The Philanthropy Roundtable applauds the decision by California Assembly Member Joe Coto to withdraw AB 624 from legislative consideration this year. This bill would have required large California foundations to disclose the racial, ethnic, and gender composition of their own staffs and boards, as well as those of their grantees and vendors. The bill passed the Assembly on a party line vote in January and looked likely to pass the Senate this summer. Had it been signed by Governor Schwarzenegger, it would have seriously harmed charitable giving in America’s most populous state.
The Roundtable and its self-defense legislative arm, the Alliance for Charitable Reform, helped to organize a coalition of foundations and public charities to oppose AB 624 and share our concerns with lawmakers in Sacramento. We made three principal arguments. The bill would have discouraged charitable giving in California, by telling donors that the state government planned to interfere in the voluntary charitable decisions of foundations. AB 624 would be an administrative burden on charities and an intrusive and unnecessary addition to the many transparency and disclosure requirements that already exist for foundations. The bill was also an ineffective and counterproductive instrument for achieving its purported objective: increasing charitable giving to low-income communities. It is good for charity, good for California, and good for America that AB 624 was not enacted into law.
However, the Roundtable also has serious concerns about the legislative process that led to withdrawal of AB 624. In violation of over 200 years of respect by American political leaders for the freedom of donors to decide where to give away their money, California lawmakers used the threat of harmful legislation to try to determine how foundations—private organizations—set their charitable priorities. And the temporary resolution of this issue in California may make it more likely that legislation similar to AB 624 will be introduced in other states (and perhaps in California again) and also in the Congress.
Mr. Coto, the chairman of the Latino Legislative Caucus, withdrew the bill after he and the chairmen of the Black and Asian Pacific Islander caucuses issued a joint press release with 10 large California foundations that had strongly opposed AB 624. In this announcement with the legislators, the 10 foundations made a multi-year, multimillion-dollar commitment for “capacity building support and technical assistance targeted to minority-led and grassroots, community-based organizations that primarily serve minority and low-income communities in California” and “support for leadership development activities that will bolster and train a diverse pipeline of executives, staff, and board members for the nonprofit and philanthropic sectors.”
The 10 foundations made it clear that their commitment was voluntary. Indeed, these foundations had already been long-time leaders in serving low-income and minority communities through their grantmaking, and it can easily be argued that their commitment was an extension of their existing strategies. Nevertheless, the legislative process here was highly problematic. Foundations were put in a situation where they felt compelled to make a multmillion-dollar commitment to causes important to powerful legislators at the very moment those same legislators were threatening to enact a harmful law. That is not the way philanthropic decisions should be made in a free society.
Our critique is not of the foundations that made this commitment. They were in a very difficult situation trying to stop enactment of a harmful law. Our critique is of a legislative process where the foundations felt compelled to coordinate and announce their funding priorities with legislators who should be leaving that decision to private organizations.
Foundations across the country should begin preparing for similar threats to their independent decision-making. The Greenlining Institute of Berkeley, California—the principal interest group pushing for AB 624—hailed the “historic agreement reached for California minority organizations with foundations,” and is pushing for comparable legislation in other states including Florida, Illinois, Michigan, New York, New Jersey, and Texas, as well as for federal legislation in Congress in early 2009. An influential Pennsylvania legislator is already working closely with Greenlining to put pressure on foundations in his state.
Meanwhile, a key question in California is who will be in charge of shaping and implementing the initiatives announced by the 10 foundations. Will it be the foundations themselves? Or will California legislators insist that Greenlining or their own representatives have a seat at the table? What role will Greenlining and legislators play in setting targets for performance, and will they introduce new legislation governing foundations if those targets aren’t met? And for what other causes will legislators now seek to direct philanthropic funding—rural areas, disabilities, environment, health care for the uninsured? These are all worthy causes—as is capacity-building for minority-run grass-roots services. But shouldn’t foundations be deciding which worthy causes are most consistent with their mission, strategy, and donor intent?
The battle to protect philanthropic freedom has just begun.
Adam Meyerson is president of The Philanthropy Roundtable.