Leading Foundations Pledge to Give More, Hoping to Upend Philanthropy
The Ford Foundation and four others plan to dramatically increase their spending, a splurge financed in part by issuing debt.
Darren Walker, president of the Ford Foundation.Credit...Andrew Seng for The New York Times
By
James B. Stewart and
Nicholas KulishJune 10, 2020
The week after the U.S. economy shut down in March, Darren Walker, the president of the Ford Foundation, fielded a stream of phone calls from the heads of dozens of organizations that Ford supports. Many were panicked. One was in tears.
“There was a sense of desperation and panic from these usually self-assured leaders,” Mr. Walker said. “There’s never been such an existential challenge to the future of the nonprofit sector.”
In 2019, the Ford Foundation handed out $520 million in grants. Mr. Walker quickly realized that was not going to be anywhere near enough in this crisis-engulfed year.
His solution: Borrow money, spend it quickly and inspire others to follow Ford’s lead.
The Ford Foundation plans to announce on Thursday that it will borrow $1 billion so that it can substantially increase the amount of money it distributes. To raise the money, the foundation — one of the country’s most well-known and oldest charitable organizations — is preparing to issue a combination of 30- and 50-year bonds, a financial maneuver common among governments and companies but extremely rare among nonprofit groups.
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Continue reading the main storyFour other leading charitable foundations will pledge on Thursday that they will join with Ford and increase their giving by at least $725 million.
The decision by the five influential foundations — major sponsors of social justice organizations, museums and the arts and environmental causes — could shatter the charitable world’s deeply entrenched tradition of fiscal restraint during periods of economic hardship. That conservatism has provoked anger that foundations, which benefit from generous federal tax breaks, are hoarding billions of dollars during a national emergency, more interested in safeguarding their endowments than in helping those in need.
The Ford Foundation, which has a $13.7 billion endowment, plans to distribute the newly raised money over the next two years, effectively increasing the percentage of its endowment that it pays out annually to about 10 percent from nearly 6 percent.
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Major charitable foundations traditionally spend a little more than 5 percent of their assets in a given year — the minimum required under federal law for the tax-exempt organizations. The less they distribute, the larger their endowments grow and the higher their odds of surviving in perpetuity.
The Ford-led plan provides a workaround. By using borrowed money, foundations would go into debt but wouldn’t erode their endowments. Foundations have issued bonds in the past to finance projects like building new headquarters, but bankers said it was virtually unheard-of for them to borrow money that they planned to distribute.
“For most foundations, the idea of taking on debt is outside of normative thinking,” Mr. Walker wrote in a letter last month to Ford’s board. “Covid-19 has created unprecedented challenges that require foundations to consider ideas — even radical ones that would have never been considered in the past.”
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John Palfrey Jr., president of the MacArthur Foundation.Credit...Bryce Vickmark for The New York Times
“This is unprecedented for us, but these are unprecedented times,” said John Palfrey, president of the MacArthur Foundation, which will start with a $125 million bond offering and then assess whether more is needed.
With 300 years of experience between them and fortunes forged in insurance and tobacco, automobiles and banking, the five foundations carry the cachet of America’s unofficial aristocracy. They are closely watched trend setters in the philanthropic community.
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Continue reading the main storyThere are more than 100,000 private foundations in the United States, and they are together sitting on endowments worth nearly $1 trillion, according to Candid, a group that tracks nonprofit groups and foundations. Some — including the Bill and Melinda Gates Foundation — already pay out a substantial chunk of their endowments every year. But many more hover near the legal floor, on average distributing roughly 7 percent of their funds annually.
Philanthropy Rises and Falls With the Stock Market
The assets of private foundations generally rise and fall with the stock market. The share of their assets that they give away fluctuates as well but has risen in general.
Total assets of private foundations
Giving as a share of assets
By Karl Russell
An increasingly vocal network of charitable figures, lawmakers and others wants to pry that piggy bank open. The Patriotic Millionaires — a group of about 200 wealthy individuals, including the Disney heiress Abigail Disney, that pushes for higher taxes on the rich — and the left-leaning Institute for Policy Studies have been pressing Congress to force foundations to double their required payout to 10 percent of their assets for the next three years.
That would generate about $200 billion in additional payouts, the Institute for Policy Studies estimated.
“I’ve been appalled for years how many foundations treat the 5 percent federal floor as a ceiling and refuse to spend a penny more than they are required to,” said Scott Wallace of the Wallace Global Fund, whose family foundation plans to give away one-fifth of its $120 million endowment this year.
“If in our hour of greatest need, America’s greatest crisis in generations, philanthropies are planning to spend less, then they need a big kick in the butt,” added Mr. Wallace, a grandson of the progressive Henry A. Wallace, who was President Franklin D. Roosevelt’s vice president from 1941 to 1945. “Only Congress can deliver that kick.”
Mr. Walker said he had approached six more leading foundations about joining Ford but was rebuffed. Some were adamant they would not increase their spending rates. A few said they might, but weren’t ready to make a public pledge.
The reluctance to spend big in a crisis reflects in part foundations’ desire to preserve their endowments in perpetuity. Because those endowments tend to be invested, the amount they distribute typically declines during recessions and stock market downturns — precisely when their money is needed most.
The Carnegie Corporation was among those that declined to pledge to spend more. The Rockefeller Brothers Fund was another. Stephen Heintz, its president, said its spending would go up this year but that its board had not yet decided by how much.
Larry Kramer, president of the William and Flora Hewlett Foundation,
said in March that the $9.7 billion foundation would not increase its spending because doing so “would require selling devalued assets from an already diminished endowment, thus locking in losses permanently, to the certain detriment of future grantees and the communities they will serve.”
Since then, financial markets have almost entirely rebounded from their March lows. Vidya Krishnamurthy, a spokeswoman for the foundation, said it was “reassessing how best to meet immediate and future needs of our grantees, amid the current crises and changing market conditions.”
So far, the evidence seems to show it does. A widely cited
paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,”
but she later walked back that statement.How does blood type influence coronavirus?
A study by European scientists is the first to document a strong statistical link between
genetic variations and Covid-19, the illness caused by the coronavirus.
Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
How many people have lost their jobs due to coronavirus in the U.S.?
The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.
Will protests set off a second viral wave of coronavirus?
Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to
warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.
How do we start exercising again without hurting ourselves after months of lockdown?
Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now:
Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.
My state is reopening. Is it safe to go out?
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
What’s the risk of catching coronavirus from a surface?
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number
of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and
hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
What are the symptoms of coronavirus?
Common symptoms
include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common.
The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
How can I protect myself while flying?
If air travel is unavoidable,
there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A
study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
How do I take my temperature?
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are
other ways to figure out if you have a fever, or are at risk of Covid-19 complications.Should I wear a mask?
The C.D.C. has
recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting
new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.
What should I do if I feel sick?
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
How do I get tested?
If you’re sick and you think you’ve been exposed to the new coronavirus,
the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
Thousands of nonprofit organizations — from community theaters to food pantries to small rural hospitals — are fighting for their survival. A
study released this week by the Center for Effective Philanthropy found that 90 percent of nonprofit groups surveyed had to cancel or postpone fund-raising events and 81 percent had to reduce programs or services. At the same time, more than half said that demand for their services had increased.
Many of those groups rely on foundations as a major source of funding.
“Frankly, the house is on fire right now, and if they don’t save the nonprofits, they’re going to have to rebuild the entire sector,” said Chitra Hanstad, executive director of World Relief Seattle, which provides services to refugees, asylum seekers and others. Its funds running low, the group is planning a round of layoffs.
The Ford Foundation was started in 1936
with a grant of $25,000 from Edsel Ford, a son of the Ford Motor founder Henry Ford. In recent years, it has devoted itself to attacking economic and racial inequality, financing groups like
Campaign Zero, which seeks to end police brutality, and
Color of Change, which works to help black communities.
Mr. Walker said he realized in March that this was the moment to borrow money. He was listening to a speech by the Federal Reserve chair, Jerome H. Powell, who said he was slashing interest rates. “It occurred to me that the cost of borrowing for highly rated institutions would have to be very low,” Mr. Walker said. The foundation’s board approved the plan.
Ford is betting that it can earn a higher return on its endowment assets than it will pay in interest on the bonds, allowing it over time to repay the borrowed money without reducing the size of the endowment.
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Mr. Walker with Wanda Crichlow.Credit...Andrew Seng for The New York Times
To keep the plan private, Ford code-named it Project Wanda. It was a reference to a striking 2015 portrait of an African-American woman,
Wanda Crichlow, that hangs in the foundation’s lobby.
The Ford Foundation debt will be marketed as “social bonds” whose proceeds will be earmarked for grants that advance environmental, social and corporate governance goals, according to Wells Fargo, which is selling the bonds for the foundation. That means they can be bought by funds focused on socially responsible investments.
Mr. Walker hoped Ford’s clout in the charitable world would lead other foundations to take similar actions. In March, he began reaching out to the leaders of large foundations to enlist their support. “My message was that it’s not defensible to pay out only 5 percent,” Mr. Walker said.
When he called Mr. Palfrey of the MacArthur Foundation in Chicago, the foundation was already looking to tap the bond market for money that could be used to increase donations. But Mr. Palfrey described Ford’s plan as “wind in our sails.”
The Doris Duke Charitable Foundation, named after the tobacco and energy heiress, is the smallest of the five organizations taking part in the plan. It has an endowment of just under $2 billion and usually distributes about $110 million a year. This summer, the foundation plans to issue $100 million worth of 30-year bonds, and it will distribute those funds by 2022, said the foundation’s president, Ed Henry.
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Continue reading the main story“The downside of that is, of course, that it creates an obligation for the foundation for the next 30 years,” Mr. Henry said. “Basically, we’re taking out a mortgage.”
The Andrew W. Mellon Foundation will increase its giving this year to $500 million from $300 million, or about 8 percent of its total assets, said Elizabeth Alexander, the foundation’s president.
The W.K. Kellogg Foundation, which usually distributes about $300 million a year, is pledging to increase grants by a total of up to $300 million over the next two years.
“We have to increase our payout and we have to go big,” said La June Montgomery Tabron, the Kellogg president and chief executive. “Let’s come together and set an example for how, no matter where your portfolio is in this moment, you can still increase your payout.”
James B. Stewart is a columnist at The Times and the author of nine books, most recently "Deep State: Trump, the FBI and the Rule of Law.". He won the 1988 Pulitzer Prize for explanatory journalism, and is a professor of business journalism at Columbia University.
Nicholas Kulish is an enterprise reporter covering immigration issues. Before that, he served as the Berlin bureau chief and an East Africa correspondent based in Nairobi. He joined The Times as a member of the
Editorial Board in 2005.
@nkulishA version of this article appears in print on June 11, 2020, Section A, Page 1 of the New York edition with the headline: Foundations Borrow Heavily To Support a Battered Nation.
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