by Wagner blogger

With the U.S. in the throes of a devastating economic crisis and donation dollars more scarce than ever, should foundations divert their funding efforts to direct-service programs which assist casualties of this devastating recession – or should they instead continue to funnel their funds into advocacy efforts aimed at alleviating social inequality?

Leaders of several foundations and non-profit luminaries grappled with the topic during a lively, 90-minute discussion entitled “Philanthropy and the Economic Crisis” on Thursday, March 26th, at  the Robert F. Wagner Graduate School of Public Service at New York University.

Gara LaMarche, Chief Executive Officer of The Atlantic Philanthropies, one of the largest and most socially progressive foundations in the country, was moderator of the discussion about the fallout from the economic crisis for nonprofits as well as the perhaps unprecedented opportunities the crisis presents for catalyzing social change. In addition to LaMarche, who is a Wagner adjunct, and Kersh, the panel included Ann Beeson, a human rights advocate and litigator who has twice argued before the U.S. Supreme Court and is director of U.S. Programs for the Open Society Institute; David Jones, president and Chief Executive Officer of the Community Service Society of New York; and Oona Chatterjee, co-executive director of the grassroots organization Make the Road.

Chatterjee, whose organization works to improve health care, education, housing and job opportunities in some of New York City’s poorest neighborhoods, said that while private funding has “held stable,” the economic crisis has caused some of its foundations to hold back on funding. So instead of concentrating on the work at hand, Chaterjee said, “We’re thinking about how to make the next payroll.”

Even before the economic crisis hit with full force, the task of raising $6 million to meet the organization’s budget was arduous, she said, since most of their donations are in the $15,000 to $20,000 range. What advocacy organizations like hers really need, she said, is help from the major national foundations. But she said she heard that the large national foundations “have a lot of pressure to fund regional and national work,” instead of locally focused, grassroots efforts.

For foundations, striking the right balance between funding organizations with a large national profile and those with a grassroots orientation is also difficult in light of the major contraction in the amount of dollars that foundations are able to provide these days. According to David Jones of the Community Service Society, a 160-year-old poverty-fighting institution in New York City, it’s more critical than ever that foundations’ funds are used responsibly. Unfortunately, Jones contended, too many boards on too many foundations are packed with lawyers and power brokers who are “out of touch” with poor communities. Rather than funding programs that could make a real difference, too often foundations are supporting what he termed “amenity charities…An amenity charity is one in which you give to Harvard because your kid  gets in.”

Ann Beeson of the Open Society Institute asserted that despite the failing economy there is an unprecedented opportunity to set a new political and social agenda, though she acknowledged that the Open Society Institute and The Atlantic Philanthropies are in a unique position to take such stances. “I think this is absolutely not the time to be timid around our policy agenda. This is the time to be transformational,” she said at one point.

The Open Society Institute and The Atlantic Philanthropies are two of the country’s largest foundations. Both are funded by “spend-down” endowments, so their mission is to donate their entire portfolio by a future date. Because of this, they are not under the same economic pressures faced by most foundations. Beeson and LaMarche defended their continued advocacy funding as cost effective in the long run, saying that if they invest now in advocacy, they will affect policies and reduce social needs over time.

Even if foundations could increase funding for direct service, LaMarche said it would be a “drop in the bucket” compared to the actual need created by the economic crisis that has washed over the entire country. With the sentiment at the White House and on Capitol Hill running high for meaningful, progressive change, The Atlantic Philanthropies felt it was a favorable time to right long-standing “systematic injustices” and put dollars to work to fund advocacy aimed at issues such as overhauling a tax code that favors the rich or instituting affordable health care.”We have a window of time now when that can work,” LaMarche said.

Meanwhile, Professor Kersh said that President Obama is expected to announce the creation of a new Office of Social Innovation. The anticipated White House “clearinghouse for the philanthropic community and agencies” will be a source of creative solutions to pressing social problems. Kersh also said the Obama administration is pushing for a reduction in the tax breaks for charitable deductions that individuals or couples making more than $250,000 a year. The proposal would cut, to 28 percent, the current rate of 39.6 percent on deductions.

One study Kersh cited from Indiana University suggests that such a policy could reduce charitable giving by 4.8 percent, which he said translates to nearly $4 billion drop in charitable giving a year nationwide. (Professor LaMarche, however, said the money raised by erasing that tax break is earmarked by the Obama administration for the type of “human needs” that foundations should be funding.)

Legislation has been proposed that would create a standard 1.32 percent excise tax on foundations, instead of the current system, which increases the tax to 2 percent. This legislation should encourage foundations to “give more money away,” Kersh said.

Lastly, the NYU Wagner associate dean and professor reported that the reputable non-profit Finance Fund conducted a survey that found that 52 percent of the nonprofit leaders polled believe that despite the federal stimulus package and other anti-recessionary efforts by the Obama Administration and Congress, their organizations will suffer some type of long term or permanent damage from the economic crisis.

cross-posted at NYU Wagner blog