Point of View

Remarks of Aaron Dorfman
December 19, 2007
Minnesota Council of Nonprofits

*Download Aaron's accompanying presentation here.

(Text appears as prepared, not necessarily exactly as delivered)

Thank you, Kari for that kind introduction. And thank you, Jon for inviting me here to speak on this very important subject.

Good afternoon. It’s great to be here in my home state of Minnesota, and to see so many old friends in the room. I’m especially honored to be sharing the dais with this distinguished group.

Some of you may not be familiar with NCRP, so let me give you some very quick background on the organization. I think that’s important as context for our topic today.

The National Committee for Responsive Philanthropy was founded in 1976, and our headquarters are in Washington, DC. Our mission is to promote philanthropy that serves the public good, is responsive to people and communities with the least wealth and opportunity, and is held accountable to the highest standards of integrity and openness.

We are the only independent watchdog organization in the country for foundations and institutional philanthropy.

Like many nonprofits, we envision a better world where all people enjoy equality of opportunity, access and fair treatment without discrimination based on race, gender, sexual orientation, physical ability, economic status, national origin or other identities.

And we see that philanthropy has a crucial role to play in bringing that world into existence.

This afternoon I’m going to focus my remarks on philanthropic support for communities of color and economically disadvantaged groups. I’ll be addressing three questions:

How much philanthropic support is going to benefit communities of color and lower-income communities – both nationally and in Minnesota?

Is that level of support sufficient?

What can we do to improve the situation?

And then, after my remarks and the remarks of the panelists, I hope we’ll have plenty of time for questions and discussion.

So first, our first question: How much philanthropic support is going to benefit communities of color and lower-income communities?

In the media and among the nation’s policy makers, this is an extremely hot topic these days – at least to the extent that you can say anything related to philanthropy is an extremely hot topic among those groups.

In a September 6th article in the New York Times, philanthropy reporter Stephanie Strom writes that: “A common perception of philanthropy is that one of its central purposes is to alleviate the suffering of society’s least fortunate and therefore promote greater equality… In exchange, the United States is one of a handful of countries to allow givers a tax deduction. In essence, the public is letting private individuals decide how to allocate money on their behalf.”

In the article, Strom goes on to point out how little philanthropic giving is really going to benefit the poor and marginalized.

Members of Congress are also paying attention to this topic.

Congressman John Lewis from Georgia now heads the Subcommittee on Oversight of the House Committee on Ways and Means. This is one of the committees that sets regulations for philanthropy. In September, Congressman Lewis called hearings to examine to what extent the nation’s charitable organizations meet the needs of diverse communities. NCRP provided testimony to the subcommittee about how little philanthropic giving benefits communities of color, lower-income communities and other marginalized groups.

In response to some of the testimony that day, Congressman Becerra from Los Angeles asked why we give full tax exemption for all types of charitable contributions if those contributions aren’t addressing the most pressing needs of our society.

Congressman Jim Ramstad from here in the Twin Cities is the senior Republican member of that committee, and he was the only Republican to attend the committee hearing.

So what do the numbers say? We’ll begin with a quick look at individual donors.

Earlier in 2007, reported in the Wall Street Journal, Google and the Center on Philanthropy at Indiana University released a study showing that less than one-third of the money contributed by individual donors was focused on the needs of the poor. Of the $250 billion in charitable donations made in 2005 (the year of the study), less than $78 billion explicitly targeted those in need. Further, the study showed that wealthy donors direct an even smaller percentage of their giving to help the poor – less than 25% of giving by those who earn more than $1 million per year was directed to help lower income people.

The study didn’t address race, so we don’t have good data on individual giving that is explicitly meant to benefit communities of color. The study also didn’t break out giving by state, so we don’t know how giving by Minnesota donors compares to those national averages.

Now let’s look at giving by foundations. NCRP has always focused most of its attention on giving by private foundations and other institutional grantmakers rather than on giving by individual donors because foundations have some very special benefits under the tax code. They’re called “private foundations”, but really some of those dollars belong to the public because the donors have already received their tax exemptions and the endowments of foundations are allowed to grow virtually tax free, resulting in the government and the people foregoing significant tax revenue. So even though giving by individual donors far outpaces giving by foundations, foundation giving deserves special scrutiny.

So here are the numbers.

Foundation Grantmaking for Marginalized Communities, National

      Ethnic Minorities - 8.2%                            Econonmically Disadvantaged - 15.7%

Some of the best data nationally for giving by foundations is compiled by the Foundation Center, based in New York. In their report covering giving in 2005, they found that 8.2% of all grant dollars were intended to benefit racial and ethnic minorities and that 15.7% of all grant dollars were intended to benefit economically disadvantaged populations. With the methodology used by the Foundation Center, some grants are counted twice, so you can’t add those two figures together. For example, if a particular grant was intended to benefit low-income African-American residents of Atlanta, it would be counted in both groups. So you can’t add the two figures together and say that 23.9% of all grant dollars were intended to benefit people of color and poor people combined. The true combined total would be some figure lower than 23%, but we don’t have an exact figure due to the methodology of the reporting.

Think about those numbers for a minute. If 15.7% of grants were classified as benefiting economically disadvantaged populations, it means that 84.3% of grants could not be classified as primarily benefiting poor people. And if 8.2% of all grant dollars were benefiting communities of color, that means that 91.8% of all grant dollars were NOT benefiting communities of color, or at least couldn’t be classified as intending to benefit communities of color.

I can be rather cynical and jaded at times, but even so, every time I think about those numbers I get a little shocked and a little bit outraged. How can such a small percentage of grantmaking in the United States be benefiting those with the least wealth and opportunity? It’s really atrocious.

The other important thing to note about Foundation Center data is that it only covers the largest foundations in the nation. There are more than 100,000 grantmaking institutions in this country, who combined hold more than half-a-trillion dollars in assets and who make grants in excess of 40 billion dollars annually. The Foundation Center data only covers just over 1,100 of the largest grantmakers, and it only captures information about grants of $10,000 or more. That said, their reports do capture more than 50% of all grantmaking. Our experience at NCRP is that smaller foundations tend to be LESS responsive to marginalized communities than the larger foundations, and so if the Foundation Center data included the smaller foundations, the picture would be even worse than it is.

But what about giving by Minnesota Foundations?

The national data collected by the Foundation Center includes data on giving by 25 of the largest foundations in Minnesota. As you can see, those foundations gave over $387 million in grants in 2005.

Now before I show you the next slide, let me check in to see how astute this audience is. Raise your hand if you think these 25 Minnesota foundations gave less money – lower percentages – to communities of color and to lower-income communities than the national sample? Okay. Now raise your hand if you think the Minnesota foundations gave more money – higher percentages? Now raise your hand if you think it was about the same or if you have no opinion. Well, let’s take a look.

Foundation Giving to Marginalized Communities, Minnesota

    Ethnic Minorities – 12.5%                        Economically Disadvantaged – 23.1%

As you can see, Minnesota seems to be doing better than the national sample. That’s good news! Of the $387 million in grants given by the 25 largest Minnesota grantmakers in 2005, 12.5% was intended to benefit racial and ethnic minority groups and 23.1% was intended to benefit economically disadvantaged populations. Considering that as a whole Minnesota is whiter and wealthier than the national averages, those numbers are even more impressive. Here are the numbers side by side.

Giving to Benefit Racial and Ethnic Minorities Giving to Benefit Economically Disadvantaged

Large National Foundations   8.2% 15.7%

Large Minnesota Foundations 12.5% 23.1%

So why are we even holding this event? If Minnesota foundations are more responsive than foundations nationally, what’s the problem?

Remember earlier when I said that it’s our experience at NCRP that larger foundations are more responsive to marginalized groups than smaller ones?

That appears to be the case here in Minnesota, and the data are much less impressive when you expand the scope of inquiry.

The Minnesota Council on Foundations annually publishes something called “Giving in Minnesota”. It is a very thorough analysis of giving by 110 of the largest grantmakers in the state. Note that the national report by the Foundation Center only includes 25 Minnesota foundations while this report by the Minnesota Council on Foundations includes giving by more than four times that many foundations. Additionally, the Minnesota Council examines every grant of $2,000 and above while the national study only counts grants of $10,000 and above.

And before I show you the figures, I should also note here that the local study is examining data from 2004 while the Foundation Center reports are showing data from 2005. So here it is.


      Ethnic Minorities – 5.1%                        Economically Disadvantaged – 4.6%

As you can see, when we expand the scope of inquiry, giving to benefit racial and ethnic minority groups and economically disadvantaged populations drops dramatically. Only 5.1% of all grant dollars were to benefit communities of color, and only 4.6% of all grant dollars were to benefit lower-income communities. Out of $750 million in total giving by these 110 foundations in 2004, only $34.6 million was intended to benefit economically disadvantaged communities and only $38.8 million was intended to benefit racial or ethnic minorities.

It is impossible to say how these figures compare with national averages – no one gathers data nationally to the same degree of specificity as the Minnesota Council on Foundations does.

My educated guess is, however, that the same pattern would be found in other states and nationally. As you include an analysis of giving by larger and larger numbers of foundations, the responsiveness to communities of color and to poor communities diminishes.

I said I wanted to address three questions today.

We’ve covered the first question. Now on to the second: Is that level of support sufficient?

I’m sure you can tell from my remarks so far what my opinion is on the matter, but I want to hear from you. Is the level at which Minnesota foundations provide support for communities of color and lower-income communities sufficient? If you don’t think it is sufficient – if you think foundations can and must do better – then I want to ask you to just stand up for a minute right where you are. Stand up if you’re not satisfied. It’s okay if you are satisfied with these numbers, but if you’re not satisfied I want to ask you to make yourself seen and heard on this issue. (Pause and wait. Make a comment or two based on how many people stand up.)

Now we can move on to our third question: What can we do to improve the situation?

Here I want to begin by praising the Minnesota Council of Nonprofits and the Minnesota Council on Foundations. The MN Council of Nonprofits began raising these issues in the 1980s with their first report “Minnesota Philanthropy and Disadvantaged People.” The Minnesota Council on Foundations has been raising these issues with their members for more than a decade, and they’re more open and transparent with the data than most regional associations of grantmakers are. The Minnesota Council has an impressive body of programming designed to improve diversity in grantmaking and among foundation staff and trustees. It’s incredibly challenging to address these issues within philanthropy, and I think both the Minnesota Council of Nonprofits and the Minnesota Council on Foundations have been doing so with courage and integrity. They are light years ahead of many of their peers around the country. Without another in-depth study, it’s hard to tell objectively to what extent their efforts are having an impact, but anecdotally I’m convinced that they are helping to move the needle here in very important ways.

So the first thing we can all do to improve the situation is to support the work of these two organizations and acknowledge they are honestly working as hard as they can to move things in the right direction. I hope we’re going to hear more about their efforts from the other panelists, and I’m looking forward to that.

The second thing I want to ask you all to do is to consider becoming members of NCRP. Yes, that is self-serving – and it is also in the best interests of the sector. NCRP is the only national organization pushing these issues. If you share our vision, you and your organization or foundation should become a member. The only way people change things in this country is by banding together with others who share a vision for change. Our Field Director, Melissa Johnson, is here today and she can answer any questions you have. You also have information in the packets you got when you came in the room.

The third thing I want to ask you all to do is to talk with elected leaders about this situation. Share these numbers with them. Elected leaders don’t, as a general rule, understand philanthropy very well. We need to help them see the good things that philanthropy can accomplish and we need their help to challenge foundations and other grantmakers to continue to improve. Foundation staff members and trustees care what political leaders think. We need to enlist them as allies in this effort.

The fourth thing I think we can do to improve the situation—and this is really important—is to create a public expectation that philanthropy ought to be benefiting marginalized communities to a greater extent than it is currently. Philanthropy cannot replace government spending, and it shouldn’t be expected to do so. But it is fair and reasonable to expect that foundations should do better than they are doing right now. In the media, in the board room and in social circles, we need to create a public expectation that says foundations and other grantmakers should be concerned with the fate of those who have the least wealth and opportunity. As peers, the grantmakers in the room are in the best situation to make this happen, but we can all play a role.

I pledge to you that NCRP will do its part in the coming years to keep this situation in the public eye. We won’t let go of this issue until we see some real progress from foundations. As Frederick Douglas, one of my heroes, once wrote, “Power concedes nothing without demand; it never has and it never will.” Philanthropic giving for communities of color and for lower income communities won’t increase unless we all work together to make a change. Sometimes that will mean collaborative work, and sometimes that will mean struggle and discomfort. But we must keep pushing on this issue – the stakes are too high for us to just ignore the situation. Thank you for giving me the opportunity to speak today. I look forward to the ongoing discussion.