaily reported that “Senate aides are quietly exploring ways to tax the massive wealth tucked away in charitable foundations.” In his most recent budget proposal, Obama once again proposed to reduce the charitable tax deduction on top earners. He thinks it’s smart policy. But behind every governmental act to control or influence the philanthropic sector lies a sentiment that is the exact opposite of charity: envy.