Illinois has just pulled off a coup by passing the largest new program in the country to offer lower-income families scholarships to attend private schools. The funding comes from donations made by individuals and businesses who receive a 75-cents-on-the-dollar tax credit when they give to scholarship-granting organizations statewide.
Even the bill’s supporters did not expect it to pass, but a perfect storm of politics, budget crises, a politically savvy cardinal, and patient philanthropy pulled it off. Here’s how it happened.
“There were a lot of naysayers, and they were right to be skeptical,” says James Perry Jr., co-founder of private equity firm Madison Dearborn Partners, and a longtime supporter of better education options for disadvantaged kids. “Versions of school choice had surfaced before in Springfield only to be dashed by a coalition of Democrats and Republicans opposed to the very idea.”
But Perry and an early group of donors—including seed funders John Buck, Bob Huffman, Mike Keiser, and John Russell—came together to form One Chance Illinois to push for a statewide tax credit for scholarships. Several national funders also joined in, including the Conrad Hilton Foundation and Laura and John Arnold Foundation, which helped support early research and polling. Donors collectively invested nearly $5 million in nonprofit education efforts, c(4) lobbying, and political giving over several years.
Most education reformers didn’t see Illinois as ground zero for a major school-choice initiative. But the election of Bruce Rauner to the governor’s mansion in 2014 provided an opening. An investor and major education philanthropist himself, Rauner campaigned on the idea of an education tax credit. He also had other priorities, though, and there was still sizable resistance in the heavily Democratic state legislature.
Meanwhile, school-choice advocates in New York had just come within an eyelash of achieving a similar school-choice victory. While their measure was unsuccessful, it seemed that their “blue-state strategy” was onto something. Borrowing from New York’s playbook, Illinois funders, advocates, and parents built an extensive coalition of religious organizations, community groups, and, surprisingly, some blue-collar labor unions (not teacher unions) to advocate for the reform. The reasoning was simple—kids of firefighters, police officers, and other union members stood to benefit considerably from a scholarship program. Some Democratic leaders were attracted in this way.
Illinois’s deep budget crisis was a crucial factor in passage of the tax credit. As the state’s long-building budget crisis deepened, the governor was steadfast in his opposition to new taxes or adding to the state’s deep deficits. In the 2018 state budget negotiations, a rewrite to fix an inequitable sharing of state funding for school districts reached the top of the agenda. Hundreds of millions of dollars in K-12 funding were on the table.
One Chance Illinois was ready, knowing that compromises between the governor and the Democratic-controlled House and Senate would be necessary to finalize a budget. “We believed that a tax-credit scholarship bill properly structured to appeal to Democrats sympathetic to providing better school options for low-income families could be the hinge,” says Perry. “It took a couple more years to materialize than we expected, but we were right that tax-credit scholarships were key to breaking the negotiating impasse.”
One additional catalyst was the involvement of Cardinal Blaise Cupich, Archbishop of Chicago. Cupich is known to have a knack for politics and also has nearly 79,000 students attending Archdiocesan schools who might qualify for scholarships. He served as an honest broker among the politicians, and an agreement was reached that created the new scholarship as part of a compromise that broke the budget impasse. Governor Rauner signed the Invest in Kids Act in August 2017, and at the end of January families began applying for scholarships that will be usable in the 2018-19 school year. Servers crashed under heavy demand, with three requests piling up for each of the estimated 15,000 available scholarships.
The bargain creating the scholarships sunsets after five years. If it is to be extended, or copied by other states, the public will need to be shown that the program is having an impact. In politically charged Illinois, organized attacks on the scholarships are guaranteed, so supporters must ramp up policy, communications, and public-relations work to sustain the program over the long run.
This surprise breakthrough, though, already offers important lessons for donors. First, if you can mobilize strong leaders and a smart strategy, don’t be paralyzed by conventional wisdom that says change is impossible. Second, never underestimate parents hungry for a better education for their kids. Third, don’t stop at logical arguments and whitepapers in justifying a reform—advocacy and political pressure also have to be marshaled. Last, be willing to take risks and buck the advice that says you should only invest in what’s “proven.”
Illinois advocates were able to leverage a relatively modest philanthropic investment of around $5 million to achieve $500 million in scholarship funding over five years. Their victory should give hope to school-choice supporters in many other places. For, in this case, Frank Sinatra’s famous line certainly applies: “If I can make it there, I’ll make it anywhere.” —Anthony Pienta
Congress Respects Philanthropy
Last year Congress passed a comprehensive tax reform for the first time in more than 30 years. The law includes significant provisions that should buoy income growth and thus charitable giving. And the tax deduction for charitable contributions—unlike many others—was preserved. The bill also repealed the “Pease limitation,” which since 1991 had reduced the value of all deductions (including for charity) among high-income taxpayers, and increased the percentage of income that can be deducted for cash donations from 50 to 60 percent. These changes may lead to more giving.
Yet there are also changes which may reduce giving. The standard deduction was roughly doubled, meaning an estimated 21 million Americans who used to itemize their charitable deductions no longer will. While American generosity is not primarily rooted in tax benefits, how the law treats gifts does influence their size and timing. The bill also doubled the threshold at which Americans are required to pay taxes on an estate. There is some concern within the charitable sector that this might reduce the amount left to charity in wills.
It will take years to fully understand the net effects of these changes. Meanwhile the tax treatment of charitable gifts will continue to evolve. If giving does decline, charitable advocates might rally behind a proposal by Representative Mark Walker and Senator James Lankford to provide a charitable deduction even to non-itemizers.
The good news is that Congress, in formulating the most thoroughgoing tax reform in a generation, was very respectful of charitable activity. That is “a testament to the importance of philanthropy,” in the words of tax attorney Alexander Reid. And it indicates that lawmakers are likely to be similarly attentive in the future.
The Millionaire Next Door
Raymond Suckling, whose $37.1 million posthumous donation to the Pittsburgh Foundation recently became the second-largest gift in its history, inherited money from his parents, invested it wisely, and lived frugally. “He loved White Castle hamburgers, drove a Subaru, and wore sneakers with Velcro,” noted friend Buddy Hallett.
The former engineer, World War II veteran, and ardent reader of military history never married or had children of his own. Buddy’s mother, Betty Hallett, was his best friend, and even after Betty’s death in 2002 Suckling remained a part of her family, enjoying home-cooked meals, and constructing Lego masterpieces with Betty’s grandchildren. “We knew he had some money but we never knew the extent,” said one Hallett family member.
Suckling began donating to his hometown in 1993. With an initial donation of just $6,000, he established the Raymond and Martha Suckling fund at the Pittsburgh Foundation to honor his late parents and support the Salvation Army, the classical radio station, and the University of Pittsburgh Cancer Institute. He developed a strong relationship with the fund’s staff and made careful grant recommendations.
“There was such a high level of mutual respect that he trusted the foundation to be the steward of this amazing gift,” said Yvonne Maher of the Pittsburgh Foundation. The funds will be dispersed with annual grants to Sewickley’s local library, hospital, and programs serving low-income families in the region. “Now, what began as a modest donor-advised fund in the memories of two parents will be improving the lives of tens of thousands of residents,” said Maher.
De-mining by the Diaspora
After wars end, governments and international agencies often fund the removal of landmines. But frequently they don’t complete the cleanup—once the media spotlight clicks off, funding dries up. That leaves charities like the Halo Trust to finish the job.
Founded in 1988, the U.K.-based nonprofit employs almost 8,000 people worldwide, in 23 countries and territories—overwhelmingly local residents whom it equips to remove landmines in their home regions. One current project centers on an area between Azerbaijan and Armenia that was mined heavily from 1992 to 1994 after the region became hotly contested between two former Soviet republics as the U.S.S.R. disintegrated.
An anonymous family foundation put up an immediate $1.5 million gift plus a $4 million matching grant to help Halo finish the job. Halo published a map delineating where governments were paying for de-mining, and highlighting other areas without government funding. It took that map to gatherings of successful Armenian-Americans, and already $1 million has been raised in response through Armenian fundraisers. The work is progressing more quickly than anticipated, with an estimated finish date of 2020.
Q&A with Andrew Youn
One Acre Fund founder Andrew Youn spoke with Philanthropy about his international nonprofit that fights poverty by improving the efficiency of very small farms in developing countries. With about half of its budget covered by earned revenue, One Acre Fund relies on philanthropic support from givers like the Bill & Melinda Gates Foundation, Cassia Foundation, LDS Charities, and others for the rest of its costs.
Q: What inspired you to establish One Acre Fund?
A: More than ten years ago, I was traveling in rural East Africa, where I met two very different farmers. One, a mother of four, only harvested a meager amount of grain from her land each year, and her family experienced an annual “hunger season” where they had to skip meals and ration food until the next harvest. Her neighbor harvested four times as much food from a similar amount of land, and her family was thriving. I wanted to understand the difference, and it turned out to be surprisingly simple: the successful neighbor used hybrid seeds, fertilizer, and good planting practices.
We started One Acre Fund in 2006 with just 38 farmers, and our staff worked out of a single rented room in Bungoma, Kenya. Today, we’re serving more than 500,000 farmers in six countries.
Q: Several organizations help small farmers around the globe. What makes One Acre Fund different?
A: We bring a market-based approach to international development. Smallholder farmers are our customers. They pay for a portion of our services, and then donor funding covers the rest. Combining farmer repayments with donor funding helps us remain financially sustainable and reach more and more farming families every year.
Operating like a business also forces us to listen to our customers. If farmers don’t want a product we offer, they won’t buy it, which means we have to continuously evaluate our services and ensure that everything we provide creates real impact.
Q: You offer farmers training and support instead of gifts. Why?
A: One Acre Fund doesn’t provide farmers with cash. Instead we offer inputs that can lift farm yields. A farmer can buy hybrid seeds and fertilizer from us on credit, and we provide weekly training sessions about better agricultural techniques. For our group of people, offering productive assets instead of cash is a better fit.
Q: Describe the typical farmer you work with.
A: Jenipher Wasike is from Kikwechi village in western Kenya. She is 39 years old and has five children living at home. She grows maize on about an acre of land. For years, she struggled to support her family and pay school fees for her children. Then, after joining One Acre Fund, her harvest more than doubled. Now she can afford to send her kids to school and feed them three meals a day. Plus the family has bought livestock and a sewing machine, so Jenipher has a side business making and mending clothes. She represents the hard work, perseverance, and ingenuity that we see from farmers every day.
Q: How do you measure impact?
A: Our monitoring and evaluation team collects data from nearly 10,000 farmers across a number of areas, including harvest levels, income of our clients, and quality-of-life-related measures like health, nutrition, education, and small-business creation. We measure our clients’ outcomes against comparison farmers who aren’t enrolled with us. In 2016, these surveys showed that One Acre Fund farmers’ income was on average 52 percent higher than non-clients.
Before offering new products or services to farmers, we conduct trials that evaluate their potential impact as well as the expected adoption rate—whether farmers will actually buy what we offer. In our early years we didn’t always take adoption rates into account, and this led to some rough patches. For example, we introduced passion fruit to our Kenyan farmers based on research showing very high profit potential, but we underestimated the challenge of convincing farmers to adopt this unfamiliar product. We soon scrapped our passion-fruit project, but it wasn’t a total failure because we learned a valuable lesson about the importance of listening to farmers.
Q: Why is it important for U.S. donors to give abroad, when there are many worthy domestic causes to support?
A: Global poverty remains the greatest scourge of our time. Despite humanity’s progress, it still affects over 1 billion people. More than 70 percent of the world’s poorest people have one thing in common: they all grow food for a living. So I believe that the best way to address poverty is to focus on farmers first.
As much as we’ve grown, we’re still only serving about 1 percent of the need in sub-Saharan Africa alone. Our goal is to one day become the number-one supplier of life-improving goods and services in rural sub-Saharan Africa, whether it’s by helping farmers achieve big harvests, healthy families through improved nutrition, or long-term sustainability so that their land remains productive in the years to come.
It’s a Big World
When high-school junior Ryan McMullin left small-town Lititz, Pennsylvania, and boarded a plane for Sant Vicenç de Castellet, Spain, there were a few things he knew: for nine months, he’d live with a host family, attend public school, and dive into Catalan culture and its languages. Except for emergencies, there’d be no trips home and no visitors from there. “I learned a lot of self-reliance and problem-solving skills,” says McMullin, now a college student studying international affairs. It “also prepared me for interacting with people from other cultures, letting me learn from the world around me, without forgetting where I came from.”
Chloe Eberly echoes this experience. In 2011, she went to Tavullia, Italy, where she made friends with kids from all over the globe and radically broadened her horizons. Also, like McMullin, “I had more independence,” she says. “When I came home, my parents saw how I had changed for the better.” She now lives in New Zealand, where she helps plan programming for new cadres of exchange students with an organization called AFS.
Both McMullin and Eberly were recipients of a Speedwell Scholarship to AFS, which offers high-school and gap-year exchange programs in more than 40 countries around the world. Originally called American Field Service, AFS was founded by ambulance drivers from WWI and WWII who believed that student exchanges could help prevent future conflict. Each year, roughly 1,000 U.S. high-school youth immerse themselves in non-English-speaking cultures through AFS, while U.S. host families welcome over 2,000 students from abroad.
The Speedwell Foundation, established by Jenny and Michael Messner of Charleston, South Carolina, now sends abroad every year 20 AFS students who otherwise couldn’t afford to go. It recently passed 200 scholarship recipients. In 1970, Jenny went to Brazil with AFS and became fluent in Portuguese. She then studied international relations at the University of Pennsylvania, where she met Michael, and launched a successful career in international banking. He pursued railroad management, then finance.
Around the time their daughter went to Italy through AFS in 2002, the Messners started the foundation to help others go abroad. Starting with one student in Lititz, where Jenny grew up, the scholarship now awards full grants of $13,000 per person in nine central-Pennsylvania counties and the Charleston area. It also helps fund a summer study-abroad program for teens from low-income backgrounds in 18 urban areas around the U.S. The way Michael sees it, there are many beneficiaries from every scholarship they fund: the students, the host families, others in the community. “It’s rewarding to contribute in a way that multiplies the gift,” he says.
McMullin notes that AFS students serve as “ambassadors” for their home countries. “People abroad will remember their time with exchange students and that may influence their impressions of the U.S.” He applies this awareness to how he interacts with immigrants uprooted from their homes and trying to adapt here. “I now have a degree of empathy I’m not sure I ever would’ve developed had I not been abroad for that long.”
Secret Codes & Philanthropy
Would you believe that the modern science of secret code-making and code-breaking was launched by a charitable donor?
George Fabyan was a classic entrepreneurial philanthropist—curious, quirky, full of passionate interests, distrustful of conventional wisdom and bureaucracy, and a fan of inventive thinking.
He was also a big supporter of deep research and investigation. With proceeds from his family textile business he set up one of America’s very first private think tanks and research labs. It was located right on his personal estate near Chicago, where Fabyan lived with his wife in a farmhouse renovated by Frank Lloyd Wright. He called the place Riverbank Laboratories, and personally oversaw the investigations that took place in this lab.
One of the subjects Fabyan was interested in was genetics and plant growth. There was a theory at the time that moonlight affected the maturing of wheat plants. So Fabyan sought out a specialist who could look into that as well as other agricultural subjects. In 1915 he hired a promising Cornell graduate student named William Friedman.
As they worked together, Fabyan and Friedman discovered they shared another intellectual fascination—they both had a bug for cryptography, the making of secret messages using different kinds of codes. Fabyan already had two scholars working full-time at Riverbank testing the idea that there were codes written into Shakespeare’s plays. Friedman got drawn into some of their work, and found himself becoming more and more interested.
He was pulled in even deeper when he began to court Elizebeth Smith. She was a talented cryptographer who was working at Riverbank on Fabyan’s Shakespeare project. Soon Smith and Friedman were inviting their friends to dinner parties where you had to break a simple code to figure out what restaurant everyone was gathering in. Before long they were husband and wife.
Like many of the best philanthropists, Fabyan decided to let his philanthropy go wherever the results and the passion were strongest, so he moved his plant geneticist over to a new Department of Codes and Ciphers that he set up at Riverbank Lab for Mr. and Mrs. Friedman to run. The couple lived right on Fabyan’s estate, and William threw himself into the work with gusto. Soon, he was publishing, with Fabyan’s help, dozens of papers. These became known as the Riverbank Publications, and established much of the mathematical basis for modern code-making and -breaking.
Then World War I broke out. At that time, the U.S. had no military or other federal department with expertise in codes. So Fabyan offered the services of his Riverbank Laboratory to the U.S. Army, to allow them to read captured enemy messages. In short order, Riverbank’s Department of Codes and Ciphers was the cryptographic hub for the U.S. government.
The Army started sending personnel to Riverbank to be trained in the use of codes. Elizebeth later reminisced of her shock at realizing how important their little charitable lab had become. “Knowledge of codes and ciphers was so scant in the United States when we entered World War I that we had to be the learners, the workers, and the teachers all at the same time,” she said.
Throughout the war, Fabyan’s private lab remained at the center of all U.S. military codework. And in addition to the vital practical work he did for the national war effort, William Friedman continued his theoretical research on codes. By 1920 he and Riverbank had published eight more classic papers that defined the new field.
In 1921 the U.S. Department of War asked the Friedmans to move to Washington, D.C., to set up a new government effort in analyzing enemy codes—what William now dubbed “cryptanalysis.” He had to build the U.S. code effort right from the ground up. As one of his first hires recalls of his interview for the position, “I found an opportunity to ask him what a cryptanalyst is supposed to do. And he said, ‘You mean you don’t know what a cryptanalyst is?’ And I said, ‘No, I’ve never heard the word before.’ And he looked out the window and he says, ‘Well, that’s not strange, I just invented it.’ ”
Friedman soon ran all signals intelligence for the Army, and then became chief cryptologist of the Department of Defense. He led the breaking of the Japanese diplomatic codes—one of the great technical breakthroughs of World War II. He helped create for America the most secure cipher machine used by any nation during the war.
The donor who signed Friedman’s paychecks during this voluntary service isn’t listed on that plaque. But now you know his secret role.
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