Government Leaders Issue Challenges to Grant Makers

By Suzanne Perry

and Caroline Preston

Grant makers need to do more to help rural areas, rebuild the hurricane-devastated Gulf Coast, promote energy independence, be accountable for overseas spending, and prepare for a possible avian-flu pandemic, said speakers here last week at the annual meeting of the Council on Foundations. The council represents about 2,000 of the nation’s grant makers.

Sen. Max Baucus, the top Democrat on the Senate Finance Committee, asked foundations to double their grants to rural areas within five years, charging that grant makers have shortchanged regions that need help.

“Rural America has the need,” Senator Baucus, who represents Montana, told the conference participants. “But rural America has not received the grants. That just does not seem fair.”

Citing statistics showing that 10 rural states received $35 per resident in foundation grants in 2005, compared with a national average of $104 per resident, Senator Baucus asked foundations to review their grant making and to commit by Labor Day to increasing their rural giving.

“When you conduct this examination and make this commitment, please send me a letter telling me about it,” he said. “I would like to hear from you.”

Senator Baucus, whose committee oversees regulation of charities and foundations, said median family income is lower, poverty is higher, and the population is older in rural America than in metropolitan areas. Furthermore, it is harder to deliver social services in rural areas because people live farther apart, he said.

He said the states that receive the least money from foundations — Alaska, Maine, Mississippi, Montana, New Hampshire, North Dakota, South Dakota, Vermont, West Virginia, and Wyoming — have created wealth in other states by providing coal, timber, food, and other resources. But they all lack big cities, which have “a wealth of people, expertise, and money.”

The 10 rural states had an average of $0.6-billion in foundation assets in 2005, compared with an average of $32.5-billion in the 10 states with the most foundations, Senator Baucus said. The statistics were provided by the Big Sky Institute for the Advancement of Nonprofits, in Helena, Mont.

While some foundations are required to restrict their giving to a particular metropolitan area, all others should double their grants to rural regions or — if they have previously done little or no such grant making — devote at least 5 percent to 10 percent of their grants to rural America within five years, he said.

Senator Baucus said he would work with the Council on Foundations on ways to coordinate government and private efforts to revitalize rural regions of the United States, noting that a meeting on the topic was scheduled for October in Montana. He said he would also help foundations cut through red tape when they work with federal programs on rural projects.

He praised several foundations for rural grant making, including the W.K. Kellogg Foundation, in Battle Creek, Mich., which awarded a grant for Tax Help Montana, a program to help low-income Montana residents apply for tax refunds that are due to them through the earned-income tax credit.

Grant makers also heard a pitch for money from Donald Powell, who is overseeing the federal government’s effort to rebuild the Gulf Coast region devastated by last fall’s hurricanes.

Mr. Powell asked foundations to contribute to the long-term reconstruction of cities and towns that were damaged by Hurricanes Katrina and Rita, by helping museums, community organizations, and religious organizations.

“The government can provide bricks and mortar, but it cannot refresh culture and restore souls,” he said.

He urged the foundations to “think big” and consider the Gulf Coast region to be a “laboratory for social innovation.”

The Council on Foundations’ annual meeting — the first held under the leadership of its new president, Steve Gunderson, a former Republican congressman from Wisconsin — drew several other current and former government officials.

Former Speaker of the House Newt Gingrich, in a blistering critique of government’s inability to respond to challenges facing American society today, told foundation officials to use their flexibility and ingenuity to find solutions to issues as diverse as disaster preparedness, juvenile justice, and energy independence.

“Government can adopt what you invent, but government has almost no potential of inventing it,” said Mr. Gingrich, who served for two decades as a Republican congressman from Georgia.

Mr. Gingrich warned that India and China are poised to surpass the United States in economic strength; that the United States is unprepared for an avian-flu outbreak or another terrorist attack; and that dependence on foreign countries for oil threatens U.S. security. Government, meanwhile, is too paralyzed by bureaucracy to respond to these threats, he said.

Mr. Gingrich also said that the United States has done a poor job providing opportunities for American Indians, and that the education and juvenile-justice systems are so flawed they are leaving millions of Americans unequipped to contribute to society.

But what philanthropy can offer over government, said Mr. Gingrich, is that it can be more responsive and innovative in its grant making.

“The greatest thing you can do would be to look at the challenges of the next quarter-century and to have the freedom to experiment in ways that bureaucracies cannot,” he told foundation leaders.

To maintain philanthropy’s advantage, foundation executives should resist the push toward overregulation of their organizations, said Mr. Gingrich.

“People in state capitals and people in Washington … can do enormous damage by transferring into the philanthropic world all the pettiness that we’ve transferred into the modern bureaucracies, which have made them stunningly incompetent,” he said.

Mr. Gingrich urged foundation trustees and staff members to organize “civil-society education projects” for elected officials at the state and federal levels to explain the work of grant-making organizations.

Foundation executives should also consider creating more cash prizes, in addition to making grants through an application process, he said. Prizes allow anyone to compete for money, regardless of their background and without having to fill out the hefty paperwork often required of grant seekers, said Mr. Gingrich, who now serves as president of the Gingrich Group, a communications and consulting firm, and as a senior fellow at the American Enterprise Institute.

Mr. Gingrich commended the leadership of Mr. Gunderson, his former colleague, and sounded a wry note about his own conservative politics, in contrast to the politics of George Soros and other conference speakers.

“I’m here in part because of his [Mr. Gunderson’s] commitment to diversity,” he said.

Mr. Gunderson, in his speech, acknowledged the difficulties of promoting change at the council, which is now seeking not only to strengthen its ability to influence federal and state policy makers, but also to expand its membership and work more closely with other associations of grant makers.

“If you’ve ever needed to push a stalled car down a western Wisconsin gravel road, you will know that keeping it rolling is much easier than getting it rolling,” he said.

Like Mr. Gingrich, the philanthropist George Soros criticized the federal government at the conference, but he laid blame on “extremists” who he said have captured the Republican Party.

He urged grant makers to cooperate with each other to help the United States return to the political center.

“It’s very important to regain that middle ground that has been characteristic and a great tradition of America, and I think foundations have a very important role to play in that,” said Mr. Soros, founder of the Open Society Institute, in New York.

He criticized the Bush administration’s anti-terrorism campaign, the Iraq war, the failure of the United States to work with other countries to fight global warming, and efforts to undermine the scientific basis of evolution — and asked foundations to tackle such policy issues.

“These are inevitably a political agenda and we can’t shy away from it,” he said. However, he said, foundations that believe in the principles of an “open society” — respecting pluralism and the right of people to think for themselves — should not imitate far-right foundations by trying to impose an ideological agenda.

Born in Hungary, Mr. Soros has established a network of foundations promoting democracy around the world. He is about to publish a book, The Age of Fallibility: The Consequences of the War on Terror.

He also commented on what he called Russia’s increasing authoritarianism under President Vladimir Putin.

Noting that Open Society began making grants to projects in Russia soon after the Soviet Union collapsed, he said the United States could have made a major difference at that time by paying for a big reconstruction project along the lines of the Marshall Plan.

“We moved in, we did what we could, but we were just a tiny speck,” he said. “Had [the government] done it on a larger scale, the way America did it after the Second World War in Europe, I think the situation would be very, very different. Now the opportunity has been lost.”

In an effort to improve the effectiveness of international grant making, the Council on Foundations released a set of proposed guidelines at its annual conference that encourages grant makers to respect local cultures, align their goals with those of grantees, and be more responsive to the needs of charities overseas.

The draft “Principles of Accountability for International Philanthropy” recommends that foundations publicize their grant opportunities in local languages; refer proposals they are unable to support to other foundations; minimize administrative and reporting demands on charities; and build trust among grantees by giving them the chance to offer confidential feedback.

The council is inviting comment on the guidelines, which will be posted on its Web site, http://www.cof.org. A final version will be released this fall.

One area of growing concern, especially among community foundations, is how to ensure that the United States is prepared for a possible avian-flu pandemic.

No one is sure whether the flu, which now infects mostly birds, will mutate into a form that is easily transmitted from person to person. But if it did, “it could make [Hurricane] Katrina look like a picnic,” said Margaret Hamburg, senior scientist at the Global Health and Security Initiative, in Washington, and a former New York City health commissioner.

She said the nation’s public-health system is under severe strain and would have a difficult time responding to a major health crisis. “Foundations can step up to the plate and really make a difference and do it in a much more nimble way than the government is able to do,” she said.

Grant makers could, for example, hold planning sessions for the people in their regions who would have to respond to a health crisis, or pay for pilot projects to experiment with measures that might be required, such as quarantines, travel restrictions, rationing, or masks, she said.

Karen Wolk Feinstein, president of the Jewish Healthcare Foundation, in Pittsburgh, said her organization, the Pittsburgh Foundation, and the county health and human-services departments are holding talks on ways to keep essential services operating if a pandemic incapacitated many workers.

Such businesses must ask themselves, “If 25 percent of my work force can’t come to work, how do I deliver?” she said.