April 04, 2016

The Value of Foundations That Operate Forever

To the Editor:

In their Chronicle of Philanthropy op-ed ("Now or Forever: Rethinking Foundation Life Spans," March 30) Ray D. Madoff and Rob Reich call for an intellectual debate about the value of perpetual charitable endowments. They suggest that spending all our philanthropic assets now "might actually succeed in warding off ... existential threats," that is, ward off "climate change, bioterrorism, and nuclear warfare." 

Why, they ask rhetorically, "warehouse philanthropic assets for a long-term future that might not exist?" Spend today, for tomorrow we surely die.

Let’s root this conversation in the realities of local places, local data, and local human stories. John Stuart Mill may have said in 1833 that "there is no fact in history which posterity will find it more difficult to understand than the idea of perpetuity," but so what?

Let’s get real.

Ms. Madoff and Mr. Reich ask a series of questions, including:

  • Whether current law has drawn the right distinctions between private foundations, donor-advised funds, and university endowments.
  • What arguments do we use to justify perpetuity, now and historically.
  • When did perpetuity become the "default" position of wealthy donors? 

I’m not sure that it has, given Ms. Madoff and Mr. Reich’s evidence that Atlantic Philanthropies, the Bechtel, and Gates Foundations, and Good Ventures have announced plans to spend down.

For me, their fundamental question — should charitable dollars "be deployed more quickly" — cannot be divorced from its companion: "What might the consequences be for the nonprofit and for citizens around the world if more foundations decided to spend their assets over a set period?" 

Let me answer, not from what theoretically might be in the best interest of nonprofits and "citizens around the world" but from the practical experience I’ve earned leading the Jessie Ball DuPont Fund, a mid-sized private foundation designed to give in perpetuity and focus on the long-term vitality of the communities in which our founder lived.

Would Port St. Joe and Jacksonville, Fla., be better off today had Mrs. duPont spent all her philanthropic dollars in her lifetime or chosen to sunset the fund over 40 years, rather than create a perpetual grant-making entity upon her death in 1970?

Mrs. duPont gifted her entire estate — $40 million — to establish the Jessie Ball duPont Religious, Charitable and Educational Fund. She received no tax benefit because she was dead. Nor did she leave her riches to her descendants. Since 1976, the fund’s trustees have granted $375 million — an amount nine times the amount Mrs. duPont bequeathed — to small colleges, large universities, churches and dioceses, libraries, museums, symphonies, hospitals, youth organizations, historic-preservation societies, the local community foundation, United Way, and even a city government. These are the kind of organizations that nurture healthy communities.

Our current endowment value is $267 million. We give away $40 million every three to four years. Not once, but repeatedly.

What would be different if the fund had spent three-quarters of its assets by 2000? In places like Port St. Joe, Fla., a town of 3,500 black and white souls whose unemployment rate reached 25 percent upon the close of the local paper mill in 1998, or Jacksonville, Fla., a city of 700,000 whose government is so cash-strapped we border on bankruptcy? No one can say for sure.

But I can tell you the investments the fund would not have made.

In Port St. Joe, we would not have funded residents’ rent, utility, and medical assistance. We would not have helped a church-based group rehabilitate 450 homes owned by retired and aging seniors living in poverty. We would not be supporting after-school and summer jobs programs for teens or a preschool reading program for children ages 2 to 5.

In Jacksonville, we would not be investing in communitywide efforts to move folks out of poverty through our local LISC chapter, which has brought $66 million to the restoration of poor neighborhoods. We would not have invested in the United Way’s extraordinarily successful Earned Income Tax Campaign. We would not have invested in Family Foundations’ 1,000 in 1,000 effort, a broad coalition of local organizations — the community college, community foundation, United Way, an early learning coalition, LISC, family foundations, the housing authority, and others — dedicated to moving 1,000 families out of poverty. 

Would other folks support these efforts at the level the fund has? Would these places be better off had Mrs. duPont never created the fund? Neither I nor Ms. Madoff and Mr. Reich can say.

That said, I applaud those foundations that have decided to spend themselves out of existence. Good for them. I also applaud those who choose to be a permanent giving instrument, compounding their giving over time. I know from colleagues administering perpetual giving in communities all across the country that our story is not unique. I invite my colleagues to reflect on what they think would be different for the communities they support if they had spent down.

What the good professors wish to know may not be knowable. What will be the consequences for people and places if we spend most of our philanthropic capital over the next two generations? 

Sherry Magill


Jessie Ball duPont Fund

Jacksonville, Fla.

Ms. Magill is also chair of the board of directors at the Council on Foundations.