Foundation leadership on diversity is missing

John C. Gamboa | SF Gate Open Forum
Tuesday, April 1, 2008

Thanks to Assemblyman Joe Coto's "sunshine" bill, The Foundation Diversity and Transparency Act, the public has heard more about diversity and accountability on philanthropic foundation boards in two months than it has in two decades. This bill, which my organization sponsored, would require large foundations to disclose their board and grant-giving diversity. Information of this type is already provided by every major bank and regulated utility in the state. What we did not realize, though, is how this issue would ignite a firestorm of controversy and condemnation from major foundations. Almost every week there is a new charge that the proposed law would unleash "diversity police" or promote "reverse racism."

The strongest argument against AB624 has not been raised by anyone in the philanthropic world, and there is good reason why. If the $700 billion of foundation assets were truly private in nature, then the Legislature has no right to require transparency as to the uses of these funds. But the taxpayers subsidize through tax exemptions to the foundation world between $40 billion and $80 billion a year.

These taxpayer subsidies were awarded in order to encourage the foundations to assist the poor and under-served communities. They were not intended, for example, to subsidize the opera or the symphony, which throughout the United States receive more than $1 billion in assistance from foundations and wealthy donors. As Robert Reich, a former U.S. secretary of labor and currently a public policy professor at UC Berkeley, has written, "These aren't charitable contributions. They're often investments in the lifestyles the wealthy already enjoy and want their children to have."

For the past three years, the Greenlining Institute has published an annual report that looks at philanthropic foundation giving to minority community nonprofits. Our last unrefuted study found that only 3.6 percent of giving went to these organizations, despite the fact that people of color make up more than half of the state. Of this, only 3/10ths of 1 percent went to African Americans. Our reports have also found that only 10 percent of total giving goes to low-income communities. Many community leaders feel this low level of giving to the needy does not make sense, considering how much foundations receive every year in tax subsidy.

What foundations may fear the most is not the Coto transparency bill, but where it may eventually lead. Today, foundations spend only a quarter, on the average, of their annual income on philanthropy. Included in this sum are grants to wealthy universities that already have huge endowments, an example of which is the Koret Foundation's $3 million dollar gift to Stanford in 2006. Foundations could be doing far more to address the immediate crisis, particularly during a recession, if they spent a larger portion of their annual income on philanthropy. For example, foundations today spend only half their income every year. If they were to spend 80 percent of their annual income, that number would rise to more than $100 billion a year.

To further support Assemblyman Joe Coto's bill, Greenlining has asked the chairman of the congressional Ways and Means Committee, Rep. Charles Rangel, to request a GAO study of the dollar amount of annual federal, state and local tax subsidies to the foundation world. And, the governor, facing a major budget crisis and substantial cuts in health, education and other social services to low-income families, may wish to ask the State Franchise Tax Board to report on the dollar amount of California taxpayer subsidies. Greenlining estimates it at $4 billion a year. This may be enough to avoid cuts in education and health care for low-income families.

In the spirit of compromise and maximizing impact, Greenlining invites all foundations, including the Koret Foundation, to join us in a venture which will have profound and long-lasting benefits for our state's underserved families. We have written Gov. Arnold Schwarzenegger to request that half of the annual income of the state's foundations be devoted to helping low-income victims of the recession for the next two years. In a time of recession, we hope that foundations will be vocal supporters of this idea.

John C. Gamboa is executive director of the Greenlining Institute. The opposing view by Jeffrey A. Farber of the Koret Foundation ran in Open Forum on March 25. To read it, go to sfgate.com