One Fund’s Ceiling Is Another Fund’s Floor

To the Editor:

Our experience as a relatively small family foundation shows that not everyone follows the pattern set forth in your article “Despite Gains in Assets, Many Funds Stick to the Legal Minimum for Giving” (February 26).

We started with $10-million in assets and made our first program grants in the spring of 1994 in two areas — homeless families and at-risk youth. We have always set our operations budget, including grant making, above the required 5-per-cent payout rate.

For calendar years 1995 through 1997, we set our budget at 8 per cent. Even at that percentage — and following a significant dip in the stock market in 1994 — our endowment had risen to $14-million by the time our board met in November 1997. At that time, our board voted on a three-year budget of 10 per cent, which brings our annual payout to $1.4-million, including our operating and administrative expenses. We are committed to holding to that figure even if the stock market declines, which would increase the percentage of payout further.

It is notable that at the same time that we increased the percentage of our payout, we made $300,000 in program-related investments (five-year low- and no-interest loans to non-profits working in the areas of affordable housing and community development). Our board reasoned that the foundation’s money would be more valuable granted or loaned directly to non-profits than increasing the size of our endowment.

Our experience demonstrates that there is little to be lost and much to be gained by viewing the Internal Revenue Service’s 5-per-cent rule as a floor, rather than a ceiling, for payout.

Alan B. Morrison
President of the Board

Martha A. Toll
Executive Director
Butler Family Fund
Washington