Foundation Perpetuity Is a Misguided Goal

To the Editor:

The central problem behind Vincent Stehle’s argument (“Payout Proposal Doesn’t Consider the Long Haul,” Opinion, August 7) is the view that the longevity of foundations is a desirable goal.

Over 70 years ago, Julius Rosenwald, one of the 20th century’s greatest philanthropists, pointed out the critical need for foundations to focus on the problems of their day rather than saving for the future. Accordingly, Mr. Rosenwald’s foundation spent down its assets and closed its doors. His argument that foundations still to be created would play the major role in addressing the problems of the future has proven to be as true today as it was then.

Even today, we are seeing new wealth being created and entrusted to foundations that will focus on the problems of today. The principal task of foundations should be to use their resources creatively and aggressively to solve the immediate and critical problems that we face. The problems we face are too important for us to be concerned about the longevity of foundations. That is why I wholeheartedly endorse the encouragement to higher payout contained in HR 7.

HR 7’s change to the payout requirement is very modest, requiring only that the 5-percent payout exclude overhead. For the many responsible foundations already spending well over 5 percent, the bill would have no impact. It is only those that are treating the 5 percent as a ceiling that would be affected. HR 7 does create a strong incentive for foundations to keep their administrative costs as low as possible. Given that every dollar spent on administration is not spent on grants, this incentive is clearly possible.

It is highly unfortunate that the large foundations have utilized their valuable resources in engaging a lobbyist to fight the passage of HR 7. The foundation community, as well as the nonprofit community we support, would be far better off if they used these resources to address the growing problems we face today.

Philanthropy is the art of giving and should be pursued as such. Established foundations should complete their work and phase out rather than remain in perpetuity. It is the appropriate process. They will be replaced by newer foundations to solve the problems of the present and future.

Richard Goldman
President
Richard & Rhoda Goldman Fund
San Francisco