Meet David Smydra, the face of the “new paradigm” in foundation grantmaking. He is an employee of the city of Detroit, but his office was created and initially funded by a consortium of Detroit-area grantmakers. Officially, he is charged with acting as liaison between Detroit Mayor Dennis W. Archer and the philanthropic community. Unofficially, Smydra is Archer’s main source of “leverage,” using philanthropic resources to lure additional federal and state dollars to Detroit.
In that respect, Mr. Smydra has been spectacularly successful. He puts his share of new funding for the city at roughly $250 million, about $100 million of which is new federal and state spending he was able to secure for Detroit in part through the up-front leverage of philanthropic money. Among his greatest successes, according to Archer, is the construction of a 30,000 square foot center that connects Detroit residents to state and federal social services.
As devolution has shifted government dollars and responsibility for social programs closer to local communities, the grantmaking of many of the largest foundations has shifted with them. In the bygone era of unlimited government spending, the “old paradigm” dictated that foundations fund the demonstration projects that would later become the building blocks of the welfare state. But today, limited government largesse has forced a new discipline on many foundations. They have begun to use their grants to fund people like David Smydra: not innovators of new government projects, but conduits for existing government spending.
The Old Paradigm
Foundation-government collaboration dates back at least to 1909 and the Rockefeller Sanitary Commission, which showered money and staff on southern state governments with the aim of eradicating hookworm. Rockefeller Institute President Rev. Frederick T. Gates wrote that although the project was conducted “under the guise of the state health boards,” it was in fact “minutely directed and paid for by the Rockefeller Commission.”
But the Rockefeller model — putting your money where your mouth is — quickly evolved into something more ambitious: using foundation funding to jump-start costly new government programs which would then, it was hoped, grow like Jack’s beanstalk when fertilized with tax dollars.
Human services bureaucrats refer to this phenomenon as “taking a program to scale.” Classic examples of scaling up include the Ford Foundation’s Gray Areas Program, which famously morphed into the War on Poverty. As recently as the early 1980s, the Edna McConnell Clark Foundation’s “Homebuilders” program — designed to prevent social workers from moving neglected children into foster care — spurred the billion-dollar federal “Family Preservation and Support Act of 1993.”
But new entitlements spending is now off the table, and scaling up new programs is starting to look a bit improbable. Even Georgetown University law professor Peter B. Edelman, not normally thought of as a critic of government programs, acknowledges that “the [old] paradigm does seem to be rather unrealistic at the moment.”
Detroit
The idea of hiring David Smydra came with the election of Archer in 1993. According to Smydra, a group called the Detroit Area Grantmakers (DAG) “suggested that it would be helpful to both parties if the mayor were to appoint someone to serve in a liaison capacity between the city and the grantmakers.” The deal sweetened when a DAG member, the Hudson-Webber Foundation, offered to pick up Smydra’s salary, later with help from the Skillman and Kresge Foundations, the McGregor Fund and the local community foundation.
What is very new in Detroit is an atmosphere that cooperation is possible and that working together there are some real improvements that can be made for the quality of life of people in this region,” says McGregor Fund Executive Director C. David Campbell. “The private foundations, the community foundations, and the corporations have really come to the table with the city.”
Although today roughly two-thirds of Smydra’s salary and that of his assistant are paid for by city funds, Archer, himself a former trustee of the Community Foundation of Southeast Michigan, is pleased with the results of the collaboration. “[The] office has reshaped the way in which city government works with all grant funders,” he says. And although the office is probably “unique to Detroit,” the first-term mayor says he gets a lot of questions about the concept from other mayors.
Archer cites the rehabilitation of the old Utley Library as a major success. “By combining the investment commitment of the W.K. Kellogg Foundation with Empowerment Zone funding, we have been able to turn an abandoned building into a state-of-the-art child care and family support center,” says Archer.
The Family Place, as it is known, is a 30,000 square foot liberal sociologist’s dream come true. No fewer than eleven social service agencies vie for visitors’ business — including the City Health Department, the “Family Independence Agency” (formerly social services), the Community Mental Health Center, and Head Start.
In supporting the project, Kellogg has committed $4 million over four years and even waived its usual policy against paying for bricks and mortar construction. Because the Family Center is in a federal empowerment zone, one immediate consequence of Kellogg’s largesse is $6 million in federal matching funds.
Nor is that all. Gerald K. Smith is a Program Director at Kellogg. “I think that our dollars will entice the redirection of [additional] government resources.” Indeed, Smydra acknowledges that one of the reasons for picking the library site was the presence of “several different governmental service organizations in that area.”
Smydra has used philanthropic support to leverage government largesse in other areas as well. “Our Detroit police department has unbelievably out-of-date technology,” he says. “We were able to use philanthropic dollars to do an assessment of how modern technology could lead to better policing, and include that in an application for Department of Justice dollars. We now have about $250,000 in philanthropic dollars, and $6.5 million in federal dollars.”
Richmond’s East End
Deputy City Manager George Musgrove describes Richmond’s impoverished East End as harboring “Third World conditions that generate Third World statistics.” In 1993 the Annie E. Casey Foundation responded to these conditions with a five-year grant — the East District Initiative — of between $300,000 and $600,000 per year. The goal? To create a “Human Services Delivery System” and otherwise automate the delivery of social services. Musgrove describes the grant’s goal as making “human services more accessible to people.” With “one-stop shopping,” says Musgrove, “a client doesn’t go to five different agencies and spend hours filling out five different sets of applications.”
The Robert Wood Johnson Foundation has also gotten into the act. Under the rubric of a planning grant for “Health and Safety of Urban Children,” the foundation is paying $400,000 to apply lessons learned in East Richmond to the city at large and surrounding counties.
The name of the game, according to Musgrove, is greater efficiency in accessing government services. “Conceptually, you could go into a nonprofit agency and access city services. That nonprofit employee could pull your file up on a computer, using video interactive services, and determine benefits [eligibility],” he says. “We want those private nonprofit agencies to access government services so that they will be able to perform their mission more effectively. We don’t want them to be in isolation.”
Greater efficiency, of course, means more demands on social services, and that costs money. “We have doubled the amount of state and federal money we have for job training and placement, child care and transportation in the past year,” says Musgrove. In the future, though, he sees the potential for “major savings” in social services budgets. “For instance, instead of having five caseworkers working with one family we want to have one caseworker delivering services to that family.”
Richmond’s approach to human services is not without its enlightened aspects. Musgrove, for instance, sees a coming shift away from entitlement programs to an investment in the most difficult-to-serve populations, with the cost being paid for by “reductions in what have been the traditional welfare programs. You will see a focus on self-sufficiency, and I think that will be a better outcome for our clients.” In fact, the city has explored creative ways of trying to foster community responsibility, for instance, by setting up and funding a nonprofit agency — with budget and program to be headed by local residents.
Yet the irony is that, while everybody agrees self-sufficiency is good news for welfare recipients addicted to handouts, city managers are in denial about their own addiction problem — an addiction that is fed by state and federal matching funds. “We are always looking for opportunities to use the foundation money as a local match to draw down federal and state dollars,” says Michael Evans, Richmond’s director of social services. “In the Department of Social Services we draw down 80 state and federal dollars for every 20 dollars we get locally, including from foundations.”
Boston
Begun in 1991, Healthy Boston, a program funded by the Boston Foundation, the Pew Charitable Trusts, and others, is what co-chair Ted Landsmark calls “a community organizing process.” “We train community stakeholders, including residents, small businesses, agencies, and others with an interest in improving quality of life in communities — to reduce dependency on outside resources,” says Landsmark.
Healthy Boston may have succeeded in training community stakeholders, but it has not lessened dependency on outside resources. In Allston-Brighton, a Boston neighborhood of about 70,000, community representatives decided their key problem was — guess what? — “lack of communication among about 15 different ethnic groups in the community and the effect that was having on the isolation of these groups from the social services that were available in that community.” English translation: Immigrants and others were having a hard time applying for welfare and other benefits. Solution? Train them to apply for welfare and other benefits.
Actually, Landsmark puts it a bit differently: “The community proposed the creation of an ESL [English as a Second Language] program [to serve] as a bridge between the local communities and the free social services that were already there but were underutilized.” Free services?
After six years of activity, Landsmark, a Yale Law School acquaintance of Hillary Clinton, is about to become president of the Boston Architectural Center. But he is proud that, after some start-up funds, Healthy Boston “no longer looks to the government for funding.” You might say that that statement is open to interpretation.
Health Care
Few areas cost state governments more than health care — also by far the largest single area of foundation involvement with state government. Things have cooled off quite a bit since the giddy days of Hillary Clinton’s health care task force, when Robert Wood Johnson Foundation President Steven Schroeder wrote a colleague to express his glee at having “had the opportunity to influence health policy through his work for the Clinton Health Transition Team. Concluded Schroeder, a tad hopefully: ”Let’s hope that our seeds bear fruit.“
But perhaps Schroeder was not so much optimistic as premature, since the battle over a government takeover of the health care industry has not so much ended as shifted to those laboratories of democracy — the states. Molly Bordonaro headed the Health Care Task Force at the American Legislative Exchange Council. ”With the failure of national health care legislation,“ Bordonaro explains, ”foundations have typically been working with state governments to expand subsidized health care programs at the state level.“
C. Patrick Babcock is Director of Public Policy for the Kellogg Foundation. One Kellogg project is ”Comprehensive Community Health Models of Michigan,“ a seven-year, three-county project funded with $22 million from Kellogg and a slightly smaller amount from some local community foundations. ”The project’s goal,“ according to Babcock, is nothing less than to ”help reform the delivery and the conceptualization of health [care].“
One of the counties has the goal of what Babcock gingerly describes as ”get[ting] access to primary care for citizens throughout the county.“ In other words, requesting a Medicaid waiver from Washington to expand the program’s eligibility to ”people who are working but cannot afford insurance.“
Sounds expensive, but Kellogg says not to worry, they may actually save money: ”You get savings in a couple of ways, first by banding together to get more buying power, and by reducing the number of people uninsured you put people into a primary care environment rather than an emergency care environment. By reducing the cost overall more people can afford it.“
Sounds good. With four years since the project’s inception there must be some results to show in terms of costs. Well, maybe not quite yet. ”We can’t tell you that we have not increased Medicaid costs,“ says Babcock.
Another Kellogg program, price-tag roughly $3 million between 1992 and 1999, goes by the name of ”Community Focused Health Information Systems.“ The program will establish community-sponsored and -supported systems to manage health care data. Does Kellogg see such a system basically duplicating the privately-owned computer networks of insurance companies as a necessary prelude to nationalizing health care?
Kellogg’s Babcock leaves little doubt where he would like to head: ”We re incubating an idea but if all we do is incubate it it’s not going to make it into the larger system.“ He adds: ”I think that if we get a national health care policy, and I hope to hell we do, we are going to have to reflect different approaches to health care. We should probably allow people different ways to get access, as long as they get access.“
Of course, Kellogg is not alone in the field of health care ”reform.“ The Robert Wood Johnson Foundation is known for large, pace-setting programs in the health care arena. Critics claim that RWJ requires states to agree to expensive expansions of health care services in order to qualify for grants.
The Johnson Foundation denies this. RWJ Senior Program Officer Nancy Barrand: ”We are very careful not to tell the applicant what to do with their application. Do we make suggestions about how it needs to be strengthened by bringing other key actors to the table? Yes, we do make suggestions.“ Of course, Barrand acknowledges, these ”actors“ could include legislators who control the state’s purse strings, such as the state appropriations committee chairman.
Then again, RWJ can’t be blamed just because some states just want to spend more money. Barrand: ”If a state comes back to us and says we want to expand coverage to women and children in our state and we want you to help us figure out how to do that by giving us grant dollars, they know that in order to implement that program they are going to have to spend money.“
The New Paradigm
One thing about the new paradigm: not everyone appears to be buying into it. Some foundations are showing signs of adapting to the new era by shifting their focus from government program building to local community building. The current five-year plan for The Annie E. Casey Foundation, for instance, states that ”human service system reform alone is not enough. We now know that we must also seek changes in our neighborhoods so that they can provide the networks and supports necessary to create social environments in which families and kids can thrive.“ The Ford Foundation, in addition, recently announced a major new initiative to create 2,000 matched savings accounts in 30 low-income communities.
But despite these exceptions, the new paradigm is gaining momentum as foundations discover new and better ways of helping cities pry dollars out of state coffers and states out of Washington. New government programs may be out of the question, but many old entitlement programs are ticking along just fine, and a host of foundations have been all too happy to work with state and city agencies to squeeze out tens if not hundreds of millions of dollars more.
Ultimately, what is noteworthy about the foundation world’s ”new“ paradigm is its utter lack of ambitiousness. Either foundations are a powerful force for good, capable of changing American public life for the better, or they are weak, and exist only to coax tax dollars into the outstretched hands of representatives of the status quo. Practitioners of the new paradigm in philanthropy tend to identify with the latter vision. Like those who gave us the old paradigm of the 1960s and 1970s — who were at least ambitious — practitioners of the new paradigm take their bearings from government and show evidence of little independent thought, seeing themselves as little more than facilitators and enablers of additional government spending. We have come a long way from the good old days, when John Rockefeller, Sr. could confidently construct a national campaign to eradicate hookworm, and see it through to completion.
