Charitable Relations

Philanthropy adapts to the Obama era.

Original Source

by Lauren Foster

Last November, two weeks after Barack Obama was elected president, Gara LaMarche took to the podium at the annual meeting of Southern California Grantmakers. The president and chief executive of The Atlantic Philanthropies was in particularly good spirits. “It is nice to be able to say you look forward to working with your own government to make the world a better place–independent of it, surely; at times critical of it–but feeling you have a partner, not an adversary,” he told the crowd. “Maybe demonstration projects we fund in philanthropy that actually demonstrate something will no longer be like the proverbial trees that fall in the forest with no one to hear them.”

In January, LaMarche and several other foundation leaders got an inkling of the possibilities when they were invited to Washington for a meeting with Obama’s transition team. Over the course of several hours, the grant-makers, including Ralph Smith, executive vice president of the Annie E. Casey Foundation, and Robert Ross, president and chief executive of The California Endowment, received a series of briefings from incoming government officials. The point of the gathering, LaMarche says, “was to hear from philanthropy and brief philanthropy about where the administration was going and how there could be partnerships and collaborations.”

To those who attended, it was “a clear and powerful” signal of the kind of partner the government could be. “It was nothing less than extraordinary,” Ross says. “I’ve only been in the world of philanthropy for eight years, but veterans of the field were remarking that it was an unprecedented strategic outreach to talk about partnerships.” It was also an opportunity for the foundations to think about their role in working with the new administration. “Philanthropy didn’t come in with an agenda as such and the general message that emerged from the philanthropic side was ‘We have knowledge about things that work that you can know about and then lift up,’” LaMarche says. “I felt the meeting showed that philanthropy had to raise its game, that we had to be more prepared to operate in real time with real opportunities. … A challenge of the moment is how philanthropy generally relates to a more activist government.”

Historically, the relationship between philanthropy and government has been one of innovator and adaptor: Foundations design initiatives or pilot programs that address social problems, and once they have demonstrated success, the government steps in with federal resources to re-create the program around the country. One of the best known—and most controversial—examples is the Ford Foundation’s Gray Areas program, an urban-renewal plan that helped pave the way for the Johnson administration’s “War on Poverty” in the 1960s.

While not all programs that are replicated are ultimately successful, foundations’ greatest achievements have usually occurred when government has stepped in. During the Bush administration, however, many foundations were stymied because the federal government was not willing to work with them in the same way as previous presidencies had been willing to. The result was that many progressive grant makers focused their efforts on changing the political climate until a more sympathetic president took office. Now that day is here, and foundations are confronting what it means to work with government again. In particular, they are working to showcase solutions to social problems, such as poverty, housing, public education, and health care, that may be replicated on a national scale—with the help of the Obama administration, of course.

Since the election, foundations and nonprofits have sought to define their relationship with the new president. Many in the sector see him as a natural ally. After all, he was a board member of The Joyce Foundation and Woods Fund in Chicago, chaired the city’s Annenberg Challenge, and his mother at one time worked for the Ford Foundation in Indonesia. Moreover, Valerie Jarrett, who also served on the board of The Joyce Foundation, is now senior adviser and assistant to the president for intergovernmental affairs and public liaison.

In an op-ed in the San Francisco Chronicle in January, Jane Wales, co-founder of the Global Philanthropy Forum and vice president at the Aspen Institute, says the administration, “strapped for resources, yet charged with large responsibilities,” has reached out to the social sector in a variety of ways. “[Obama] has signaled the kind of partner this government hopes to be,” she writes.

The notion of government as a “partner” can mean many different things. What most foundations hope for when they partner with government, be it at the local, state, or federal level, is that the additional financial resources will allow successful programs to be sustained, replicated, and made available to more communities. Other foundations are looking for ideological support—an administration whose policies are broadly in line with their own. The Robert Wood Johnson Foundation was an ardent backer of the Clinton health-care plan. In 1994, RWJF paid $1.5 million for the broadcast time and an additional $1 million to promote and advertise a two-hour program on the need for health-care reform, which featured Hillary Clinton. Many in the public sector view partnership as foundations not only kicking in some cash to get a new program started but stepping in where government resources have dried up—say, to save a homeless shelter that has lost funding and faces the threat of closure.

Other partnerships can come in the form of the government financing projects or using research that foundations have been working on for years. As Joel Fleishman notes in his book, The Foundation: A Great American Secret; How Private Wealth is Changing the World, while the national Earned Income Tax Credit (EITC) program “was not developed by foundations, it was a foundation-created and -supported organization, the Center on Budget and Policy Priorities, a nonprofit think tank, that led the way in extending the EITC to the states.”

For the Council on Foundations, a partnership with the new administration means considering ways to jointly address challenges. “President Obama has signaled he understands the importance of philanthropy in finding solutions,” said Steve Gunderson, the council’s president and chief executive, in a February address to a group of funders who had gathered in Indianapolis. “He believes in the power of partnership, and he wants philanthropy to step forward.”

Philanthropic organizations are certainly ready to step forward. But how they will actually work with the Obama administration remains to be seen.

Of all the programs that foundations are hoping the Obama administration will pick up and run with, perhaps none has gotten more attention than Harlem Children’s Zone, a New York City charity run by Geoffrey Canada and supported by foundations, financial institutions, corporate executives, and various government entities.

The goal of the Zone, as it is known, is to break the cycle of generational poverty by addressing the spectrum of problems that poor families face, from failing schools and violent crime to chronic health problems. Over the years it has introduced several initiatives: in 2000, Baby College parenting workshops; in 2001, Harlem Gems pre-school program; also in 2001, the Asthma Initiative, which teaches families to better manage the disease; in 2004, the Promise Academy, a high-quality public charter school; and in 2006, an anti-obesity program to help children stay healthy.

Obama was paying attention. In July 2007, the then-senator announced a plan to fight poverty that included creating “promise neighborhoods” in 20 cities modeled after the Harlem project, which he said was “an all-encompassing, all-hands-on-deck anti-poverty effort that is literally saving a generation of children in a neighborhood where they were never supposed to have a chance.” Obama said the federal government would provide half the money, and philanthropies and other private entities, the rest. Arne Duncan, Obama’s secretary of education, voices support for replicating the charity’s approach in an article in the April issue of Chicago magazine. Asked whether he is familiar with what Canada is doing, he tells the reporter: “Yes. I’m going to create 20 Harlem Children’s Zones around the country. I am.” And does Duncan think he will face opposition? “I don’t care. I’m going to fund it,” he replies.

But even with the government on board, replicating programs like Harlem Children’s Zone is a difficult—if not impossible—task. There have been no announcements on how the administration plans to do this, and foundations themselves often have a difficult time expanding on successful pilot projects. “We are in the business of investing in solutions and the major challenge is actually when we find one, we don’t know how to scale it up into policy-driven, systemic change,” says Ross of The California Endowment.

As Paul Tough, author of Whatever It Takes: Geoffrey Canada’s Quest to Change Harlem and America, writes in the January/February issue of
Mother Jones, “I’ve heard one question over and over: Can it really be reproduced? It’s true that it took a leader with Canada’s unique qualities and personal history to create the first Harlem Children’s Zone, to inspire donors enough to expand it from a modest community organization into a nonprofit powerhouse with a $68 million annual budget. But replicating the Zone, especially with federal backing, will require a different and more attainable set of skills. … The bigger question is whether Obama, once in office, will conclude that the government can’t now afford this kind of bold initiative.”

This is why people like William Dietel, president of the Pierson-Lovelace Foundation in Los Angeles and a partner in the philanthropic consulting firm Dietel Partners, say the Council on Foundations should stop making vague calls for partnership and start being more vocal on the specifics of how they can work with the Obama administration.

“For example, something so simple as the Council on Foundations gathering the foundation community together and saying: Let us commit X billions of dollars of our capital to a challenge to the federal government to address X, Y, and Z issues where we have some knowledge, we have some experience, and we know that if we had adequate resources and we are willing to put up our share, we could really move the needle in a partnership,” says Dietel, who is also a former president of the Rockefeller Brothers Fund. “But I don’t see anything like that coming out of Gunderson. It’s all rhetoric: ‘Let’s have a partnership.’ Well, come on, these are times when words aren’t what counts, what counts are actions, and what would you specifically propose? We’ll wait till hell freezes over before we hear from him.”

Many services that americans take for granted—public libraries in every small town, public broadcasting, even the national 911 emergency response telephone system—were born in foundations and brought into mainstream life by a partnership with government.

The Public Broadcasting System, for instance, was spawned by the Carnegie Corporation’s 1967 report, “Public Television: A Program for Action,” by the Carnegie Commission on Educational Television. In the 1970s the Robert Wood Johnson Foundation supported projects that led to the development of the 911 emergency-response system. And in 1974, the Ford Foundation, in conjunction with a group of federal agencies, created the Manpower Demonstration Research Corporation to evaluate programs and policies targeted at low income people. Years later, the research produced by the Ford Foundation and federal agencies provided the evidence on which the Clinton administration and Congress enacted major welfare-reform legislation in 1997.

The heyday of such collaborations was the 1960s and 1970s—but several notable partnerships also formed during the Clinton years. The Annie E. Casey Foundation’s Juvenile Detention Alternatives Initiative (JDAI) was launched in 1992 to address the fact that young people are often unnecessarily detained, with debilitating consequences for both public safety and youth development. JDAI is considered one of the country’s most effective efforts at reforming the national juvenile-justice system. It was designed to ensure that serious and chronic youth offenders are detained, while effective alternatives are available for other youth who can be safely supervised in the community while awaiting their final court disposition. From the outset, JDAI was designed to be a collaboration between the foundation and state or local governments. It all started with five pilot programs, funded by the foundation, in counties across the country. The outcomes were so successful that other counties and states took notice. This year, JDAI will be in more than 100 jurisdictions in 28 states and the District of Columbia. The way the partnership now works is that the foundation offers technical assistance to new JDAI sites in order to help get the site up and running while the local and state governments finance most of the actual reform efforts.

For major social innovations to be successful, foundations require an “activist, expanding federal government” as a partner. “There is no significant social initiative or innovation at any kind of scale that can be funded primarily by private dollars,” says LaMarche. Karl Stauber, president and chief executive of the Danville Regional Foundation, explains that “foundations, working in close cooperation with other institutions, identify important social issues, explore possible approaches deemed to be worthy of experimentation, fund the experiments at some scale, assess the results, and then, if appropriate, attempt to transfer the model to permanent government funding.”

Given that the Obama administration is, so far, an activist, expanding federal government, some wonder whether we are returning to the era of major public-philanthropic partnership. “I would say that on the continuum the answer is absolutely—it returns organized philanthropy to its rightful
place as incubators for innovation and problem-solving,” Ross says. “On the other hand, the world is a far more complex place. It is far more ideologically constrained—the politics are more unforgiving and treacherous, and so it’s a tougher moment to have the ideas break through the ideologies.” 

Fleishman says philanthropic-public partnerships “happened much less during the Reagan administration and more in Clinton and very little in the second Bush administration.” Many progressive grant makers spent the Bush years trying to transcend ideology. Today, they find themselves in unfamiliar territory—some of their grant recipients are now working inside the Obama administration and their policy agendas are more aligned than during the Bush years.

Last year The Chronicle of Philanthropy asked the Center for Responsive Politics, a nonpartisan research group in Washington, to compile data from the Federal Election Commission on donations to presidential and congressional candidates and political-party committees from staff members at the 25 wealthiest foundations and 75 of the largest charities. The data showed that Democrats received 88 percent of the almost $1.2 million contributed from January 2007 through August 2008 and that Obama received 12 times as much in donations than did his Republican rival, Sen. John McCain—about $399,000 to almost $32,000.

“It’s a new day for many because the people who are populating the government have strong philanthropic ties and nonprofit ties, so that’s a different relationship. You can pick up the phone and talk to someone,” LaMarche says. “There is access that was unthinkable in the Bush administration.”

Yet “it is too easy to say the prior administration didn’t care about philanthropy and this one does. That is both too easy and wildly inaccurate,” says Smith of the Annie E. Casey Foundation. “What you have here is a level of intentionality about finding solutions to social problems. The seriousness of purpose around finding solutions leads this administration to focus more intensely, and more intentionally, on looking for partnerships. I think you will see this administration really promoting partnerships with the private sector, partnerships with the faith community, and partnerships with philanthropy.”

Fleishman agrees. “I would bet you that every large foundation with a substantive policy interest in the field of health policy has already been engaged with the Obama administration in its thinking about what do to about health reform,” he says. “And I would bet you, too, that virtually every significant foundation that is interested in education was engaged with the Obama people during the transition period about what’s to be done to reform education and what kind of role foundations could play along with everybody else.” For now, however, partnerships remain an ideal.

The big unknown is how the economic crisis will affect collaboration. Will it put greater emphasis on partnerships? Or will innovative ideas flounder without funding as the government is forced to focus on repairing the economy? Already, some privately funded programs are struggling. Harlem Children’s Zone, for all the plaudits it has earned, has been hard hit as the financial crisis has crimped donations from Wall Street.

“On the one hand, the economic challenges are unprecedented, at least in our lifetime,” Ross says. “At the same time, it is through these moments of utter crisis that there is a premium on great ideas.”

One example of crisis and opportunity, he says, is the French Maternal and Child Health system. In late 1945, Charles de Gaulle embarked on the process of rebuilding postwar France; scores of young men had been killed, birthrates were low, and maternal and infant mortality rates were alarmingly high. “The future of a generation of citizens was at stake—and was at the mercy of a nation in ashes with a broken health care system,” Ross wrote recently in The Sacramento Bee. “Out of this smoldering crisis, de Gaulle provided leadership to conceive and implement the French Maternal and Child Health system, called La Protection Maternelle et Infantile. … More than a half-century later, the French PMI and health system serve as the envy of maternal and child health in the industrialized world.”

The economic crisis affects not just government’s ability to make long-term investments but the capacity of philanthropy itself, as many foundations reduce their spending dramatically to keep pace with shrinking endowments. While foundations are required by law to pay out 5 percent of their endowment in grants annually, and many foundations adhere precisely to that figure, the National Committee for Responsive Philanthropy recently issued a report urging foundations to voluntarily increase the payout to 6 percent annually, and some members of Congress have occasionally threatened to raise the payout rate by law.

Dietel, of the Pierson-Lovelace Foundation, believes a battle is looming on this front. “This is the moment made to order for foundations; they are tax-exempt organizations. Their purpose, their mission, is to help, and it is not to focus on maintaining their corpus. They are not financial institutions; they’re charitable institutions, and therein lies the rub,” he says. “What you’re going to see is a very hot fight between government and the foundations, particularly the Council on Foundations.”

The Council, he notes, has consistently resisted efforts to raise the payout. “I don’t see any reason to think they have suddenly become enlightened or that their hearts have been touched in any way,” he says. “Instead, they have fought Congress whenever this issue has come up.”

Pablo Eisenberg, a senior fellow at the Georgetown Public Policy Institute and a regular columnist for The Chronicle of Philanthropy, wants the Obama administration to “put the heat” on foundations. Unlike many of his peers, he does not see the government making a concerted effort to reach out to philanthropy. “There’s been no mention of the role of foundations,” he says. “They ought to be saying: ‘You’ve got a lot of money—why don’t you guys provide some seed money?’ They should be pushing foundations to give more money by increasing the payout to at least 6 percent in grants and be more in the trenches.”

Stauber, of the Danville Regional Foundation, is cautiously optimistic, encouraged by Obama’s speech to a joint session of Congress in late February. “I thought the opportunities [for foundations partnering with government] after the stimulus bill would be limited. I was blown away by [the] speech,” he says. “Obama mentioned a number of initiatives where foundations have played an important reform-agenda role, [for example] Robert Wood Johnson Foundation and Kaiser on health care. Obama’s discussions about education are very tied to work that’s been done by a variety of foundations, including Annie E. Casey, Kellogg, Lumina, and Gates. As for reinventing the work force, a major component of the stimulus package and what the president was talking about was helping people to get the training they need: Annie E. Casey, Hitachi, and Ford have been involved in the National Fund for Workforce Solutions.”

Partnerships between foundations and government at all levels are essential to a well-functioning society but are not without risk. “When a foundation enters into a partnership with government, its distinctive strength is its independence from government,” Fleishman says. “It must maintain that independence at all costs. To serve society best, however, that independence should be used flexibly to achieve the greatest possible social impact.”

Adds Ross, “We need to create partnerships around the ideas and not around the person who inhabits the White House. And that is the line we have to be very careful not to cross—not to become too enamored with a personality. We really are talking about partnerships that advance ideas that move this country forward, and if we keep that first and foremost in our thinking, the partnerships will go very well.”

Lauren Foster is a freelance journalist based in New York. She was a full-time correspondent for The Financial Times for nine years, most recently focusing on the nonprofit sector.

than did his Republican rival, Sen. John McCain—about $399,000 to almost $32,000. “It’s a new day for many because the people who are populating the government have strong philanthropic ties and nonprofit ties, so that’s a different relationship. You can pick up the phone and talk to someone,” LaMarche says. “There is access that was unthinkable in the Bush administration.” Yet “it is too easy to say the prior administration didn’t care about philanthropy and this one does. That is both too easy and wildly inaccurate,” says Smith of the Annie E. Casey Foundation. “What you have here is a level of intentionality about finding solutions to social problems. The seriousness of purpose around finding solutions leads this administration to focus more intensely, and more intentionally, on looking for partnerships. I think you will see this administration really promoting partnerships with the private sector, partnerships with the faith community, and partnerships with philanthropy.” Fleishman agrees. “I would bet you that every large foundation with a substantive policy interest in the field of health policy has already been engaged with the Obama administration in its thinking about what do to about health reform,” he says. “And I would bet you, too, that virtually every significant foundation that is interested in education was engaged with the Obama people during the transition period about what’s to be done to reform education and what kind of role foundations could play along with everybody else.” For now, however, partnerships remain an ideal. The big unknown is how the economic crisis will affect collaboration. Will it put greater emphasis on partnerships? Or will innovative ideas flounder without funding as the government is forced to focus on repairing the economy? Already, some privately funded programs are struggling. Harlem Children’s Zone, for all the plaudits it has earned, has been hard hit as the financial crisis has crimped donations from Wall Street. “On the one hand, the economic challenges are unprecedented, at least in our lifetime,” Ross says. “At the same time, it is through these moments of utter crisis that there is a premium on great ideas.” One example of crisis and opportunity, he says, is the French Maternal and Child Health system. In late 1945, Charles de Gaulle embarked on the process of rebuilding postwar France; scores of young men had been killed, birthrates were low, and maternal and infant mortality rates were alarmingly high. “The future of a generation of citizens was at stake—and was at the mercy of a nation in ashes with a broken health care system,” Ross wrote recently in The Sacramento Bee. “Out of this smoldering crisis, de Gaulle provided leadership to conceive and implement the French Maternal and Child Health system, called La Protection Maternelle et Infantile. … More than a half-century later, the French PMI and health system serve as the envy of maternal and child health in the industrialized world.” The economic crisis affects not just government’s ability to make long-term investments but the capacity of philanthropy itself, as many foundations reduce their spending dramatically to keep pace with shrinking endowments. While foundations are required by law to pay out 5 percent of their endowment in grants annually, and many foundations adhere precisely to that figure, the National Committee for Responsive Philanthropy recently issued a report urging foundations to voluntarily increase the payout to 6 percent annually, and some members of Congress have occasionally threatened to raise the payout rate by law. Dietel, of the Pierson-Lovelace Foundation, believes a battle is looming on this front. “This is the moment made to order for foundations; they are tax-exempt organizations. Their purpose, their mission, is to help, and it is not to focus on maintaining their corpus. They are not financial institutions; they’re charitable institutions, and therein lies the rub,” he says. “What you’re going to see is a very hot fight between government and the foundations, particularly the Council on Foundations.” The Council, he notes, has consistently resisted efforts to raise the payout. “I don’t see any reason to think they have suddenly become enlightened or that their hearts have been touched in any way,” he says. “Instead, they have fought Congress whenever this issue has come up.” Pablo Eisenberg, a senior fellow at the Georgetown Public Policy Institute and a regular columnist for The Chronicle of Philanthropy, wants the Obama administration to “put the heat” on foundations. Unlike many of his peers, he does not see the government making a concerted effort to reach out to philanthropy. “There’s been no mention of the role of foundations,” he says. “They ought to be saying: ‘You’ve got a lot of money—why don’t you guys provide some seed money?’ They should be pushing foundations to give more money by increasing the payout to at least 6 percent in grants and be more in the trenches.” Stauber, of the Danville Regional Foundation, is cautiously optimistic, encouraged by Obama’s speech to a joint session of Congress in late February. “I thought the opportunities [for foundations partnering with government] after the stimulus bill would be limited. I was blown away by [the] speech,” he says. “Obama mentioned a number of initiatives where foundations have played an important reform-agenda role, [for example] Robert Wood Johnson Foundation and Kaiser on health care. Obama’s discussions about education are very tied to work that’s been done by a variety of foundations, including Annie E. Casey, Kellogg, Lumina, and Gates. As for reinventing the work force, a major component of the stimulus package and what the president was talking about was helping people to get the training they need: Annie E. Casey, Hitachi, and Ford have been involved in the National Fund for Workforce Solutions.” Partnerships between foundations and government at all levels are essential to a well-functioning society but are not without risk. “When a foundation enters into a partnership with government, its distinctive strength is its independence from government,” Fleishman says. “It must maintain that independence at all costs. To serve society best, however, that independence should be used flexibly to achieve the greatest possible social impact.” Adds Ross, “We need to create partnerships around the ideas and not around the person who inhabits the White House. And that is the line we have to be very careful not to cross—not to become too enamored with a personality. We really are talking about partnerships that advance ideas that move this country forward, and if we keep that first and foremost in our thinking, the partnerships will go very well.” Lauren Foster is a freelance journalist based in New York. She was a full-time correspondent for The Financial Times for nine years, most recently focusing on the nonprofit sector.