The Magazine

No Good Deed...

A bad bill makes its way through the California legislature.

Feb 25, 2008, Vol. 13, No. 23 • By MATTHEW CONTINETTI
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Lately we've been hearing that California has been restored to its historic position as harbinger of America's political future. Let's hope not.

On January 29, in a party-line vote, Democrats in the California Assembly approved AB 624, which requires "every private, corporate, and public operating foundation" with "assets over $250 million" to disclose, "among other things":

the "race, gender, and sexual orientation" of its board of directors and staff;

the "percentage of .  .  . contracts" awarded to businesses owned "by specified groups";

the "number of grants and percentage of grant dollars" awarded to groups serving "specified communities"; and

the "number of grants and percentage of grant dollars" awarded to groups "where the grantee's board of directors and/or staff" belong to "specified groups."

Which "groups" and "communities" are "specified"? The legislation does not say, though that whole bit about "race, gender, and sexual orientation" offers a clue. AB 624's vague language notwithstanding, the required information must be "posted on each private foundation's Internet website" and published in its "annual report." And there will be no exceptions.

This gratuitous and unprecedented imposition on the nonprofit sector has been met with surprisingly little opposition. AB 624 is expected to pass the California Senate, and Governor Arnold Schwarzenegger may even sign it into law. (His office says he has "no position.") It's not as if California's privacy-rights community is concerned. What is the position of the Southern California chapter of the ACLU on legislation that would force private foundation diversity officers to run around each year asking employees whether they like girls or boys? "We don't have a position," says a spokesman.

The legislation's author says that his intentions are benign. AB 624 "does not require foundations to invest in minority communities," writes Assemblyman Joe Coto. "It does not create racial quotas for grant making and employment." No, Coto's legislation is a "simple attempt" to require foundations to "disclose key data related to diversity on an annual basis." Such data are necessary because foundation "grant making and governance" suffer from a "lack of diversity. .  .  . A number of studies" say so, he declares.

The study Coto has in mind is "Fairness in Philanthropy" (2005) by the Berkeley-based Greenlining Institute, the sort of place that bestows a "profile in courage" award on Representative Barbara Lee for casting the lone vote in opposition to authorizing the use of force against al Qaeda and the Taliban back in 2001. In 2006, the Greenlining folks followed up "Fairness in Philanthropy" with "Investing in a Diverse Democracy: Foundation Giving to Minority-Led Nonprofits." Both studies purport to reveal, in "alarming" detail, a "dramatic philanthropic divide" between "minority-led nonprofits" and "non-minority-led" nonprofits. Did you know, for example, that "independent foundations awarded only 3 percent of grant dollars and 4.3 percent of grants to minority-led organizations" in 2002? (Emphasis in the original.) Or that "five independent foundations" studied by the Greenlining Institute awarded "no grants" to "minority-led organizations"?

Historically, foundations have been free to direct money wherever they want, as long as it is being spent on genuinely charitable purposes. Let's leave aside, however, the numerous questions that Joe Coto's bill and the Greenlining Institute's research raise involving donor intent and the role of foundations in American society. Let's also leave aside the false argument that the government is legally permitted to require race, gender, and sexual orientation disclosure on the basis of the foundation sector's tax exemption, which is like saying that because the IRS allows you a mortgage deduction it also gets to know everything that's going on in your house. And let's leave aside the insidious racial essentialism that plagues all such bills and studies--the idea that only "minority-led organizations" are able to serve the interests of minority populations. Instead, let's just take a cursory look at the methodology by which the Greenlining Institute arrived at its "alarming" findings.

The authors of "Fairness in Philanthropy" examined data from the "top 50 independent foundations and the top 25 community foundations by total giving in 2002." This sample is "by no means representative" of the foundation sector at large, the Greenlining authors admit. Using subscriber-based databases like Guidestar, the researchers compiled a list of the groups to whom foundations were awarding grants. Whereupon they investigated whether or not those groups were "minority-led."

What counts as a "minority-led" group? "A minority-led organization," the authors of "Fairness in Philanthropy" write, "is one whose staff is 50 percent or more minority; whose board of directors is 50 percent or more minority; and whose mission statement and charitable programs aim to predominantly serve and empower minority communities or populations." How many grantees fit these criteria the report's authors do not say.

And they probably can't say, because if they did they would reveal that the fix was in from the start. The United States is a multiracial, multiethnic country, but the combined numbers of "blacks," "Hispanics," and "Asians" equal only about a third of the total population. The "50 percent or more minority" number is therefore entirely un-representative. Also, it's ridiculously high. You could have a foundation whose chairman was a minority, or whose board and staff were both 49.99 percent minorities, and it still wouldn't qualify as a "minority-led organization" in the Greenlining Institute's view. Assemblyman Coto's bill is based on seriously flawed research.

It's also largely unnecessary. One thing the Greenlining study does prove is that a lot of information about the demographic composition of foundations and grantees is out in the open already. "To determine if the grantee met Greenlining's definition of minority-led," write the authors of "Fairness in Philanthropy," "researchers conducted web-based and media searches to collect demographic data on staff members, boards of directors, charitable programs, and organizational missions of listed grantees." In other words they spent a lot of time trolling the web checking out the color of people's skin. And they did so at a time when those organizations were not required by California state law to disclose such information on an annual basis. It is true that they occasionally ran into trouble: "If an organization did not have a website," the report states, "researchers called the organization to gather information about the ethnic makeup of board and staff members."

Now, "in some cases, this information was not available," the authors of "Fairness in Philanthropy" disclose--in those cases, it should be noted, where foundations and their grantees didn't find any particular reason to share their demographic makeup with others. So AB 624 properly should be understood as an attempt to make easier the work of outfits like the Greenlining Institute.

And that is yet another reason to oppose the bill. No one should want to make the lives of racial mau-mauers any easier. What AB 624 won't make any easier is charitable giving in California. The Washington, D.C.-based Philanthropy Roundtable, along with former Stanford law dean and NAACP lawyer Paul Brest, oppose the bill on the grounds that it will actually drive foundations out of the Golden State, as donors who do not want to expose grantees to the onerous reporting burden spend their money elsewhere. And how will California's minorities--and Californians generally--be served by that?

The logical response to donor flight is, of course, to nationalize disclosure requirements. Indeed, the Greenlining Institute aims to do exactly that; we hear the next targets likely will be New York and Illinois, and that Democrats on the House Ways and Means Committee are interested. If AB 624 becomes law, then, California once again will be the place where America's political future happens. Except that such a future--where an entire sector of the economy is brought under the purview of diversity bean-counters--is a place where we don't want to live. If it reaches his desk, Governor Schwarzenegger should veto this bill.

--Matthew Continetti, for the Editors