At the Philanthropy Roundtable’s recent annual meeting in Palm Beach, James Piereson (executive director of the John M. Olin Foundation) and Rebecca Rimel (president of the Pew Charitable Trusts) addressed the relationship between philanthropy and public policy, then fielded questions on such topics as K-12 education, campaign finance reform, universal preschool, and taxes. Chester E. Finn Jr. (president of the Thomas B. Fordham Foundation) moderated the session.
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James Piereson: Private foundations are limited by law in the ways they can and cannot seek to influence public policy. Involvement in election campaigns, for example, is prohibited. Lobbying—contacting representatives to support or oppose legislation—is likewise prohibited in nearly all cases. If foundations spend funds in these ways, they may lose their tax exemption.
Grantees—public charities—are permitted to lobby legislatures, so long as such efforts represent only a small part of their activities. While foundations may support charities that lobby, they are not permitted to earmark funds for lobbying. In short, if foundations are to affect public policy, they must do so indirectly, through grantee programs which in various ways may influence legislators, experts, or public opinion on broad principles that go beyond particular bills under consideration.
For much of their history—from the early 1900s into the 1960s—foundations typically influenced public policy through demonstration projects or through blue ribbon panels that recommended this or that policy. In the early 1960s, for example, the Ford Foundation’s Model Cities program was picked up by the Johnson administration as part of its “Great Society” agenda, and prominent foundations funded private commissions that helped birth public television and the National Endowments for the Arts and Humanities.
Foundations had little input on the New Deal programs of the 1930s. Waldemar Nielsen’s history of foundations, Golden Donors, hardly mentions foundations in this connection, except to note the antipathy to FDR of various business leaders like J. Howard Pew and Alfred Sloan. Typically, foundations were wary of political involvement because they feared that controversy and public notice carried great personal and institutional risks. By the 1960s, such concerns had faded; today they seem to have disappeared.
A significant shift in policy-related philanthropy occurred when McGeorge Bundy, a refugee from the Kennedy-Johnson administrations, became president of the Ford Foundation in 1966. He developed the pioneering strategy of “advocacy philanthropy,” in which foundations invested funds in a maze of advocacy and litigation groups to promote feminism, affirmative action, disarmament, and other liberal causes. The groups didn’t lobby for legislation, but advocated ideas that led to legislation, then sought to influence the regulatory bodies that carried out the legislation and the courts that interpreted it. Such influence was often reinforced by timely research studies, conducted by a think tank or a university program funded by the same philanthropies. Bundy’s strategy of bypassing the electoral process became the model for foundations seeking to affect public policy.
This innovation had important consequences. First, it led to a 1968 effort, funded by the Ford Foundation, to decentralize New York City public schools by creating community school boards. This change brought on an explosion of ethnic tensions and set back race relations and public education in the city for a generation or more—it was a spectacular failure.
Second, the liberal groups created under Bundy’s leadership came to control the Democratic Party, displacing the old voting blocs (Southerners, Catholics, urbanites, union members) of FDR’s coalition. By the end of the 1970s, the Democrats had surrendered their place as the nation’s majority party; now, after a generation, they remain trapped in the advocacy group box Ford built.
Third, in the late 1970s, various conservative foundations, my own prominent among them, adopted the “advocacy philanthropy” model. The impressive array of conservative groups one sees today—from the Manhattan Institute to the Heritage Foundation to the Federalist Society to the campus newspaper movement—resulted from this strategy.
Unlike Bundy, the Olin Foundation has focused more on building institutions, nurturing talent, and promoting broad ideas than on promoting specific policies. We thought this focus better fit our competence, and we believed policies would follow once the institutions, talent, and ideas were in place.
Our achievements and failures? I think our work has encouraged a popular acceptance of free markets and religion’s role in society, and a consequent skepticism of socialism and the welfare state. This appreciation of the institutions of liberty is what we are most proud of.
We’ve had some policy successes in collaboration with other institutions. A prominent example is welfare reform, signed into law by President Clinton in 1996, which imposes work requirements and time limits on assistance. Our role began in 1982 with a grant to assist Charles Murray with his book Losing Ground. Published in 1984, Losing Ground showed that the welfare system, far from alleviating poverty, was trapping more and more people in long-term dependency. Lawrence Mead of NYU later published two books with our assistance that made the case for imposing work requirements and reciprocal obligations to society as conditions for receiving welfare. The Heritage Foundation, a think tank we support, continued the research and pressed for reforms. Another think tank, the Hudson Institute, mounted demonstration experiments in Milwaukee with the assistance of that city’s Bradley Foundation, to show that reform would reduce welfare rolls and move people from poverty into the work force.
Yet, as often with public policy, little progress was made through the 1980s and into the 1990s, despite the vigorous debate over welfare. When Republicans gained control of Congress after the 1994 elections, however, a welfare reform bill passed, calling for work requirements in welfare programs and a five-year eligibility limit. President Clinton vetoed it, but when a similar bill passed in 1996—an election year—he signed it. Despite predictions that the bill would throw poor people into the streets, it has proved an enormous success, both for the poor and society in general.
A second policy success involves New York City, site of Ford’s spectacular failure. In the 1980s, the Manhattan Institute, with support from us and others, developed an approach to urban government that emphasized welfare reform and new crime-fighting methods, including the “Broken Windows” idea developed by George Kelling and James Q. Wilson, who argued that police action against petty crimes like breaking windows would help prevent worse crimes. The Institute’s arguments, especially in its magazine, City Journal, caught the attention of Rudolph Giuliani, and after his election to mayor he began implementing these ideas. Within five years, major crimes in the city were cut in half, homicides by two-thirds, and welfare rolls were also cut—a success that helped push welfare reform nationally. Now these successful ideas have spread around the nation, benefiting millions of urban dwellers.
What about failures? They come in at least two types: First, one fails to have a proposal adopted; second, it is adopted but proves a failure in practice. We, unlike Ford, have not yet experienced the latter, but many policies we have encouraged have yet to be implemented widely, most notably school choice, litigation reform, and Social Security privatization. Yet these cannot be regarded as complete failures because they remain sound ideas and may yet be approved by the political process. Indeed, our current President, along with a majority in Congress, seem sympathetic to these three ideas.
Our greatest disappointment has involved the courts, an arena in which conservative hopes have largely been dashed over the past quarter-century. Our foundation, like several others, has invested heavily in litigation groups to bring cases in the areas of race and sex preferences in college admissions, hiring, and federal contracting; the defense of school choice; term limits; and a prominent place for religion in public life. Many conservatives were convinced that the various liberal victories in the federal courts during the 1960s and ’70s might be replicated on the conservative side. Yet this was not to be. It turned out conservative justices were not prepared to break new ground the way their liberal predecessors had.
What lessons have we learned?
First, it can take a long time. The ideas that led to welfare reform had been germinating for decades before a law was passed.
Second, success or failure can come from unexpected sources. When Charles Murray wrote his book on welfare in 1982, it was assumed that a Republican President might push welfare reform but be blocked by a Democratic Congress. Yet by 1996 reform was promoted by a Republican Congress and signed into law by a Democratic President.
Third, the American system provides many opportunities for experimentation in public policy. There are various levels of government, from local to national, and within each level are various centers of power, including the courts, regulatory bodies, advisory commissions, and the like. Many important issues, like welfare reform, require efforts at all levels and in all arenas of influence. Moreover, there are various informal and unofficial levers that can be used to advance a cause.
Fourth, it helps when like-minded people are elected to office. Liberal foundations had great success in the 1960s and ’70s because their people were in office; conservatives have had much success in the past few decades for precisely the same reason. (This point may involve a chicken-and-egg problem: Arguably, the work of conservative thinkers helped conservative politicians win office.)
Fifth, remember President Truman’s advice: “If you can’t stand the heat, get out of the kitchen.” Public policy is usually controversial, despite the popular illusion that there are many things everyone agrees on. Inevitably, some people will hate you, say nasty things about you, and distort your intentions. Trustees will see this, as will their families and neighbors. “What’s going on?” they’ll ask. Some philanthropies cannot absorb such controversy.
Sixth, know Newton’s First Law of Politics: Every action begets an equal and opposite reaction, or even a disproportionate reaction. Efforts, especially successful ones, will generate counter-activities by adversaries, which may continue long after success has been achieved.
A final corollary: When your work creates controversy, it usually means you’re having an effect. No one will complain if you are irrelevant or ineffective. If your adversaries scream, it is not the time to back off.
Still, recall that progress in America does not always occur through public policy and politics. More frequently, human progress occurs through technological advances or through gradual changes in morals and mores. The mobilization of all sides in the public policy arena has led to stalemate; perhaps, seeing this, wise donors may move their funds to other areas where marginal progress or breakthroughs are more likely and can be achieved with less effort and money.
Remember, too, that this greatest of all democracies belongs to the people—not to the experts, to the wealthy, or to prominent foundations. We should be prepared to have everything we advocate tested in public debate, for the institutions of free government are what makes our work possible.
Rebecca Rimel: My role today is to convince you of the extraordinary power and influence you can have in shaping the course of events. Let me declare up front that I believe philanthropy can play a critically important role in informing the policy debate, though it is not for the faint of heart.
Mr. Piereson has insisted that philanthropy is inherently ideological, that the policy solutions we advance are partisan. I think the polarization between red and blue America undermines the very results we seek to achieve, making it nearly impossible to reach across ideological divides and find the common ground necessary to develop workable solutions to complicated problems.
Effectively educating children to improve the nation’s economic future as well as their own is not left or right; nor is it liberal or conservative to do what we can to ensure that the world’s oceans remain both ecologically and economically viable into the next century. We need more, not fewer, diverse views at the table to tackle our toughest problems.
When it comes to a foundation’s role in the public square, one size does not fit all. Some prefer to stay out of the public policy arena, but many of us have chosen to play a role. The roots of my organization, the Pew Charitable Trusts, go back to 1948 when a foundation was created to further the health and welfare of the American public. We do this by advancing compelling policy solutions to pressing issues in such areas as the environment, education, and health and human services. Fortunately, we remain a family foundation, with our donors’ children and grandchildren stewarding the institution as they feel the founders would have wanted.
In tackling public policy issues, you will experience both the thrill of victory and the agony of defeat. One of our efforts which has been both thrilling and agonizing is campaign finance reform, which offers a good example of the Trusts’ approach to public policy. Since the late 1980s, the rules governing campaign financing have become increasingly ineffective. As a result, the cost of running for office has skyrocketed, and huge amounts of unregulated money have flowed into the system. The state of affairs is one of the main reasons Americans of all ages have turned away from the voting booths.
We developed a program in 1996 to increase public trust and confidence in elections by reforming the role that money plays in campaigns. It was based on solid, nonpartisan research and was designed to bring more varied and moderate voices to the debate. These reform efforts have included designing practical, incremental reform proposals; building bipartisan support for reform; and providing data on the amount, sources, uses, and impact of money in campaigns. In fact, this research was the key to our strategy, and it was relied upon heavily during the legislative debate.
Our investments and the efforts of our partners contributed to a remarkable victory. In March 2002, President George W. Bush signed the Bipartisan Campaign Reform Act into law, which banned raising and spending soft money by national candidates, regulated deceptive issue ads, and increased disclosure provisions.
However, right around the corner was the threat of defeat. The law was challenged in the courts. We supported the legal team that defended the law, and once again the research by institutions we funded was relied upon heavily during the proceedings. In December 2003, the Supreme Court upheld all the major provisions of the law. Still, there continue to be challenges to the rules, as well as concerns about the effectiveness of the Federal Election Commission’s enforcement.
We continue to work hard to ensure that campaign laws are implemented and enforced. So after all this, can we claim the campaign system is fixed? Not by a long shot. But we can say that we’ve made significant progress on an issue most thought was intractable.
Another example of Pew’s policy work is foster care. Our bipartisan support includes Representative Tom DeLay (R-Tex.) and Senator Hillary Clinton (D-N.Y.). To bring the facts to bear, we formed a commission led by former Congressmen Bill Gray and Bill Frenzel. We’ve invested in research, education, and advocacy, and have high hopes. If we succeed, we’ll have the chance to move more than 200,000 kids to safe, loving homes—not a bad return on investment.
Another area of concern for us is pre-K education. We’re working at the state level to ensure that every three- and four-year-old in America has access to pre-K education. We also work on policy issues to protect the health of our oceans and our wilderness. We are encouraging more work to look at the environmental and economic consequences of global warming.
What’s important here are not the details of each campaign, but the collective influence all of us can bring to bear on critical issues by providing accurate, timely information; by leveraging our resources; and by bringing the best ideas and minds to influence and solve problems involving the health and happiness of the American public.
Our recent transition from a private foundation to a public charity helps us do this even better. We’ve taken advantage of our public charity status to set up our information and polling projects as a separate subsidiary, the Pew Research Center, based in Washington, D.C. With this new structure, we are able to gain economies in their administration and increase their impact.
Our interest is and will always be in advancing informed debate among policymakers. We want to bring the facts to bear so we can bridge differences, not emphasize them, and arrive at workable solutions.
Each of us has a great deal of influence in informing the policy debate. It is up to us on behalf of our donors, our partners, and the American public to dream big dreams. Imagine every three- and four-year-old receiving a quality pre-K education. Imagine children moving through the foster care system to find warm, loving homes. Imagine that those trying to game our campaign finance system could not. Imagine our wilderness and oceans being stewarded wisely so that our children and grandchildren will benefit as we have.
Margaret Mead once said, “Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.” That describes the individuals gathered in this room and your collective generosity and capability. With your passion and your power, the future looks promising indeed.
Chester Finn: Let’s come back to the question of failures.
Rimel: We’ve had many. We spent much time and effort in the 1980s trying to inform policy with large-scale demonstration projects, assuming that demonstrating success would guide public policy. We did it in education, health and human services, and other areas. I cannot give you one example where policy was changed as a result. We also invested a fair amount of money in reforming K-12 education around the country, particularly in Philadelphia, our hometown. The money was well stewarded and spent, and no doubt individuals benefited, but I cannot tell you more young people are graduating from public schools and are better prepared for jobs. That’s why we’re dedicating almost all our education funding to pre-K, with success so far in five states and failure in four.
Piereson: We’ve had debacles in non-policy areas, especially in our efforts on the campus. In policy work, we’ve had a failure with term limits, an issue that received much support from our foundation, but which was killed off at the federal level in 1996 by an adverse decision from the Supreme Court.
Finn: Rebecca, you suggested Jim believes everything is ideological, and then you suggested it need not be. Then you gave some examples, such as campaign finance reform, that sound like universal goods but that I believe rapidly turn into ideological fracases. So first, Jim, is everything ideological? And, Rebecca, are you serious that your examples are non-ideological?
Piereson: Naturally, I don’t think everything is ideological. Far from it. I think a lot of things are political, including some of the examples Rebecca mentioned. On the other hand, much of our work has aimed at getting politics out of parts of society where it does not belong—for example, the arts and humanities, and college education. University faculties are far too political and ideological. They shouldn’t be. They should be teaching their subject matter. The same is true of the arts and humanities. During the 1980s and ’90s, the federal arts and humanities endowments were used to promote political agendas. The Olin Foundation didn’t think this was right, and we criticized it. We sought to remove the politics and ideology from these areas.
Campaign finance reform is, I believe, heavily political. I think that President Bush made the biggest mistake of his administration when he signed the Campaign Finance Act and that the U.S. Supreme Court was gravely wrong to uphold it. We saw this legislation unravel in the recent election, as first the Democrats found ways to evade it, and then the Republicans followed suit.
I’m not sure that you can remove politics from some of these issues, and often the effort to remove them to find some “nonpartisan solution” makes things worse. I don’t think everything is political, but much work in public policy is, inevitably, political.
Rimel: I agree. If it’s public policy, it involves politics, because in this country policy is made by the people we elect. But you can’t move public policy forward unless you’re prepared to be bipartisan, because this country has decided that our government will be divided right down the middle from a partisan standpoint. People on both sides of the aisle, Republicans and Democrats, support campaign finance reform, or it would never have passed. People on both sides of the aisle believe every three- and four-year-old in this country should have access to an adequate pre-K education.
Finn: Each of your foundations has gone through a major organizational restructuring. At the Olin Foundation, you are sunsetting yourselves and are close to shutting down. At the Pew Charitable Trusts, you’ve gone from being a private foundation to being a public charity. I’d like to hear more from Jim about the reasoning—especially with respect to public policy, if you can make that link—behind the sunsetting. And, Rebecca, I’d like to hear about the virtues of being a public charity.
Piereson: We’ll close our foundation next year. We’ve allocated or pledged almost all of our money. This was John Olin’s wish, clearly stated when he began the foundation in the mid-1970s. He feared that if his foundation persisted more than a generation beyond his death, it might be captured by people who didn’t share his principles. He also wanted to influence his own time. How does one define one’s own time? Maybe 20 or 30 years beyond one’s death. It’s difficult to look much beyond that. John Olin figured that in our dynamic society, the future would take care of itself, as new foundations, new benefactors, new philanthropists emerge to address new challenges.
Rimel: Our donors took a very different approach. They believed a significant representation of the family should remain on the board, as it does today. The family spends a lot of time thinking about the donors and donor intent and what would Aunt Mabel or J. Howard have done. We’re blessed to have the son of one of the donors, and he has said, “Most of the issues we’re dealing with today didn’t exist when the donors were alive. They gave us good minds, and they expected us to be wise stewards.” And so, as he likes to say, “We should stop looking for ghost support for our positions.”
That said, why did we change our structure? Primarily, we did it because we can operate much more efficiently. For instance, we’re reaching out to donors and offering them our grantmaking expertise. The Lenfest Foundation has come to us, and we’re managing a program for them in oceans research, but under their title and direction. So we’re able to leverage our platform to serve other donors. There are benefits to being a public charity. First of all, you don’t pay excise tax. Secondly, you don’t have a mandatory payout requirement, though we are committed to maintaining the same level of charitable expenditures. Third, you don’t fall under a lot of the regulations for foundations, both on the books and being considered. Adam Meyerson rightly said the political climate for foundations over the next five to ten years is troublesome.
Questioner: Rebecca, I’m surprised you said one advantage of being a public charity is not paying excise taxes. Jim and Olin have supported reducing taxes, but Pew isn’t known for wanting taxes lowered, and many policies you advocate would require greater government spending. Why should Pew not have to pay taxes like the rest of us?
Rimel: It’s odd to me that foundations are taxed and charities aren’t. I don’t think either one should be paying taxes unless those taxes will directly benefit the public and further the mission. It’s unfortunate the sector’s taxes aren’t dedicated to making the sector stronger, encouraging people to give, and policing the sector. You’re right: Some programs we promote, like pre-K education, will cost more money, but the return on that investment by the taxpayer is huge, the data show.
Questioner: I would like to know how you two address funding priorities for K-12 education, especially charter schools and other alternatives to conventional public schools?
Rimel: There’s a lot of passion and good intentions around many movements in K-12, but we think our role should be to bring the facts to bear. So we’re funding research and evaluation on the charter school movement. We’re doing work with the Hudson Institute. We’ve also worked with Columbia University to analyze the choice movement and charter schools. It will be easy to move public policy if we’re able to demonstrate that kids in charter schools learn more, persist longer in their education, and end up living more productive lives.
The facts are already fairly compelling for the return on investment with pre-K education. Our decision to promote universal access to pre-K, rather than just focusing on the disadvantaged, was strategic and political. If you can make a policy an interest of the middle class, the voting public, your chances of having that policy implemented are much greater.
Piereson: Again, we’ve actively promoted school choice and charter schools, primarily in inner-cities where the greatest failures and challenges are. We see these as very productive avenues of reform. We’ve funded evaluation through Paul Peterson’s center at Harvard, which has shown that these programs work well in teaching children. Unfortunately these reforms are being blocked by political forces.
Questioner: First, a comment: You don’t have to be a Pew or Olin to engage public policy; plenty of nonprofits would welcome $5,000 or $10,000. We can all get involved. Second, Rebecca, regarding universal education for three- to four-year-olds, it sounds like you’re creating another government entitlement and calling it “quality education.” Pew was active in K-12 education and then withdrew because you found so many failures. Why do you believe that making this new commitment on behalf of all us taxpayers will work well for the children who need it most?
Rimel: I completely agree a quality pre-K education isn’t enough. A child who then goes into a dysfunctional K-12 system will have the earlier benefit dissipate by about fifth grade or even before. But we know that preschool education gives kids a huge jump-start—all kids, rich kids, middle-class kids, and poor kids.
Questioner: Rebecca, we agree on many points, such as educating all our children. Now, are you willing to tell your allies when you think they’re wrong? For example, will you write a letter to the New York Times saying the Times and the teachers’ unions should be ashamed for not giving charter schools a fair chance?
Rimel: I’m careful to use my platform only to speak on the issues where we have taken a position and not to disparage others. With respect to the teachers’ unions, this is something on which the school reform groups we supported broke their pick. Our grantees tried to work collaboratively with the teachers’ union in Philadelphia, our home town, to move along union leadership. To let them be, shall we say, more thoughtful, more open to experimentation, less hostile. We failed locally, and we failed in some of our national work. I do believe that frustrating our children’s ability to learn as much as they can is a national sin. So I agree with you. [applause]
Questioner: Rebecca, were you surprised by the role of so-called “527” groups in this election?
Rimel: Yes, you had to be stunned by the 527 loophole that was found in the campaign finance bill. We were extraordinarily disappointed that the Federal Election Commission didn’t act on that but deferred it until after the election. The 527 groups flew totally in the face of the legislation that had been passed and upheld in the courts. Some of the groups we fund are moving to try to correct the problem, and I’m hopeful that will happen.
Finn: My first law of money: You can’t stop people from spending their own money on whatever they want to spend it, at least not in a free society. Government hasn’t found a way to stop that, whether people are educating their kids or contributing to the candidate of their choice.
Rimel: Well, I want to be clear that our intent is not to stop the flow of money. That would be ridiculous and foolhardy, and I have a very pragmatic board. But the public has the right to know where the money is coming from, where it’s going, and how it’s being spent; so we need disclosure and transparency.
Questioner: Jim, you said the heyday for foundations’ ability to affect public policy is past and implied there are structural reasons behind this. Would you elaborate? Rebecca, since you don’t agree, please comment on the degree to which you think foundations can affect public policy and why.
Piereson: I was referring to the 1960s “Great Society” period, when foundations had much influence because they were thought to be above the fray. It’s hard to imagine a President appointing a cabinet member from a major foundation today, because foundations are seen as too much in the fray.
Rebecca is absolutely right: You need bipartisan support to pass anything significant, unless you have the White House and a great majority in Congress. Many major laws in the 1960s were somewhat bipartisan, but many big steps also occurred in 1965, after LBJ won his ’64 landslide and also had about two-thirds of Congress. In the last generation advocacy groups have stalemated politics and created webs of interest groups on both sides, which make it very difficult for the political process to move. And foundations have played a large role in creating them.
Rimel: I agree, not surprisingly, that there are many challenges, but the time has never been riper. What this country is desperately looking for are thought leaders and positions based on fact rather than perception. I believe policymakers trying to act in the public interest will look to those types of sources, and that’s the work our grantees and partners are engaged in. So I think the time has never been more ripe.
