Rick Cohen’s Predictions for 2013

This week we welcome back Rick Cohen, national correspondent for Nonprofit Quarterly.

Yogi Berra’s insight that “the future ain’t what it used to be” goes double for 2013 as the nation peers over the edge of the fiscal cliff. As this is being written, negotiations between President Obama and Speaker Boehner imploded, primarily because the Speaker couldn’t corral his recalcitrant Tea Party wing. Be assured that no matter what happens, the nation will hit future cliffs, with reverberations that will roil society—and consequently philanthropy. Assuming more cliffs are ahead, foundations have much to anticipate in 2013 and beyond. Here are ten guesses as to what 2013 portends for foundations.

Fracturing of the charitable coalition: Despite occasional voices suggesting that President Obama’s proposed 28 percent deductibility cap for charitable and other itemized deductions was a decent idea, most charities have organized every year to defeat the President’s proposal either that the cap was devastating in and of itself or that it might lead to efforts to eliminate the century-old charitable deduction altogether. Leading into the fiscal cliff debate, the solid wall of charitable defenders has begun to fracture, not because of a belief in the deduction. Partly, it is because of the tension of being seen as going to the mat to save wealthy donors three or seven cents of tax savings on the dollar as though the wealthy somehow can’t absorb that. And partly, the fracturing is happening due to the increasingly vocal message of some charitable deduction defenders that it’s much better for nonprofits and society to save a dollar of charitable deductions than a dollar of government programs, a message promoted by some religious charities, even promoting the notion that a dollar of charitable giving to religious groups was more valuable somehow than a dollar of charitable giving to secular nonprofits. National trade associations that have broadened their message on the deduction to include even tepid support for higher tax rates for the wealthy have been sharply criticized for their apostasy. That fissure will increase rather than decrease in 2013. Foundations are going to be called to account, not just on the deduction itself, but on where they stand regarding America’s still increasing concentration of wealth.

Make or break federal commitments: The mini-solution to the fiscal cliff is hardly going to protect federal programs from cascading cuts. The concern here is about discretionary domestic spending in areas such as housing, child care, mental health, and virtually every other safety net function addressed by the federal government outside of entitlement programs such as Social Security and Medicare. Four years ago, foundations found President Obama’s new initiatives in social entrepreneurship such as the Promise Neighborhoods program and the Social Innovation Fund exceptionally alluring. Plenty of foundations made big and small commitments to these and other new signature programs of the incoming administration. If this were a normal second term for the administration, this would be a make or break time for these programs, as John C. Ronquillo of DePaul University suggested to us, but these aren’t normal times. The pending sequestration cuts are really cuts upon cuts of domestic programs, unable to keep up with the increasing service demands faced by nonprofits and communities. Foundations will probably continue to hear the siren song of making once new programs work and at the same time face pressures to deal with a safety net that is falling apart. It seems difficult to imagine that foundations can continue to emphasize their investments in President Obama’s four-year old, relatively underfunded social enterprise initiatives when the nation’s historic commitment to the poor are at risk.

Minimal oversight from the IRS: When we asked various smart friends of Nonprofit Quarterly for their predictions for 2013, Char Mollison, a former senior official at the Council on Foundations and Independent Sector, tersely responded, “The IRS will not investigate the political activities of churches.” Our feeling is that the IRS won’t be investigating much of anything in 2013. The Exempt Organizations unit’s staffing is down, while they’ve inherited the huge challenge of monitoring the compliance of nonprofit hospitals with the community hospital benefit requirements of the Affordable Care Act. With the fiscal cliff and continuing budget cuts, it’s unlikely that the IRS will see a Congressional campaign for fully capitalizing the historically undercapitalized EO unit. Perhaps foundations are breathing a sigh of relief, but it’s ill-taken. A strong EO unit undertaking more intensive investigations is to the benefit of the nonprofit and philanthropic sectors.  If foundations are truly committed to accountability, they should be speaking out for strengthening the entity charged with providing philanthropic oversight.

Payout pressures again: With foundation endowments having recovered much of their losses from the depths of the Great Recession, there will be pressure on foundation payouts, but from an odd direction. There seems to be a movement building for establishing a minimum mandatory payout rate on donor advised funds, even though at least for the DAFs managed by community foundations and by the big financial firms, average payouts are double or triple the payouts of foundations. Those average payouts may camouflage some individual DAFs that spend next to nothing, but overall, the DAFs get the money out onto the nonprofit street. As the pressures mount on the DAF managers, presumably targeting the big players such as Fidelity and Schwab, they will smartly respond with statistics that show very high payouts and very low administrative overhead. Congress will likely have little appetite for legislating payouts in 2013, but the DAF focus will end up putting private foundations on the defensive to explain why five percent payouts make sense, not just in individual foundation terms when increasingly foundations have living donors, but in philanthropic sector terms, in which new capital flowing into philanthropy more than makes up for any potential declines due to foundations spending above five percent.

More Detroits: Detroit may be the epicenter of municipal fiscal disasters, but there are a number of cities that have declared bankruptcy and others that are all but bankrupt. For many nonprofit watchers, the focus has been on municipal governments attempting to exact payments in lieu of taxes out of nonprofit property owners, generally the larger endowed “eds and meds”, but another dynamic of desperately troubled cities directly involves foundations. In Detroit, as municipal government has withered, handing off municipal functions to be managed by non-local nonprofit agencies, foundations have stepped to the fore individually and as multi-foundation collaboratives to take on functions beyond the capacity of Detroit’s failing governmental apparatus. Particularly notable efforts have addressed job creation, entrepreneurship, public education, and neighborhood land use planning.  It hasn’t been without controversy as the participating foundations have faced the duality of being both wanted and at times resented by municipal officials and community-based nonprofits fearing a loss of power and influence over major decisions. Despite the complaints, Detroit has been the beneficiary of extra millions of grant dollars and foundation technical expertise. Although only a couple of metropolitan areas can boast of a collection like Kresge, Skillman, and Kellogg, it is hard to imagine that other cities won’t try to replicate the model to tap their most proximate institutional foundations for more than typical generosity.

There’s no question that any of these predictions could be undone by the turn of events when President Obama and Speaker Boehner finally go face-to-face and trade proposals to solve or at least buy some time to avoid the fiscal cliff. Half of the predictions are mixes of predictions and hope, the latter based on a faith that whatever their flaws and weaknesses, foundations as a sector will find their way toward doing the right thing in 2013.

What book will you read Thursday?

Mario Morino

This Thursday is Read a Book Day in the U.S., what will you be reading? I’d like to suggest that you pick up a book I’m reading, Leap of Reason, Managing to Outcomes in an Era of Scarcity, written by Mario Morino; it also includes a compendium of essays by others on the topic of mission effectiveness. Mario is the chairman of Venture Philanthropy Partners and the Morino Institute and  he also has deep ties to Cleveland: he serves on the board of directors of The Cleveland Clinic Foundation and is an Emeritus Trustee of Case Western Reserve University.

Mario will speak at our annual conference on Thursday morning, November 15, then follow up with a session with a smaller group of philanthropy leaders. He published Leap of Reason last year and distributed it widely; you can download a free copy in digital or PDF here.

I polled a few OGF members to see what they’ll be reading this week and I think you’ll agree it’s an interesting assortment of titles.

• Marcia Egbert, The George Gund Foundation: Alice Schroeder’s bio of Warren Buffett, The Snowball.
• Kathy Merchant, Greater Cincinnati Foundation, says “A group of us in Cincinnati are going to read Family Wealth: Keeping it in the Family. The author is James E. Hughes, Jr.”
• Bob Jacquay, The George Gund Foundation, says “Given the season, I’m actually paging through a few old chestnuts, LOUD & Clear in an Election Year: Amplifying the Voices of Community Advocates (2004).”
• Susan Urano, The Athens Foundation: Walk Out/Walk On by Margaret Wheatley and Debra Freize.
• Kim St. John-Stevenson, Saint Luke’s Foundation: Switch by Chip and Dan Heath, Leap of Reason and If It Takes a Village, Build One by Malaak Compton-Rock.
• Doug Kridler, The Columbus Foundation: The Wandering Falcon by Jamil Ahmad.
• John Mullaney, The Nord Family Foundation says “The Righteous Mind, Why Good People are Divided by Politics and Religion. In my opinion it provides valuable insight into many issues we face in philanthropy.”

Use the comment box to let us know what you’re reading!

Will your company win?

The U.S. Chamber of Commerce is accepting nominations for its 2012 Corporate Citizenship Awards, with a submission deadline of May 31.  The Chamber gives awards in 4 categories:

• Best Business Neighbor: U.S.-focused social, community and/or environmental initiatives;
• Best International Ambassador: social, community, and/or environmental initiative that takes place within one or more developing nations;
• Best Partnership: a business-nonprofit collaboration whose goal is to achieve high impact and sustainable results on a single social, community, or environmental issue; and
• Best Corporate Steward: responsive and responsible members of society, whose overall values, operational practices, and stakeholder strategies exemplify shared value.

The Chamber described the award program in a recent Huffington Post blog, A Movement to Reward Social Problem Solvers.  The Business Civic Leadership Center – the Chamber’s resource and voice for businesses’ social and philanthropic interests – will announce the winners in December. I wonder if any OGF members will be among the finalists and winners?

Special Thanks to 2010 OGF Volunteers

OGF greatly appreciates the many ways that individuals gave of their time and expertise as volunteers during the past year. Whether serving on a committee, guiding OGF’s public policy, speaking at programs or writing for the newsletter, we thank more than 200 people who volunteered with such dedication in 2010. If, despite our best efforts, we have missed someone, please accept our apologies and thanks.

• David T. Abbott • Ron Amstutz • Joy L. Anderson • Eric P. Avner • Bonnie Baker • Marvelous Baker • Ann Barnum • Dave Beckwith • Lori Beiler • Andrew Benson • Steve Bentley • Raymond J. Biddiscombe • Terry D. Bishop • Todd Book • Terrence Blair • Terry Boose • Elizabeth Bower Reiter • Caprice H. Bragg • Robert Briggs • Jerome R. Brockway • Vikki Broer • Julie Brown • Kelly Budros • Steven Buehrer • Alison Burner • Keith Burwell • Peg Butler • Peggy Calestro • Carrie Carpenter • Mary Beth Carroll • Marlene A. Casini • Kathleen Cerveny • Kathleen Chandler • Richard Clark • Angela Clements • Bill Coley • Karen Cook • Margot James Copeland • Stuart Cordell • Lisa Schweitzer Courtice, Ph.D. • Thom Craig • Kimberly E. Cutlip • John Dedrick • Toni Dengel • Dan Dodd • Barry Doggett • Terri Donlin Huesman • Cynthia Drennan • Sally Duffy • Leslie Dunford • Nichole E. Dunn • Stephen Dyer • Gregory Edwards • Joan Elder • Marianne Eppig • Ruth Swetland Eppig • Deena M. Epstein • Patricia Eshman • Amy Eyman • Keith Faber • Nancy Fisher • Mike Foley • Lucille G. Ford • Brian R. Frederick • Leah S. Gary • Kay Geiger • Karen Gillmor • Maribeth A. Graham • Denise Griggs • Kathy Hallissey • Carol Harmon • Sarah Harrison • Jeneen Hartley Sago • Sandra Harwood • Adriennie Hatten • Simone Hayes • Diane Higginbotham • William Hiller • Donald E. Hoffman • Karen Hooser • Deborah D. Hoover • Pam Howell-Beach • Matt Huffman • Jim Hughes • Margot James Copeland • Robert Jacquay • Heidi B. Jark • Chad A. Jester • Shannon Jones • Amy Kaplan • Kurt Karakul • Eric Kearney • Rick Kellar • Kippy King • Troy Kirkpatrick • Katherine T. Kreuchauf • Melissa A. Kleptz • Joe Koziura • Susanna H. Krey • Douglas F. Kridler • Lori Kuhn • Kathy Ladiner • Jeffrey R. Lyttle • Ron Maag • Leslie Maloney • Timothy J. Maloney • Ed Marrinan • Molly Martin • Helen Mattheis • Maureen Maxfield • Christine A. Mayer • Chad McCarter • Jeff McClain • Ann L. McCracken • Cheryl McKenna • Robert Mecklenborg • William L. McNeese • J. Scott McReynolds • Randell McShepard • Kathryn E. Merchant • Hedy P. Milgrom • Dale Miller • David P. Mitzel • Phyllis Moody • LaToya Moore • Seth Morgan • Sarah Morton • John J. Mullaney • Ann K. Mullin • Christine Mulvin • Dennis Murray • Patricia O’Brien • Brittany O’Connor • Patricia O’Connor • W. Scott Oelslager • Mark Okey • Joanne Olnhausen • Adrienne O’Neill • Summer Paris • Matt Patten • Anna Patton • Thomas Patton • Michael M. Parks • Jill Paulsen • Cinnamon Pelly • John T. Petures, Jr. • Richard W. Pogue • Cathy Ponitz • John Prather • Janet P. Pry • Paul Putman • Dianne Radigan • Caroline Ramsey • Joel Ratner • Cecilia Render • Nancy Reymann • Ronn Richard • Joseph A. Rochford • Jenni Roer • Veronica Runcis • Terry Ryan • Heather Sands • Tim Schaffer • Joe Schiavoni • Peter Schindler • Mark Schneider • Dean Schooler • Kirk Schuring • Bill Seitz • Dan A. Sharpe • Stephanie Shaw • Michael Shinn • Cristin Slesh • Stephen Slesnick • Janelle Simmons • Michael Skindell • LaTida Smith • Marian Spicer • Linda Springer • Mary Sobecki • Kim St. John-Stevenson • Peter Stautberg • Ginny Strausburg • Gerald Stebelton • Shelly Stolarczyk-George • Barbra Stonerock • Fred Strahorn • Pam Straker • Leslie Strnisha • Marie Swaisgood • Judith M. Thompson • Diane K. Timmons • Nina Turner • Susan Urano • Ted Vander Roest • Deborah Vesy • Ray Watson • Gordon B. Wean • Janet R. Weisberg • Chris Widener • Helen Williams • Roland Winburn • Mary Witten Wiseman • Megan Wolfer • Francie Wolgin • Denise San Antonio Zeman

Prizes in Philanthropy Grow in Popularity

Prizes in philanthropy seem to be quite in vogue these days, gauging from a recent Chronicle of Philanthropy article as well as other media coverage and announcements. The awards range from modest cash awards of $5,000 up to the granddaddy of them all, the X Prize Foundation’s $10 and $20 million awards.  Some awards seek to spur innovation while others award accomplishment; some go to individuals, some to organizations; some are judged by experts while others depend on popular votes.

A few examples of perhaps less-known foundation prizes include:

• Lodestar Foundation’s $250,000 Collaboration Prize
• Broad $2 million Prize for Urban Education
• Knight’s News Challenge
• Hitachi Foundation’s $50,000 Yoshiyama Young Entrepreneurs Program
• JPMorgan Chase’s Community Giving Contest
• Dominion East Ohio’s Community Impact Awards

Last year, a report by McKinsey & Company, And the winner is, also focused on the potential of cash awards to catalyze breakthrough solutions to social problems. It suggested that “Leading philanthropists should consider how they can best use prizes as part of their philanthropic portfolio, and should accept the challenge of finding innovative ways to harness the potential of this powerful instrument.” McKinsey’s research counted large prizes (which they defined as $100,000 or more) that totaled $375 million last year.

Does your foundation currently award a prize or is it considering doing so? If so, we’d like to hear about it. And, while OGF’s prize, the Ohio Philanthropy Award, doesn’t include a cash award, each year’s recipient does receive a very nice art glass sculpture suitable for your office bookshelf. Nominees for the award must be:

• an individual or a group of individuals involved with organized philanthropy in Ohio; or
• a grantmaking organization (foundation, corporate contributions program or other grantmaking organization) or a group of grantmaking organizations in Ohio.

Nominations are due July 16; more info is online for OGF members.

Let’s talk,
Claudia Herrold
vice president, communications & public policy

Welcome, Philanthropy Colleagues

Welcome to Let’s Talk Philanthropy, the blog of Ohio Grantmakers Forum. OGF staff and members will use the blog to discuss philanthropy issues and practices, particularly those pertaining to Ohio’s grantmakers.

We want to hear from you! So, comment away as items are posted. And, if you would like to submit a post – maybe it’s something from your site or something written just for OGF’s blog – contact Claudia Herrold. If you have comments you want to share offline, questions, topics for future posts or ideas about how to improve the blog, Claudia is ready to listen.

We’re excited to get started and hope you will be, too, so let us hear from you here and on Facebook. Thanks for stopping by and we hope you’ll return often.

Claudia Y.W. Herrold
Vice president, Ohio Grantmakers Forum