Foundations: More now is less later

They say a proposal in Congress to boost giving would harm charities in the long run.

The Jessie Ball duPont Fund of Jacksonville gave away more than $13.6-million a few years ago, including $70,000 to repair a church in Lake Wales, $147,250 for the Jacksonville Museum of Modern Art, $17,000 for Big Brothers Big Sisters of North Florida and dozens of other causes.

But some in Congress say that's not generous enough.

In a proposal that already has shaken the insular world of large charitable foundations, two congressmen want to force these nonprofit institutions to give away millions more each year.

Supporters say this jolt to private foundations would blast loose $2-billion to $4-billion each year for the arts, for schools, to feed and clothe the homeless.

"It would pump billions of dollars into America's charities and at the same time offer an incentive for greater foundation efficiency," said Sloan C. Wiesen of the National Committee for Responsive Philanthropy, a watchdog group.

The foundation world has reacted angrily. Directors say a law forcing them to spend more could chip away at endowments. They fear it would destroy the delicate financial balance that has allowed many wealthy Americans - think Henry Ford, Andrew Carnegie and others - to create self-sustaining engines of charity, designed to last forever.

The idea "takes a sledgehammer to the field without understanding what is at stake here," said Sherry Magill, president of Jessie Ball duPont Fund, which had 2002 assets of more than $255-million.

"It's born out of ignorance and apathy," said David A. Odahowski, of the Edyth Bush Charitable Foundation in Winter Park, which has assets of $67.4-million. "Ignorance on behalf of public policy decisionmakers without any public hearings, without testimony, without solid experience in the field."

Without meaning to, the James Irvine Foundation of California gave a boost to this debate. The San Jose Mercury News recently reported that this large foundation gave its president $717,000 in total compensation one year; feted him with $104,000 in retirement parties; and gave him a sendoff gift of $25,000 cash. Meanwhile, the foundation's giving has declined.

No one says this is typical, but it has directed a spotlight to the the huge wealth of some foundations and the need to manage it efficiently.

Why should anyone care? Because foundations provide a mountain of money each year - $27.6-billion in 2000 alone, according to the Foundation Center in New York - for everything from cancer research to education to hot meals for the hungry.

If foundations are hoarding money and spending it on cushy salaries, as some critics hint, the arts and the homeless and the cancer researchers are getting shorted. On the other hand, if Congress passes a law that forces foundations to spend too much, charities might benefit in the short run, but the foundations' endowments could deteriorate.

Current law requires foundations to give away 5 percent of their assets each year. That can amount to a healthy chunk of cash, considering that the Miami-based John S. and James L. Knight Foundation's assets exceed $1.6-billion and the New York-based Ford Foundation's 2000 assets topped $10.8-billion.

But they don't have to give away all that money to charity. Foundations can count their own salaries and administrative expenses in this 5 percent, with certain restrictions. So, if a foundation hires a new $100,000-per-year staffer, it could mean it gives out $100,000 less grant money the next year.

This is what Reps. Roy Blunt, R-Mo., and Harold Ford Jr., D-Tenn., want to change. They say foundations should pay a true 5 percent, not counting administrative expenses. Doing so "will help foundations to give more to the American people," said Laurent Crenshaw, deputy press secretary to Blunt, who is the House majority whip. Prodding foundations to give more inevitably will "help grantees and their programs, whether that's a soup kitchen or a homeless shelter."

It also will encourage efficiency, says Wiesen, of the Responsive Philanthropy watchdog group. If administrative expenses no longer come out of the 5 percent, a foundation might think harder about paying its executive director $717,000.

But Dot Ridings, president and CEO of the Council on Foundations, objects to "trying to fit foundations into a cookie-cutter mold."

The largest private foundation in Florida, the Knight Foundation in Miami, employs a staff of 52, led by CEO Hodding Carter III, a former assistant secretary of state. The foundation's "charitable administrative expenses" - those that count toward the 5 percent - amounted to about $7.8-million in 2001. That included a $375,000 salary for Carter. In that one year, Carter's total compensation including benefits reached $646,066, because of a one-time payment he received for three years' worth of pension contributions.

That may sound like a lot of money to slice out of the foundation's annual 5 percent giving, but officials at the foundation say that's not what happened. The foundation's board decided a few years ago it wanted to aim to give away 5 percent of its assets annually, not counting administrative expenses.

Figures provided by the foundation indicate it gave away 4.6 percent of its assets in grants in 2002, 5.4 percent in 2001, 5.6 percent in 2000 and 4.9 percent in 1999. Under the foundation's policy, its spending is compared to its average assets over the previous three years.

Carter said the board made this decision during the boom years of the stock market, but in recent years, the market has declined and so have the foundation's assets. He said the foundation may not always be able to pay the extra amounts.

"If we have several more years like that, then we're going to have to say "Whoa, Nellie,"' Carter said.

He said he's not surprised by the proposed legislation, because privately held foundations with vast wealth are always going to make an appealing target. "Any populist in his right mind looks at foundation money and says "Those arrogant bastards, why are they sitting on all that?"'

Foundation directors say they sit on all that cash in many cases because they have to: the benefactors' wills call for them to continue investing and giving in perpetuity.

Changing the law would be tantamount to asking a dead person whether they mind spending their money differently, foundation directors say.

"You can't go have that conversation with Jessie Ball duPont. She's deceased," Magill said.

The legislation, if passed, wouldn't affect all foundations. For example, most university, community and hospital foundations would not be covered.

In the Tampa Bay area, the effect of the bill is likely to be small, because the area has relatively few large private foundations. Some of the local foundations that do exist pay more than 5 percent already, so it wouldn't change how they do business, either.

Take, for example, the Joy McCann Foundation, which was formerly known as the Culverhouse Family Foundation, financed with the estate of Hugh F. Culverhouse, the former owner of the Tampa Bay Buccaneers. It reported assets of $24.4-million in 2001 and distributed about $1.9-million in grants, well above the 5 percent level, even without counting expenses.

The unpaid directors of the foundation include Joy McCann Daugherty and her new husband, Dr. Robert Daugherty, chairman of the University of South Florida Medical School. The foundation's gifts in recent years have included more than $5-million to the USF Foundation for medical research and education. Thomas Purcell, foundation president, said the foundation does not accept solicitations for grants.

Another local foundation that has at times given more than the 5 percent requirement is the virtually unknown Eagle's Wing Foundation of St. Petersburg. It reported assets of $10.4-million in 2001, the same year it gave $7-million to the First Baptist Church of St. Petersburg. Its directors include Jabil Circuit chairman William Morean and his wife, Kelly.

The Glazer Family Foundation, affiliated with the Tampa Bay Buccaneers, had 2001 assets of $507,723 and gave away $416,331 in grants. The Tampa Bay Rays of Hope Foundation, affiliated with the Devil Rays, had $344,567 in assets in 2001 and gave away $128,995 in grants.

"What we are raising, we are raising to give away," not to build an endowment, said Dick Crippen, executive director of community development for the Devil Rays.

Publix Super Markets Charities has an intriguing approach to running a foundation. With $460.9-million in 2001 assets, it is a major player in Florida giving, doling out $24-million that year to the Pasco Public School Foundation, 4-H of Pinellas County and hundreds of other organizations. But it keeps a lean staff of four. CEO Carol Barnett, daughter of Publix founder George Jenkins, takes a foundation salary of just $12,000 per year.

Magill, of Jacksonville's Jessie Ball duPont Fund, said the legislation could cause her foundation to pay out an extra $1.5-million. But she said she's most worried about the effect on smaller foundations that may not be able to withstand the pinch, particularly in lean years for investing.

Carter, of the Knight Foundation, said the misleading part of the debate is the underlying assumption that foundations can take over much of the work of government itself.

The entire assets of American foundations amounted to $486-billion in 2000. That's less than three months of the federal budget.

"Foundation money is marginal money," Carter said. "It's important, should be created, it can be productive, but it is not some sort of bottomless well."

- Curtis Krueger can be reached at krueger@sptimes.com or at 727 893-8232.

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