The Magazine

Big Philanthropy’s New Role

An unhappy partnership with the public sector.

Mar 31, 2014, Vol. 19, No. 28 • By JAMES PIERESON and NAOMI SCHAEFER RILEY
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Many cheered last month when President Obama finally used his bully pulpit to talk about the problems facing young men of color. Of course, the president did not have much else to offer: Nearly all of the $200 million pledged for his “My Brother’s Keeper” initiative is from private foundations, not public coffers.

Visitors looking at the Detroit Institute of Art’s Diego Rivera mural

Visitors looking at the Detroit Institute of Art’s Diego Rivera mural

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This comes on the heels of a recent announcement that several private donors, including the Ford, Kresge, Charles Stewart Mott, and Knight Foundations, have pledged nearly $330 million to help the city of Detroit cover its pension costs in bankruptcy proceedings. In return, they have demanded that public officials in the state and city place the Detroit Institute of Art into nonprofit hands so that the institute’s art collection cannot be sold to pay the city’s creditors. There are apparently more than 20 other conditions that the foundations have attached to this deal, which have not yet been made public. 

There have been other cases in recent years of government officials looking to private institutions to underwrite favored causes. The mayor of New York City recently asked the Nature Conservancy to redistribute private funds from the care of Central Park to the upkeep of other parks around the city. Some years ago legislators in California introduced a bill that, if passed, would have required private foundations to appoint advocates to their boards and donate more of their funds to the needy. More such cases are bound to arise as financially starved governments search for new sources of funds.

As these cases suggest, a significant change has occurred in recent decades in the relationship between government and private philanthropy. During the 1960s, in the heyday of the Great Society, prominent foundations funded new programs on an experimental basis in the hope that the federal government would step in with its vast resources and fund them on a permanent basis. The Public Broadcasting System, the National Endowments for the Arts and Humanities, “model cities” and urban renewal programs, federal housing efforts, and many more such programs began in this fashion. 

The foundations also created advocacy and litigation groups that pushed for race- and gender-based affirmative action, environmentalist protections, and public welfare initiatives. These foundation-funded groups lobbied to expand government programs further and make it impossible to eliminate any of them. 

As all of this suggests, foundation initiatives were a one-way process designed to expand the role of government and the welfare state. During the 1980s and 1990s Presidents Reagan and Bush encouraged foundations, corporations, and individual donors to step up to demonstrate that the private sector can address problems that government had failed to solve. President Reagan created a Task Force on Private Sector Initiatives to make recommendations along these lines. President Bush had his “Thousand Points of Light” initiative to highlight successful private sector efforts to strengthen civil society.

But these efforts never attracted much support from prominent foundations and philanthropic leaders. It was not their responsibility, they said, to fill in the gaps caused by federal budget cuts. Having spent so much money building up government programs, they were understandably reluctant to assist in cutting them back. 

Now, decades later, as government money begins to run out at all levels, this process is finally coming to an end, albeit with most of these expensive programs still in place. Instead of foundations leveraging government, as they did in the 1960s and 1970s, governments are now looking to private foundations to bail them out. 

This was an inevitable development given the tendency of government to expand into new fields of activity and to take over previously private institutions. Today many of those charitable organizations started or funded by private foundations receive the bulk of their funds from state or federal governments. According to The Nonprofit Almanac, in 2010 public charities received a quarter of their revenue from fees for goods and services from government sources. Health and human services nonprofits raised the majority of their money from government sources, according to the National Center for Charitable Statistics. All of the work that these foundations have done to influence public policy has actually made the independent sector more a tool of government than the other way around.

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