NY Times Article By STEPHANIE STROM
FOR 11 nights last month, several dozen homeless people slept on plastic sheeting and soiled blankets outside the gleaming new $500 million headquarters of the Bill & Melinda Gates Foundation in Seattle. Their objective was a $30,000 grant to help reopen shelters that had been closed by cuts in government funds.
The demonstration outside the foundation, the wealthiest in the world with $37 billion under its control, illustrated the gap between those who say charitable giving should be directed at individuals in need — a street-level approach, sometimes disdainfully called checkbook philanthropy — and those whose generosity runs toward big-ticket items like experimental programs, cutting-edge university science labs or what Doris Buffett, Warren E. Buffett’s older sister, calls “S.O.B. gifts” — donations that support symphonies, opera and ballet.
As America’s needs grow, philanthropy and how it is carried out are being questioned more closely.
Eventually, the government relented and reversed the cuts in Seattle, and the protest ended. Meanwhile, the Gates Foundation noted that it had spent $47 million on transitional housing and homeless families in the Pacific Northwest and had committed $67 million more to the issue.
“We’re trying to move upstream to a systems level to either prevent family homelessness before it happens or to end it as soon as possible after it happens,” said Melissa Milburn, a spokeswoman for the foundation. As the ranks of the needy grow, so does the need for charities that put food on a poor family’s table, a roof over a homeless man’s head or a coat on the back of a child whose mother is in prison, or for the charities that provide dental work for a woman without health insurance.
The number of Americans living below the poverty line — 46.2 million — is the highest it has been since the Census Bureau began collecting such data. Median incomes are declining, and college graduates can’t find jobs. The gap between the haves and have-nots has widened sharply.
Yet for the last three years, state and local governments have slashed budgets that address homelessness, school nutrition, substance abuse and a range of other social services. In some cases, money is cut outright; in others, governments defer payments for months. Still others have been asking pointed questions about what their residents receive in return for the exemptions from property and sales taxes granted to nonprofits.
While many Americans have always given generously to help people, many others — including individuals with the deepest pockets and foundations with billions in assets — make donations of a different sort: building museums to house their art collections; underwriting new wings in hospitals or halls named for them at their alma maters; using their money and influence to sway public policy and influence political campaigns; or seeking to solve problems in distant lands rather than in their own backyards.
While charitable giving rose slightly over all in 2010, gifts to organizations that address basic human needs fell 6.6 percent, according to Giving USA. And the middle class, which has traditionally given more to address those needs, is feeling the bite of the economic malaise.
“At a time when America is having a debate about the social contract, philanthropy is silent,” said Emmett D. Carson, chief executive of the Silicon Valley Community Foundation, which has assets of $2 billion. “We are silent about the depths of the problems of homelessness, joblessness, foreclosure, hunger, and people are starting to believe that philanthropy is irrelevant to the core needs of their communities.”
As an example, he cites various proposals by the Obama administration to reduce the tax deductions for charitable giving — like reducing that benefit for the wealthy. “Because of our silence, we now have a president, a former community organizer, who does not value the charitable deduction,” Mr. Carson said. “What he’s saying is that, left to its own devices, government can spend those dollars better than philanthropists.”
Mr. Carson, one of the most prominent African-Americans in institutional philanthropy, has long been known as a sort of Diogenes, unafraid to debunk the mythology that cloaks philanthropic institutions. “As an industry, we prefer to be bystanders,” he said of institutional philanthropists. “We are afraid of controversy, and we don’t like to explain why we make the choices we make as grant makers.”
An alumnus of the Ford Foundation, Mr. Carson came to Silicon Valley to oversee the merger of two community foundations in Santa Clara and San Mateo Counties, home to some of the world’s wealthiest people, and he subsequently ruffled more than a few feathers there. The merged Silicon Valley Community Foundation’s first project took aim at foreclosure. “I got asked at least a million times, why are you working on foreclosure, what does that have to do with these counties?” Mr. Carson said.
His staff had been conducting public meetings, he said, where they heard over and over that people were struggling with mortgage payments. “It was the tale of two valleys,” he said. “One is very well known, filled with high-tech and social media moguls that can find enough people with the talent and skills their companies need. And then there’s the other Silicon Valley, the one that has some of the highest unemployment rates, the highest foreclosure rates, the highest dropout rates — and the highest cost of living.”
In addition to foreclosure, the foundation took on payday lending and financial literacy and set up a “community opportunity fund” that pays for food for the hungry and shelter for those losing their homes. As a result, more than $6 million has been distributed to food pantries and shelters since 2008.
“We can’t expect philanthropy to fill in all the gaps,” Mr. Carson said. “But we can’t be ostriches, either.”
But not all philanthropists want to work on this level, and many of the generous have their own specific crusades. On the same day the Census Bureau announced its poverty statistics, the Found Animals Foundation, which works to help stray and abandoned animals, announced it would award a $25 million prize to any scientist who finds a nonsurgical method for spaying and neutering animals.
Dr. Gary Michelson, the billionaire orthopedic surgeon behind the foundation and the prize, also put up an additional $50 million to support the research needed to reach that goal — and said he would provide more, if needed. “If the first 50 goes, I’ll put in another 50,” he said. “I intend to finish this.”
Echoing many big donors, Dr. Michelson said that donating to food banks and homeless shelters was not fulfilling. “Early on what I learned was that, yes, you can write checks and mail them off — just don’t expect a lot for that,” Dr. Michelson said.
A few years ago, for example, he read about a group of professors from a community college who put up $500 in an effort to keep students from dropping out because they couldn’t afford textbooks. Horrified, he contributed $50,000.
“That was the right thing to do, but all I did was the equivalent of giving a hungry person a fish,” Dr. Michelson said. “What I needed to do was come up with a more permanent solution.”
So he is starting a nonprofit that hopes to digitize textbooks and put them online for students to download at little or no cost. “Of course, this is something the government should do, but my saying it won’t help move the government to do it,” he said.
Similarly, William E. Conway Jr., the billionaire co-founder of the Carlyle Group, recently told The Washington Post that he was dissatisfied with giving tens of millions of dollars to nonprofits that provide food, shelter and health care to the needy. “So much of what I do now is stopgap,” he told The Post. “Somebody’s hungry, we give money to the food bank. It would be far better if we had a more permanent solution.”
Mr. Conway, who declined to speak to The New York Times, told The Post that he hoped to use his philanthropy to create jobs and other more “enduring” things. Mr. Buffett pledged the bulk of his fortune to the Gates Foundation but insists that his sister Doris is the “real philanthropist” in the family. Ms. Buffett presides over the Sunshine Lady Foundation, which does nothing but help people in need.
“Who am I to dispute what Warren says?” she said.
She recently visited a maximum-security prison where 11 inmates were getting degrees from accredited colleges, including Cornell and Mercy College, through her philanthropy. “The general recidivism rate is about 63 percent coast to coast,” Ms. Buffett said. “In our program, it’s zero.”
A similar program she started works to provide education to victims of domestic violence. More than 1,600 women have graduated under it, and “one went on to the Wharton School,” she said.
Ms. Buffett had long been giving away money when her brother made his pledge to the Gates Foundation. So when he began getting letters from people asking for his help, he put them in a box and sent them to her, along with $10 million.
“I rounded up a bunch of ladies, and we started reading letters,” she said. “Some of them were nutty, but most of them were from people who were genuinely desperate and just needed a little help.”
They asked for money to put tires on their cars so they could get to work, for new glasses, for hearing aids, for custody payments and myriad other things. “We checked out their stories,” Ms. Buffett said. “We never enable anyone, we empower them.”
One woman, for instance, had crippling arthritis, and her husband wasn’t working. Ms. Buffett agreed to help out — only if the husband found a job. “I said, ‘You send me a Xerox of his paycheck, and we’ll match it until Christmas,’ ” Ms. Buffett recalled. “The first week, I think he got something like $75 for raking leaves or yard work, but by the second or third week, he was employed by one of those big national hardware chains. We got that fellow up out of his Barcalounger — we empowered him.”
During more than a decade of philanthropy, Ms. Buffett has paid for tires, roofs, wheelchairs and refrigerators — “It doesn’t have to be the swankiest one,” she said — and covered legal bills for custody fights and electric bills to ensure heat. Money for dental work is a common request, and on occasion she has paid for trips to the Mayo Clinic “so they can get a proper diagnosis and some help.”
“I do consider these as investments rather than giveaways, and I’m looking for a good return on them,” she said. “The best return is when lives change for the better in some way, that’s the commanding thought behind all I do.”
Her program to educate prisoners is an example of what many in the nonprofit world call “impact investing,” a catchall phrase to describe unconventional ways of getting money into nonprofit coffers and reducing the reliance on philanthropy.
In Britain, for example, Her Majesty’s Prison Peterborough has long had high rates of recidivism. A new nonprofit group, Social Finance, raised money to address that problem in part through the sale of $8 million worth of “bonds” to foundations and wealthy individuals.
If Social Finance succeeds in reducing recidivism by 7.5 percent or more, the British government will not only repay the “investors” but give them a return on investment. The Rockefeller Foundation is one of the investors, and it is working to replicate the British experiment in the United States.
Antony Bugg-Levine, the newly appointed head of the Nonprofit Finance Fund and a former Rockefeller Foundation managing director who oversaw that “investment,” said the experiment could be the harbinger of a new way of deploying philanthropic dollars to address basic needs, pointing to the growing number of foundations and family offices that use grant money to support nonprofits through low-interest loans and bridge financing.
Still other foundations and family offices are experimenting with what is known as mission-related investments, using endowment assets to invest in mainstream companies whose business or business practices in some way produce benefits for society.
Companies, too, are finding ways to reorganize their operations so that they generate social benefits in addition to profits. The Wal-Mart Stores foundation, for instance, recently pledged to spend $100 million over the next five years to support the development of businesses owned by women and buy some $20 billion in merchandise from such enterprises.
“These are much larger pools of money that have traditionally been invested solely to achieve a financial return,” said Mr. Bugg-Levine, co-author of “Impact Investing: Transforming How We Make Money While Making a Difference.”
“If just a fraction of those assets gets invested in this way,” he said, “it can make a significant difference.”
Yet some Wal-Mart employees and others have asked why Wal-Mart did not use that money to support its employees’ health care needs.
David Tovar, a company spokesman, said that Wal-Mart gave away more than $300 million in 2009 and that it addressed at least one basic need with its program to provide fresh foods from its groceries to food banks.
“Linking charitable giving and employee benefits is an apple-to-orange comparison,” Mr. Tovar said. “We spend several billion dollars each year providing comprehensive benefits to more than one million associates and their families.”