the changing landscape of philanthropy

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1 Southern California Grantmakers Signature Publication of philanthropy

2 1 1 Sushma Raman President, Southern California Grantmakers 4 philanthropy in southern california James M. Ferris Founding Director, The Center on Philanthropy and Public Policy, University of Southern California Sushma Raman President, Southern California Grantmakers 6 strategic vs. responsive grantmaking A Conversation with Fred Ali President and CEO, Weingart Foundation 8 the growth of family foundations Susan Crites Price Vice President, National Center for Family Philanthropy 10 philanthropic and nonprofit trends 12 corporate philanthropy and the changing economy Margaret Coady Director, Committee Encouraging Corporate Philanthropy 14 capitalizing on crisis and opportunity Robert K. Ross, M.D. President and CEO, The California Endowment 16 a view from los angeles: generating creative public-private partnerships in an era of change Torie Osborn Chief Civic Engagement Officer, United Way of Greater Los Angeles 18 the future roles of california foundations Helmut K. Anheier UCLA Center for Civil Society Philanthropy is at a unique inflection point in California. In the past decade there has been a significant tilt westward in terms of growth of assets, number of foundations, and level of giving. In the period just prior to the economic downturn, California surpassed all other states in actual asset dollar gain. This growth has been paralleled an increase in diversity in institutional forms of giving as well as the types of issues supported. It has been characterized greater innovation in many organizations ranging from small, local foundations to large, global institutions. A symbol of this westward shift, The Annenberg Foundation recently launched two dynamic and inclusive public spaces to bring together diverse communities in a geographically dispersed region: the Annenberg Space for Photography and the Annenberg Community Beach House. The rise of individual donors working collectively to advance the public good is evidenced the success of the EveryChild Foundation, which includes 200 women donors contributing $5,000 each to award an annual $1 million prize to one outstanding nonprofit organization in Los Angeles. Foundations and corporations ranging from The California Endowment to the California Community Foundation to Sony Pictures Entertainment, Inc. are increasingly looking to place-based giving as a strategy to enhance community building and leadership development in communities across Southern California, from El Monte to Culver City to Long Beach. Orange County-based Fluor commits 36,000 volunteer hours a year to improving schools and building houses as part of its three decades of volunteerism around the world. Ventura County Community Foundation s Destino Legacy Fund and the United Latino Fund focus on demographics of the region providing grants to meet the needs of California s majority minority. While local perspectives are the priorities of many, there are also global leaders such as the Conrad N. Hilton Foundation which launched the West African Water Initiative, now a $52 million public private partnership. The Initiative aims to contribute to the United Nations Millennium Development Goal of halving, 2015, the proportion of people without sustainable access to clean drinking water. A laudable and critical goal, given that over one in six people in the world lack access to clean water, over two in six lack access to sanitation and 90 percent of diseases in the developing world are caused lack of access to clean water and sanitation. Given the diversity and range of forms of giving, types of issues supported, strategies for pursuing social change, and the flexibility and collective power of the sector, it is no wonder that this inflection point in philanthropy s trajectory in California is not without contestation. The shifting perceptions about the role of foundations and government in the state, rapid racial diversification (with which much has not kept pace), and the implications of the fiscal and governance crisis all contribute to the tensions and trends in this unique time in California s philanthropic history. continued... Looking Ahead: the Changing Landscape of Philanthropy, is the first in a series of signature publications which will be published periodically SCG, focusing on areas of critical interest to grantmakers.

3 2 3 Sushma Raman is president of Southern California Grantmakers. Raman previously served with the Ford Foundation as program manager of the International Initiative to Strengthen Philanthropy, a $100 million project that increases the impact, effectiveness and scale of key foundations worldwide. Given the diversity and range of forms of giving, types of issues supported, strategies for pursuing social change, and the flexibility and collective power of the sector, it is no wonder that this inflection point in philanthropy s trajectory in California is not without contestation. Role of Foundations in California The atrophy of state institutions and public services for low-income communities, heralded first Proposition 13, and then furthered welfare reform and anti-immigrant legislation, has resulted in increased pressures on the nonprofit and private philanthropic sectors to fill the gaps. Yet, the role of foundations shrouded in privacy for the better part of the last century and now being unveiled through occasional media and legislative spotlights has never been to replace that of the state. Instead, the multiple roles (depending upon the values of the founders and the mission of the institution) are to innovate, seed promising projects, invest in community leadership, and promote policies that hold state institutions and private actors accountable. The growing influence disproportionate to its relative scale, often behind the scenes or beneath the radar, and catalytic in a range of areas has resulted in increased scrutiny of the field elected officials, the media, nonprofit activists, and the public. Concomitant to this trend is a lack of awareness s role, the ways in which it is regulated, and how it operates. All this occurs against a backdrop of increasing poverty and inequity, deterioration of public systems and institutions, an explosive growth of the nonprofit sector, a growing economic crisis and a rapid diversification of society and communities. According to a survey the Philanthropy Awareness Initiative (PAI), 85 percent of influential Americans were unable to give an example of a foundation that benefited their community, while 99 percent of media coverage of foundations focused on a grant as opposed to philanthropic impact. Clearly, philanthropy must shape more powerful, relevant messages about its role and impact and develop deeper, long-term relationships with key influentials. Democratization of Philanthropy The notion of democratizing philanthropy has emerged in recent debates about philanthropy s role, impact, and effectiveness, both in California and around the nation. While the term yields more than 1,000 search results on Google with topics ranging from diversifying online giving options for donors to building affinity groups and giving circles, it has largely been utilized watchdog groups to articulate a vision that is more accountable, transparent and diverse. Is this concept one that should be of increasing concern to philanthropists and those who work for foundations? Or is it irrelevant and at best a distraction to a field that is already diverse in its missions, strategies and viewpoints? Literature on the nonprofit sector can yield some insights into the answers. While pure public goods are those provided the state and pure private goods are those provided the market, the philanthropic sector supports quasi public goods goods that provide public benefit in a range of ways, while marshalling private resources to do so. This occurs for a range of reasons, including market or state failure, asymmetries in access to pure public or private goods, and cost efficiencies. Situated at the intersection between public and private, at a time when public resources are in decline and private needs are on the ascent, philanthropy is a site for contestation and for demands from multiple, competing publics, all of whom have divergent views of the public good. How philanthropy responds will affect how the sector is perceived and regulated. And in turn, over-regulation could stifle its growth at a time when philanthropy is increasingly being seen as a critical financial and convening resource to the nonprofit sector. While there is no one answer, given the diversity in the philanthropic sector, institutional grantmakers will need to voluntarily embrace a greater commitment to transparency and responsiveness, through mechanisms such as self-evaluation, enhanced clarity in communications, and diversity in governance and leadership. And philanthropy must remain collectively organized to safeguard its interests and ensure its unique attributes can function freely, without impediment, in the years ahead. Looking Back to Look Ahead Four decades ago, the 1969 Tax Reform Act and its aftermath dramatically affected the philanthropic sector through introduction of regulation targeting private foundations. Similar debates and dialogues in the 60s and 70s related to greater equity in philanthropy led to the foundation of the National Committee for Responsive Philanthropy, a philanthropy watchdog group. The greater legislative scrutiny of the field led concerned foundation leaders in Southern California to establish the Los Angeles Inter-Foundation Center (now known as Southern California Grantmakers). Currently, at a time of national economic uncertainty and escalation of poverty, the philanthropic community must look back in order to move forward, and it must proactively embrace what makes it unique while addressing the competing and sometimes conflicting demands placed upon it a range of interested stakeholders.

4 4 5 philanthropy in southern california James M. Ferris Founding Director, The Center on Philanthropy and Public Policy, University of Southern California James M. Ferris, PhD, is the founding director of the Center on Philanthropy and Public Policy at the University of Southern California. He is a professor in the School of Public Policy, Planning and Development and holds the Emery Evans Olsen Chair in Nonprofit Entrepreneurship and Public Policy. Philanthropy in Southern California is robust. It is at dynamic to philanthropy in the region and region s largest foundations include The J. know characterizes the region s economy, models of industry and issue-based public Philanthropy is fragmented, decentralized, and dispersed. At the same time, it tends to be dynamic, adaptive, and innovative. While individuals will vary in their assessments, philanthropy in the region has been shaped those entrepreneurs who have created wealth and chosen to use a portion of it for the betterment of the community. 1 FC Stats, The Foundation Center, Ferris, J., E. Graddy, and A. Ferree, California Foundations, 2004: Trends and Patterns. The Center on Philanthropy and Public Policy. University of Southern California, a scale that makes it one of the two concentrations in the state, and one of the most significant nationally; it has been growing at a brisk pace with double digit rates in most years since 1990; and it has become more diverse and complex as new players, strategies, and institutions increasingly characterize. Scale and Pace As of 2007, there were 2,930 active private and community grantmaking foundations in the Los Angeles area. They held assets of close to $42.7 billion, made grants of $2.1 billion, and received gifts of $1.8 billion. 1 From , the number of foundations has more than doubled, foundation assets have increased almost 50 percent net of inflation reflecting increases in the value of endowments as well as new gifts received, and grantmaking has increased 85 percent net of inflation. This continual creation of new foundations results in a foundation community that is trending younger as a whole. There are a number of established, larger foundations many of which were created in the 1950s. But there are a number of newer, substantial foundations that have been created since 1990, many of which are likely to come of age in the next 10 to 20 years. This provides a the potential to shape the philanthropic sector to serve the community even better in the future. Structure and Scope Philanthropy in the region is characterized a high degree of concentration, both in giving and receiving. 2 A great majority of foundation giving is done a few relatively large foundations. There were 13 foundations in Los Angeles with assets of over $250 million in 2004; they accounted for 40 percent of the giving of all Los Angeles foundations. At the same time, grants made foundations are also highly concentrated. Based on a sample of slightly more than 4800 grants, there were 102 grants of $1 million or more that accounted for 42 percent of the grant dollars in the sample. The average grant size was $128,281 and the median grant size was $25,100. Not surprisingly, large nonprofits are the recipient of many of these larger grants. These nonprofits mount major capital campaigns and have the capacity to make good use of grants of such size. Of course, the great majority of grants are rather small and go to many mid and small size organizations. Further analysis of Los Angeles foundations and foundation philanthropy in the region underscores that philanthropy in Los Angeles is not solely LA-focused. The Paul Getty Trust and The Conrad N. Hilton Foundation, both with an international scope; several foundations that play important national roles such as the Annenberg Foundation, the Broad Foundations and the W. M. Keck Foundation; and two statefocused health foundations, The California Endowment and The California Wellness Foundation. While these foundations contribute to the local community, their missions extend well beyond Southern California. Distinctive Features of Philanthropy in Southern California Of course, foundation philanthropy is but a slice overall. While it is the most visible, and the one in which we have the best data, foundation giving only accounts for 13 percent of private giving from all sources in the U.S. If one takes the national breakdown and uses that to impute the level of overall giving in the region based on the known level of foundation giving, private giving in Los Angeles would amount to roughly $11.77 billion. Individual giving, both from those living and individual bequests, would approximate $9.65 billion, and corporate giving would approximate $ million. One of the perennial and most intriguing questions asked is: how different is philanthropy in Southern California than elsewhere? In many ways, philanthropy in the region reflects much of what we governments, and communities. Philanthropy is fragmented, decentralized, and dispersed. At the same time, it tends to be dynamic, adaptive, and innovative. While individuals will vary in their assessments, philanthropy in the region has been shaped those entrepreneurs who have created wealth and chosen to use a portion of it for the betterment of the community. Along the way, the region s philanthropic legacy is punctuated some important and distinctive features. The California Community Foundation (1915) was one of the earliest community foundations in the country. The John Randolph and Dora Haynes Foundation, founded in 1926, was one of the early foundations, like the Russell Sage Foundation, that focused on social science research. Los Angeles has a large share of the nation s foundations that were created in the 1950s and that have been a significant force in the nonprofit sector and for civic life in the community for over fifty years. These include the Ahmanson Foundation, The J. Paul Getty Trust, the W. M. Keck Foundation, and the Weingart Foundation. The Entertainment Industry Foundation (1942) was an early effort to combine the philanthropy of the entertainment studios and industry to have a greater impact on the community, and three decades later the Liberty Hill Foundation (1976) was created to bring together donors around issues of social justice two early grantmaking charities. In more recent years, the region has spawned a number of innovative philanthropic efforts: Los Angeles Urban Funders (1994) a place-based funder collaborative for which Southern California Grantmakers served as the incubator and the Los Angeles Arts Funders (1998) an affinity group of private and public arts funders in the region. Challenges for Philanthropy in the Region Despite the scale and pace that has characterized philanthropy over the last few years, the fact is that community needs and the nonprofits that address them have grown even faster. And the past year is a stark reminder that trends can be seductive. Although it is too early to tell precisely how long it will take to rebound, the philanthropic sector is better positioned to respond to the recent decline in economic fortunes than it was before. Over the last decade, there has been much work focused on how to leverage philanthropic resources to achieve greater impact. The challenge for philanthropy in the region and beyond, is to be continually mindful of the importance of innovation and adaptability in strengthening philanthropy for the long term.

5 strategic vs. responsive grantmaking A Conversation with Fred Ali President and CEO, Weingart Foundation Fred Ali is president and chief executive officer of the Weingart Foundation. He previously served as the executive director of Covenant House in Los Angeles, where he developed a multi-service program for homeless youth. Ali has also served as vice chancellor of the University of Alaska, Anchorage. 7 I think the deeper issue in philanthropy is who owns the strategy, who designs the program and who develops the plan rather than labeling foundations as either strategic or responsive. Q: From your perspective, define strategic grantmaking. How does it differ from responsive grantmaking? A: People often assume that there are strategic grantmakers and responsive grantmakers. But these labels are typically not very helpful because people have different definitions. For example, a so-called strategic grantmaker might design a strategy and then seek out nonprofits for program implementation, whereas a responsive grantmaker provides support to nonprofits that present their own strategy. However, the majority of foundations with whom I am familiar, whether they call themselves responsive or strategic, do take into consideration the plans and aspirations of the nonprofits with which they work. And, in many cases when a foundation announces a strategic initiative, the strategy was actually designed the foundation and its grantees. Q: How would you characterize the Weingart Foundation s grantmaking? A: We believe it is the role of the nonprofit organizations we support to design programs and develop strategies that will allow them to reach their goals and fulfill their missions. The nonprofits we support are in the best position to know what is needed in the communities they serve. It would be inappropriate to tell a credible, well managed nonprofit what their strategy should be or how to design their programs. At the same time, we are strategic in the sense that we define the areas of our grantmaking where we want to concentrate our resources. There are also times when we want to have specific impact, which is why we have our own special initiatives. Even then, we rely on the nonprofits that have hands-on expertise. For example, we spent a lot of time focusing on the health care needs of Skid Row and determined that there was little or no coordination in its health care delivery system. We then went back to the nonprofits working on Skid Row, presented our findings and asked them how they would address the needs we identified. A group comprised of private and public agencies was formed under the auspices of the Community Clinic Association of Los Angeles County. The group was subsequently charged with developing plans, projects and policy actions that would result in the integration of services and expanded capacity. Ultimately, the design and strategy came from them producing a number of jointly coordinated projects designed to improve service delivery, outreach and access. Q: What are the advantages and limitations of each type of grantmaking? For funders? For the nonprofits they serve? A: While I think this is rare, there are funders who believe that nonprofits generally don t have the expertise to develop strategy. The danger of this approach is that the people who know what s best for their communities are often left out of the equation. Yet, because there is so much competition for resources, these grantseekers feel they have no choice but to accept the money. From our perspective and my own experience in the field nonprofits with solid management are in the best position to know about the issues they are working on, and tend to be closer to the clients that they are trying to impact. We also hear from grantees that it creates resentment when a funder tells them how to operate their programs. This doesn t foster a good relationship between the funder and the grantee. At the same time, it places the organization that has developed a strategy that works for them and their community in a difficult situation. A strong nonprofit may feel they can decline the funding, but others may give in to the temptation to chase the money. Q: What role does strategic grantmaking play in a challenging economic environment? A: Some funders are specifically addressing the economic crisis, while others are maintaining their existing grantmaking approach. Many argue that in the grand scheme of things, foundation dollars represent a small amount of support, that the markets will recover and foundations should stick to their long-term goals. I respect this thinking, particularly with funders who are involved in complex, time-consuming issues where a long-term investment is warranted, such as medical research or global warming. However, in areas such as health and human services, the needs of most nonprofit organizations are absolutely critical. Every recent survey undertaken on the impact of the recession on the nonprofit sector paints a frightening picture. Good, strong organizations are reporting the loss of government and private funding. They re digging into their reserves, while also reducing core staff positions. Significantly, those organizations involved in the delivery of critical services are also reporting a demand for more services, which is putting them in a terrible bind. The sector is in trouble. In California, we see organizations that have been severely hurt and don t have the financial reserves to survive. Funders need to take a hard look and focus on core operating support, which is more critical than ever, even if it means temporarily abandoning other funding strategies. It s just common sense. Right now the nonprofits we serve are having trouble keeping the lights on and maintaining their core staff. The good news is that most funders in Southern California are either providing general operating support or are open to doing so. And it s important for funders to be transparent about their strategy during this financial crisis. A lot of our grant applicants are expressing frustration about being unclear as to how other funders are approaching the current economic situation. Funders need to communicate their approach directly to their grantees. It s also extremely important for funders to make a special effort to listen to their grantees right now to convene, learn from and continue to respond to their needs the best they can. This is a time unlike any other. The economic meltdown has been much deeper than anyone predicted and a lot of organizations are facing a very difficult situation. Q: Going forward, how is the philanthropic changing to create new models for strategic grantmaking? What trends do you see in the future? A: I have heard from a number of people recently who have said: This is a time for funders and grantseekers to be very candid. We have organizations that are not financially viable and to continue to make emergency grants to keep them alive may not be the best approach. The truth is there are plenty of well-established organizations that need funds and with the right support will weather the current crisis. This is a time for leadership and for some difficult decisions. The competition for dollars is greater than ever before and those dollars are limited. Funders need to be smart in using resources where they will have the greatest impact, and to be very careful in regard to supporting those organizations that are not financially viable. And that s true even if it means not making a grant to an organization with a great mission that did great work in the past, but doesn t have a strategy for getting beyond this crisis. We need to provide unrestricted operating support grants to organizations that are viable and understand how to support the needs of the communities they serve. It s time for smart grantmaking that will assist our best and most effective nonprofit organizations not only weather the immediate crisis, but also meet the challenges and opportunities that lie ahead.

6 8 9 the growth of family foundations Susan Crites Price Vice President, National Center for Family Philanthropy Susan Crites Price joined the National Center for Family Philanthropy as vice president in She oversees several programs and is a frequent speaker on such subjects as passing on values to the next generation and planning for succession. Susan is the author of The Giving Family: Raising Our Children to Help Others. Most donors who create family foundations do so with two primary goals: to help society and to engage their families in a joint endeavor built on shared values and a desire to leave a legacy. It appears as if the news and entertainment media and the Internet have suddenly discovered philanthropy, but they are on the trailing end of a trend. Private giving, in particular through family foundations, has burgeoned in recent years. Family foundations are the fastest growing segment of the foundation field, and one third of them have been established since The Foundation Center s most recent data show that in 2007 there were 37,500 family foundations with total giving of $18.5 billion. The biggest one, the Bill & Melinda Gates Foundation, is almost a household name now. But the majority of them are small and unstaffed. In 2007, roughly 60 percent had less than $1 million in assets. Many of these are poised for their own growth spurt; their assets are expected to balloon upon the sale of a family business or the death of the donor. Left out of these numbers is the surge in families taking advantage of the many new choices in philanthropic vehicles available to them instead of, or in addition to, a foundation. The growing variety of charitable estate planning tools and new giving vehicles such as donor advised funds means more families are making philanthropy part of their lives. Why a Foundation? Most donors who create family foundations do so with two primary goals: to help society and to engage their families in a joint endeavor built on shared values and a desire to leave a legacy. Foundations are often the choice for donor families who want more control over their grantmaking than other vehicles such as donor advised funds allow. Most families plan to exist in perpetuity. In order to do that, they must continually engage the next generations of the family. Engaging younger family members in a foundation s work at early ages is a priority for many of today s family foundations. For young people, growing up with a tradition of giving becomes part of their identity and their desire to contribute to the common good. A Relatively New Field The foundation as an institution dates to the beginning of the 1900s with a small number of individuals and families who had generated enormous wealth during the industrial revolution. But the growth surge really began in the 1990s, especially due to the new wealth created the technology sector. Until recent years, family philanthropy was not recognized as a distinct field. In fact the phrase family foundation wasn t even coined until around Before that, family foundations loosely defined as those in which family members play a significant role in governance had been lumped together with all private foundations. This was in part due to the tax code which does not make a distinction and has no legal definition for this type of foundation. A decade ago, few thought that family foundations merited specific research. Today, thanks to the National Center for Family Philanthropy s work with, and funding of, the Foundation Center to identify family foundations from among all private foundations, this segment is now extensively researched, analyzed and reported. There was no body of literature on family foundations as exists today. Nor were donor families included as an area of academic study. Today, there are professorships in family philanthropy. Much has happened in a few short years to understand this growing field. Current Trends One field-wide trend is giving while living. Philanthropy used to be something that one got involved in after retirement. Now Americans are giving at much younger ages, thanks in part to high profile philanthropists such as Bill Gates. A related trend is having multi-generations at the board table. Rather than figuring out their foundation s grantmaking after the estate of the donor has been settled, the second or third generations, for example, are working together with the patriarch or matriarch. Additionally, given the changing demographics of today s families, donors might be involving their parents, siblings, spouses (or even ex-spouses), domestic partners, stepchildren and adopted children. Another trend, partly brought on the economic crisis that began with the stock market slide in 2008, is that perpetuity is no longer a given. Some foundations have decided to maintain or even increase their grantmaking in response to urgent needs, both domestically and globally, even if it means spending down their endowments. Others find that it s hard to keep a family involved over many years. For example, the third generation from the donors may live all over the world and have little connection to each other or to the foundation s mission. Some donors have put limits on their foundations lives at the outset, because they would rather the grantmaking be done a generation with personal knowledge of the donor and his or her wishes. A 2009 Foundation Center study found that 12 percent plan to limit their lifespan or are spending down. For example, the Gates Foundation plans to sunset 50 years after the death of the last of the current board members. But another 25 percent are undecided, either because they have not yet discussed the issue or because of uncertainty about the family s future involvement. What the Future Holds Geographic focus is changing. It used to be that entrepreneurs built businesses in a community and also focused their charity there. Now entrepreneurs make money in the global market. We are still learning what the focus of their giving will be, but this trend, along with the fact of families being increasingly dispersed geographically, has distinct implications. On a 2008 random survey of family foundation practices conducted the National Center for Family Philanthropy, 21 percent of respondents said they give internationally, a growing trend that is expected to continue as more of the younger generations, who have been raised in the Internet age and traveled widely, take their places at the family foundation table. As for funding strategies, there are early signs that family foundations will operate more collaboratively and more publicly. Many seem to be seeking new options in grantee partnerships, assessing effectiveness and use of their investments to further their mission. As the field has grown, so has the scrutiny. It s safe to assume that government, the media, nonprofit sector commentators, and the public will seek more accountability and transparency from family foundations. How well the field will be prepared to respond is still to be determined.

7 10 11 philanthropic and nonprofit trends Data provided Foundation Center 2009 and UCLA School of Public Affairs. data on foundations and nonprofits in Los Angeles, 2007 California n Foundation giving per capita $164, ranking 13th n Foundation giving is 0.33 percent of gross state product, ranking 15th Los Angeles County regional trends Nonprofit Organizations per 10,000 population, 2007 United States 34 California 32 top 20 u.s. foundations awarding grants in the los angeles metropolitan area, 2007 Total $ Number of Foundation Name State Awarded Grants 1. The Annenberg Foundation PA 61,691, The Ahmanson Foundation CA 51,421, Weingart Foundation CA 49,994, n Nearly 4,000 foundations Los Angeles County Gordon and Betty Moore Foundation CA 39,362, n More than half the foundations were created in the last two decades n More than 40,000 nonprofits, the highest number among U.S. counties n Nonprofit sector employs 6% of the workforce Ventura County 29 Orange County 30 Santa Barbara County Bill & Melinda Gates Foundation WA 37,266, W. M. Keck Foundation CA 31,745, The Lincy Foundation CA 30,550, Skirball Foundation NY 30,428, aggregate financial information for foundations in Los Angeles, 2007* (foundation type, number of foundations and % of total ) Riverside County Nonprofit Expenditure per 10,000 population, The California Endowment CA 25,420, The Ralph M. Parsons Foundation CA 22,503, The California Wellness Foundation CA 19,313, Chartwell Charitable Foundation CA 19,191, Total number of foundations: 2,930 United States $42,824, The James Irvine Foundation CA 15,674, The Andrew W. Mellon Foundation NY 14,935, Independent** 2, % Community 7 0.2% Corporate % Operating % California $39,151,245 Los Angeles $34,888,642 Ventura County $12,483,105 Orange County $19,877,928 Santa Barbara County $17,634, UniHealth Foundation CA 13,993, The Robert Wood Johnson Foundation NJ 12,927, The Ford Foundation NY 12,905, Eli & Edythe Broad Foundation CA 11,402, The William and Flora Hewlett Foundation CA 11,227, Arnold and Mabel Beckman Foundation CA 9,502, * Figures include only Los Angeles area foundations that awarded grants in the 2007 fiscal year Riverside County $7,825, **1,769 of the independent foundations are family foundations

8 corporate philanthropy and economy Margaret Coady Director, Committee Encouraging Corporate Philanthropy Margaret Coady is director of the Committee Encouraging Corporate Philanthropy, where she consults with companies seeking to contextualize their philanthropic giving and authors publications based on her analysis % Corporate grantmaking priorities in the current economic climate 19% Fulfill existing philanthropic commitments 38% Giving Officers CEOs 56% Refocus contributions to causes central to business strategy 17% 21% Refocus contributions to areas of greatest need 1% 4% Incease overall philanthrophy Sample size: 119 Giving Officers, 47 CEOs The weakening global economy has brought heightened visibility to the fragile state of funding at many nonprofit organizations, as well as to the vital role that corporate philanthropy plays in helping communities thrive. Resources are always precious, but now companies and recipient organizations must use them especially judiciously. Like all stakeholders in the philanthropy community, the Committee Encouraging Corporate Philanthropy (CECP) seeks to understand the effect that an economic downturn has on the level and timing of corporate giving. In this article, CECP shares the latest findings from its Corporate Giving Standard (CGS) philanthropy measurement initiative. Sharp Declines in Profitability The economic downturn that began for some industries in the summer of 2007 did not discriminate in 2008, with 68% of companies that responded to CECP s annual philanthropy survey showing a decline in corporate profits year-over-year. In fact, the decline in profits was acute for many respondents, with 29% of companies seeing pre-tax profits drop a quarter or more, and 16% of companies suffering outright financial losses for the year (not just profit declines). The Majority Gave More Against this challenging economic backdrop, 53% of surveyed companies increased their giving from 2007 to 2008, which is off only slightly from the 56% of companies that increased giving from 2006 to An impressive 27% of companies increased their 2007 to 2008 giving 10% or more, demonstrating that supporting community partners was a top priority despite the hurdles imposed tight credit markets, a paucity of consumer spending, and widespread economic uncertainty. Is Giving Linked to Financial Performance? A commonly-held assumption in the field of corporate giving is that there is a link between a company s pre-tax profit and its philanthropic contributions; in other words, that giving increases or decreases based on a company s profitability swings. To test this hypothesis, CECP conducted multiple regressions on its data from 2006 to Interestingly, the results did not uphold a linear relationship between profit and giving levels, even when a one-year time lag between pre-tax profits and giving was taken into consideration. The absence of a link between giving and profits is supported the finding that 51% of the companies that saw pre-tax profit fall from 2007 to 2008 increased their giving in the same time period. On the flip side, 45% of companies with increased profit decreased giving. While CECP believes that a company s financial performance does play a role in shaping corporate giving budgets, it appears to be just one of many factors a finding corroborated the diverse reasons cited below survey respondents for fluctuations in giving. Why Some Companies Increased Giving n Strong Profits through Third Quarter. While the downturn was felt many financial institutions in 2007, companies in other sectors did not experience its effects until the third and fourth quarters of Consequently, companies had largely disbursed expanded giving budgets before their business was affected. n Increased International Giving. Rather than trim domestic giving budgets to fund new international initiatives, companies typically allocate new funds for grant-making programs abroad. The data show international giving rising roughly one percentage point per year over the last several years to 13% in n Improved Contributions Tracking. Typically companies struggle most in the tracking of: international giving, non-cash giving, and donations made regional business lines. Improved communication with subsidiaries or other departments, and implementing new company-wide grant-tracking software enabled companies to account for giving that may have previously taken place but was not included in their CECP survey in the past, increasing the year-over-year tally. n Merged Giving Programs. Several companies underwent mergers or acquisitions in 2008, leading to combined giving programs. In this sense, the underlying company has fundamentally changed in its scale and resources, making its year-over-year total giving appear to surge. n Beyond-Budget Disaster-Relief Gifts. When disaster strikes, companies often authorize assistance funds beyond their allotted giving budget. In 2008, companies supported relief efforts for the Sichuan earthquake in China and the California wildfires. Why Some Companies Decreased Giving n Weakening Economy and Uncertainty. As some companies began to forecast weakened performance, they cut back spending firm-wide, including corporate philanthropy budgets. n Corporate Spin-Offs and Department Closures. Just as mergers and acquisitions can cause a company s contributions to surge, total giving can decline when a business spins off or terminates part of its operations. This was true for several firms in the CECP sample in n Completion of Multi-Year Commitments. Several companies experienced a period of decreased giving as new programs or re-commitments to previous programs are evaluated at the conclusion of multi-year grant commitments. n Currency Exchange Fluctuations was characterized drastically widened average trading ranges for currency pairings such as EUR/GBP, GBP/USD, and EUR/USD. The last half of the year in particular saw large daily and weekly fluctuations. For companies with large international grant-making programs or those headquartered outside the United States, volatility in conversion rates caused total giving levels to appear to fall. Leveraging Non-Cash Resources Non-cash contributions are one of the salient ways in which corporate philanthropy is distinct from individual giving and government aid. While cash grants are most versatile, noncash donations such as product donations, pro bono service, use of company facilities, and equipment donations can connect nonprofits with highly-valued assets that they might otherwise be unable to afford, especially in a declining economy. In the CGS Survey, corporate giving is defined as the sum of corporate cash grants, corporate foundation cash grants, and noncash giving. To understand how the financial crisis impacted each giving type, CECP separated the companies that increased giving from 2007 to 2008 from those that decreased it, and then looked at the median percentage change in each type of giving. Among the 53% of companies that gave more in 2008, non-cash giving increased the most surging nearly 29%. Companies whose giving declined dropped most in cash grants from the corporate side. In both company groupings, corporate foundation giving levels changed less significantly yearover-year. Adjusting Course in the Current Climate CECP polled leading CEOs and giving officers to understand how they are focusing their efforts in light of economic. The data show that CEOs and corporate giving officers seek to fulfill preexisting commitments to grantees while working to more fully integrate philanthropy strategy with company-wide business objectives (see graph). These results synch with the conclusions reached the CEOs in attendance at CECP s 2009 global leadership conference. At this meeting, CEOs emphasized the need to foster an intellectual climate that allows fresh ideas on social investment to flourish. They viewed changes in the global economy as a chance to commence strategic course-corrections that will strengthen their ability to thrive when conditions improve. In their view, corporations have an obligation now more than ever to restore public trust investing in projects designed to create a positive ripple effect within and across communities. Executing on this intention requires: dispatching previously untapped non-cash corporate resources; seizing opportunities for increased efficiency; and inviting employees, customers, public sector advocates, government representatives, and critics into a collaborative dialogue.

9 capitalizing on crisis and opportunity Robert K. Ross, M.D. President and CEO, The California Endowment Robert K. Ross, M.D., is president and Chief Executive Officer of The California Endowment, a private, statewide health foundation established in 1996 to address the health needs of Californians. Prior to his appointment in September 2000, Dr. Ross served as director of the Health and Human Services Agency for the County of San Diego. 15 Today we find ourselves at the crossroads of crisis and opportunity. We re in the midst of the worst budgetary disaster that California has faced in generations, and at the same moment, the White House is providing exciting new leadership on the We re in This Together We believe in grantmakers as changemakers, and that means that we attach ourselves to a cause, to a movement around that cause, and to others in the movement who are also seeking to create change. The current environment underscores the need for grantmakers to commit themselves fully to social change. We must realign our tactics, grants, and expectations. To this end, we look to these five principles to guide our work: 2. find the game-changers in state governance It is abundantly clear that structural factors, such as the two-thirds vote requirement for approval of budgets and tax increases, are contributing to the ongoing budget and well-being. It is more imperative than ever for our strategies to effectively make that case. Foundations have a unique vantage point and platform from which to identify and elevate a conversation of a just and equitable society and we must serve this role. Foundations have a unique vantage point and platform from which to identify and elevate a conversation of a just and equitable society and we must serve this role. role of government in social change, particularly in the areas of social innovation and national service. As community-focused grantmakers, we see the pain caused the terrible cuts to California s health and human services programs and are working hard to help preserve the state s social safety net. However, we believe that we cannot allow this crisis to distract us from our core mission, which is fundamentally about social change. We make grants not just to do good in a particular community, but with an eye toward how successful local innovations can support meaningful change in the misaligned policies and broken systems that got us into this mess in the first place. Let me explain why and how we put that philosophy to work at The California Endowment. When foundations operate as changemakers, they must embrace interdependence among all those working for social change, a culture of knowledgesharing, and a more long-term approach to building the capacity of our grantees to become effective advocates. We see government as a key partner in social change because it is through policy and systems-level work that change will be made real. We believe that innovation begins in communities, but we need to have the research that definitively proves the effectiveness of local programs, along with the public and political communication channels that shine a spotlight on this work. Finally, the lifting up of social solutions requires strategic advocacy. That advocacy involves media communications and public storytelling and it also requires sophisticated policy advocates who can adjust to changing environmental conditions to be most effective in their work. All of this is a long way of saying, We re in this together. The Landscape With this philosophical backdrop, let s look now at the political and its implications for funders. The promise of the new administration in Washington indicates an estimated $31 billion in new federal funds will be available to California. At the same moment, the state budget crisis is unprecedented, has been only temporarily resolved, and is already causing untold harm to communities. 1. maximize opportunities and minimize damage The federal American Recovery and Reinvestment Act (ARRA) presents immediate, new opportunities to leverage literally billions in federal funding. The Endowment believes foundations can help California organizations and communities make the most of ARRA dollars and build capacity to leverage federal dollars in the future. Another pivotal and timely federal opportunity that California s foundations cannot afford to miss is support for the Census 2010 outreach effort. The state has eliminated virtually all census outreach funding, at a time when California can least afford to lose federal funds, political power in the nation s capital, and private investment opportunities. According to a PricewaterhouseCoopers report, in 2000 more than 500,000 Californians were not counted resulting in a $1.5 billion loss in federal funding. The adverse consequences of a poor count cannot be overstated. This requires all of our action and The Endowment asks all funders to join the statewide coalition to secure California s future. At the same time that we look to maximize opportunities, we must also minimize the damage to California s social safety net. The ongoing state budget crisis requires defensive and long-term advocacy strategies. It will require new conversations and a willingness to put everything on the table. Let us be ready for new alliances and difficult tradeoffs in order to preserve the most essential government services. governance crisis. We believe philanthropy can play a role in supporting groups working on governance and fiscal reform so that the state political structure can be corrected and we can stop the cycle of continual crises that we are in today. 3. build the political will Changing the current gridlock in state government will require more than good ideas backed credible research and data. It will require a change in political will, requiring savvy messaging and communications, as well as the community-based work of building new leadership with a higher degree of civic engagement. Communities must be connected to each other, and to local and statewide policymakers and media. This is a good opportunity to leverage new technology such as social networking, as President Obama did so effectively in his campaign. 4. take the moral high ground The biggest crises bring out either the best or the worst in a society. In the case of California s state budget crisis, perhaps the most troubling cut of all is the emerging trend of singling out undocumented Californians for disparate treatment. We must not only redouble our efforts to improve the conditions for these populations, but also remind others of the contributions that immigrants make to California s economy and tax base. Underserved people are not the problem. The problems facing our state are the economic downturn, budget crisis and structural impediments, which threaten our health and 5. avail ourselves of white house leadership on social innovation and civic engagement Underserved communities have a great ally in the Obama White House. We urge funders to capitalize on the new focus on social innovation and service, which have been key features of our society at its finest moments. Let us walk together as leaders, with the President and First Lady, to sound the call for the best and brightest ideas for social improvement. It All Starts With the Grassroots Lastly, we must never forget that local communities are at the heart of social change. Especially in the midst of scarcity and hardship, it is always from local sources that greatest innovations arise. The Endowment so firmly believes this that we ve gambled our new ten-year strategic plan, Building Healthy Communities, on that premise. Of course we did not anticipate the times we find ourselves in, but we know more than ever that we re in exactly the right place. While much about this period is daunting, we also see great opportunity. We must capitalize on the sense of urgency we are all experiencing working together toward the social change that is essential for California s future.

10 a view from los angeles: 17 generating creative public-private partnerships in an era of change Torie Osborn Chief Civic Engagement Officer, United Way of Greater Los Angeles Torie Osborn is chief civic engagement officer for the United Way of Greater Los Angeles. Formerly senior advisor to Mayor Antonio R. Villaraigosa and executive director of the Liberty Hill Foundation, she recently completed a Durfee Foundation Stanton Fellowship to think and write about collaboration between local government and philanthropy. Ultimately, the test of this new era s creative surge in publicprivate partnerships will be not only the transformation of local communities, but solid systemic fiscal and governance reform at a statewide level as well. This new Obama era of mutual responsibility for social-problem-solving may finally mean we can replace old walls with newly constructed bridges between the public and philanthropic sectors. Historically, innovative solutions from public libraries to Head Start to the Earned Income Tax Credit (EITC) have been funded private philanthropy, piloted nonprofits, and then replicated at scale government. That traditional model relies on expanding government, and is now again being championed at the federal level, albeit updated to a time of smaller domestic spending and greater private philanthropy. For example, the Obama administration s plans for 20 promise neighborhoods around the country, based on the successful Harlem Children s Zone, will be cofunded equally federal and private dollars. At the same time, the new White House Office of Social Innovation and Civic Participation is institutionalizing the President s all-hands-on-deck commitment to collaborative social impact. Here in Los Angeles, public-private partnership is certainly not a new idea. But a widely engaged philanthropic culture of true collaboration and genuine partnership with government seems to finally be generating real energy for change. Looking Back to See Forward In 2006, I headed for City Hall and a newly created cabinet position as Mayor Villaraigosa s liaison to philanthropy. A Durfee Foundation fellowship funded research, which included visiting other cities and interviewing local foundation trustees and executives. I encountered a number of models: New York s purely fundraising office directly supplemented the city s annual budgeting process with $75 million in corporate and private gifts. In Denver, the Mayor s office coordinated with local foundations on long-term initiatives for at-risk youth and homelessness. San Francisco s local community foundations served as a convening and funding hub for Mayor Newsome s anti-poverty initiatives and later played a leading role in galvanizing support for universal healthcare. Significantly, in Los Angeles, I discovered a hidden history of isolated acts of publicprivate innovation, but little in the way of a common, cross-sector culture of trust or even ongoing communication. Individual heroic philanthropies kept plugging away, most notably the Annenberg Foundation, which spent many lonely years braving the buzz saw of bureaucracy in order to fund the likes of public parks, pools, community centers, and emergency medical equipment. Over time, Annenberg did not stand alone. The slow, but steady work of foundation leaders, newly collaborating with each other and then with government, transformed the culture. Porous boundaries of the new economy joined in, as more philanthropic and nonprofit leaders entered government and former government leaders moved into philanthropy. In recent years, new spaces were created. Liberty Hill s Green LA coalition provided knowledge capital to the Mayor s environment staff, while Southern California Grantmakers (SCG) was funded the Nathan Cummings Foundation for convenings that focused on advancing a culture of civic philanthropy. The James Irvine Foundation funded a historic strategic planning process during the Mayor s first year, , which laid tracks for his bold reform agenda. The Weingart Foundation s multiyear Skid Row health collaborative included county departments, and The Conrad N. Hilton Foundation made a successful longterm investment in the supportive housing model for the chronically homeless, ultimately championed across the country President Bush s homelessness czar. Using their considerable influence, those LA foundations, joined The California Endowment, followed up their patient-capital investment with tough love: behind-the-scenes meetings among political leaders to push hard for integrating city housing dollars and county health services to help the homeless. Millimeter millimeter, the fruits of partnership ripened. The United Way now collaborates with LAUSD on reform, and helps link workforce funders to a city-led labor/ business/community college partnership to create living-wage jobs in growth and green sectors. The Mayor s first philanthropy breakfast in early 2008 helped mobilize support for the heralded Summer Night Lights Program, reducing violence at 16 city parks in areas historically plagued gangs. It could not have happened without the active involvement of Weingart and Ahmanson Foundation leaders, whose personal passion attracted a host of other foundations into firsttime partnerships with government. Lessons Learned If I had to condense lessons from my crash course in breaking down walls between government and philanthropy, I would suggest two. First, trust is the currency of social change. Building relationships and leveraging them is how change happens. Yes, it takes years, but people are hungry to be part of solutions, and quiet leaders dedicated to connecting the dots between people and policies and institutions do move the needle over time. Secondly, in an era of term limits and no major corporate headquarters, the philanthropic community in LA along with its nonprofit partners carries the long-term vision of civic progress. I see a growing sense of mission and social responsibility that results in more boldness and collaborative action. Making Partnerships a Way of Life Case in point: just as the Obama era ushers in change across the nation, the city of Los Angeles and three foundations Weingart, Ahmanson and Annenberg have launched a co-created, co-funded and well-staffed Mayor s Office of Strategic Partnerships. In addition to serving as a fiscal sponsor, SCG is supporting and facilitating this new public/ private entity organizing focus groups with select foundation and corporate CEOs to help provide input on priorities and new opportunities. Headed a distinguished civic leader, Deputy Mayor Aileen Adams a former state cabinet officer, Justice Department Presidential appointee, city prosecutor and fire commissioner says her aim is to make partnerships a way of life for LA. She has the experience to back it up from her early days revolutionizing child treatment in sexual abuse cases linking the Stuart Foundation and local rape-crisis centers, to facilitating the massive state-wide Flex Your Power campaign to save energy during the Davis administration. Today, Deputy Mayor Adams has big plans. These include leveraging transportation, housing, job training and other city dollars in South and East LA neighborhoods, in collaboration with place-based efforts The California Endowment and other foundations committed to investing in long-term community change. Whether philanthropy can help restore trust in government at a time of unprecedented social inequality and when scale is desperately needed remains to be seen. Ten years ago, the United Way issued its powerful report on poverty in Los Angeles, A Tale of Two Cities. Today the statistics are no better, but the alignment of powerful forces, including civic and political will for change, is far greater. Ultimately, the test of this new era s creative surge in public-private partnerships will be not only the transformation of local communities, but solid systemic fiscal and governance reform at a statewide level as well. A few years ago, several foundations quietly got together and funded the bipartisan, centrist California Forward, now gaining attention in the wake of the state s calamitous budget mess. When a mere 51 percent majority of Californians can take away legal marriage from gay couples but a supermajority of 66 2/3 percent is required to raise dollars to save lives and educate people, common sense says something is very wrong. Can the forces of creative change ignite some reformist heat at the state level? That seems to be the next frontier.

11 18 19 the future roles of california foundations Helmut K. Anheier UCLA Center for Civil Society...mastering a crisis requires a proactive stance on behalf of foundation leadership embracing what philanthropy stands for: creating opportunities for creativity and innovation and preserving past achievements for the benefit of all. Among the many factors that shape the future roles of California foundations in a period of crisis and change, three in particular offer a useful starting point for the visioning exercise presented here. The first is that demand for philanthropic dollars will vastly outpace available resources. While this gap is nothing new, it is the growing size of the difference between needs and available funds that matters. Second, over the last few decades, the nonprofit sector in Southern California has experienced significant growth, at rates higher than the expansion of philanthropic assets. More nonprofits are competing for relatively fewer philanthropic dollars. Third, unlike in the past, a severely cash-starved system of local and state government will be unable to take on any new programs that may have been pioneered foundations. To the contrary, governments may increasingly expect philanthropy to absorb some of the growing costs of social services, education and health care. These three trends will put significant political and social pressure on foundations. Therefore, it is important to have a good understanding of what foundations can do, as well as their distinct strengths and weaknesses. A historical perspective is useful to help frame current positions and options. Lessons from the Past for Today s Challenges Foundations initially emerged in the last century as private institutions serving public benefit at a time when the capacity, if not legitimacy, of government in a broad range of fields was underdeveloped if not absent: health care, social welfare and higher education are cases in point. In these fields, there were few other institutional actors with comparable resources and visions, and foundations operated in a relatively open environment. Foundations were in a position, given their relative size and the absence of other legitimate actors, to engage in basic policy intervention, become institution builders, and assume a pioneering role. This changed dramatically in the 1930s with the rise of the modern state in fields that until then were more within the institutional responsibility of foundations and other private nonprofit institutions. Education, health care and social welfare changed in terms of prime funders and policymakers. Between 1950 and 1980, outspent government and with capacities declining in both absolute and relative terms to those of the state foundations shifted their role to focus on incremental innovations and policy improvements. The basic model became that of leveraging limited philanthropic resources to With the reorganization of welfare and the quasi-marketization of many government services, foundations role changed again. By the 1990s, foundations, experiencing renewed growth in numbers and resources, found themselves in more diversified institutional environments, populated largely other institutions that had grown even more in their capacity. In response, searching for a new role, foundations today serve oftenspecialized demands and a greater diversity of purposes than in the past. At the same time, a proliferation of new and different forms of philanthropy has occurred since the 1980s: the model of the grantmaking foundation is becoming one of a range of private institutions seeking to contribute to diverse and contested notions of public benefit. Given the dismal state of public finances and a dysfunctional political system, popular sentiments fueled political opportunism might well demand that foundations play roles similar to those they performed prior to the 1950s: as alternative providers of social, education, and health services to relatively large segments of the population, and in areas where government has withdrawn or is withdrawing. Of course, given the resources required, foundations are unable to serve as general welfare providers, and are also no longer in a position to act as pioneers and bring about basic policy intervention. Yet unless foundation leaders can manage such expectations and communicate their own vision, the danger is that foundations are judged the records of a distant past to solve current problems, rather than their present day capacities. What are the capacities foundations can offer in the face of the dual economic and government crises that are threatening the current and future welfare of California? Foundations have significant comparative advantages over other institutions. The signature characteristic of the modern foundation is its independence both from market considerations and election politics, making it among the most autonomous institutions of modern societies. Foundations can take the long-term view and are less beholden to short-term economic and political expectations. As a result, foundations might be better positioned than other institutions to contribute to society adopting four distinct roles: Social Entrepreneurs identifying and responding to needs or problems that are beyond the reach or interest of market firms, government agencies, and existing nonprofits; Institution Builders identifying coalitions of individuals and organizations capable of implementing a program or course of action across sectors, regions, and borders; Risk-Absorbers investing where there is great uncertainty that an investment will yield a return and that actions will bring about intended benefits; Value-Conservers supporting practices, virtues and cultural patterns that cannot easily be supported via markets or win funding from governments that must answer to majorities. Financial means are only one of the resources employed foundations in playing out these advantages. Knowledge, legitimacy and autonomy are others. These qualities and resources are well suited to help nonprofits and the constituencies and interests they serve. They are also well suited to deal with the central element of the current crisis and the governance problems at the core of it. continued... achieve disproportionate impact.