The Perfect Storm
Some of the losses that soup kitchens, homeless shelters and job training centers are experiencing may soon be offset as money from the stimulus bill trickles down from Washington to agencies that contract with state and local government, says Lester Salamon, director of the Center for Civil Society Studies at Johns Hopkins University. But the relief won't spread to everyone: cultural institutions such as museums and orchestras rely mainly on charitable donations and the sale of tickets and subscriptions. Many are canceling exhibits and shows. The situation is similarly dire for advocacy organizations that don't take government money and are now competing for a limited--in some cases, nonexistent--pool of funds. A few months ago, Madeline deLone, director of the Innocence Project, which has pioneered the use of DNA technology to overturn wrongful convictions, was sitting in a meeting when her communications director burst through the door. It was mid-December, and the details of Bernard Madoff's spectacular $50 billion Ponzi scheme were just coming to light. On the phone was a reporter who wanted the Innocence Project's reaction to the revelation that among Madoff's victims was the JEHT Foundation, a leading funder of criminal justice reform. The news was a surprise to deLone, who rushed to her computer, clicked on an e-mail that had landed in her in-box that morning and learned that nearly half the Innocence Project's foundation support--12 percent of its overall budget--was gone. With it went the possibility that some prisoners serving time for crimes they did not commit would ever get the chance to prove it. "What we do is DNA testing, and many states don't have evidence-retention statutes," says deLone, "so the longer it takes for us to get to cases, the less likely the evidence will be there. Clearly, there will be cases where the biological evidence we could have tested will be destroyed between today and the time we can get to the case."
Elisa Massimino, executive director of Human Rights First, learned about the collapse of JEHT a few days after receiving a multiyear, $2.4 million grant from the foundation. "It was an earthquake," she tells me. Days later came the equally jolting news that the Picower Foundation, with an endowment of $1 billion, was also shutting down, likewise courtesy of Madoff. It had just pledged $250,000 to Human Rights First to fund a program for indigent refugees seeking asylum. "We're not disappearing, but we've got to find a way to do more with less," says Massimino. "Every organization I've talked to is going through this."
Thanks to the transformation of the political landscape, the work of many liberal advocacy groups has lately become easier. As the ACLU's Romero puts it, "Ashcroft never met with me; [Attorney General Michael] Mukasey never met with me." Now, he says, "the lines are hugely open...it's night and day." On the other hand, to the extent that their voices are muted because of a lack of resources, advocates of progressive change risk missing an opportunity that might not come around again. This is the concern of Gara LaMarche, head of The Atlantic Philanthropies, one of the largest, most socially progressive foundations in the country. LaMarche cites healthcare as an example. "If healthcare reform is going to pass, it will probably be this year," he says. "Healthcare is not something you can say, 'OK, it's a bad year; we'll put it off until 2010 or 2011'--it's now or never." On this and a host of other issues, the early months of the Obama administration are likely to be critical, which is why, despite losses suffered by his foundation's endowment, LaMarche plans to increase giving in the short term and to lend support to advocacy organizations reeling from the collapse of other foundations. As part of this effort, The Atlantic Philanthropies and the Open Society Institute agreed in December to match donations made by members of MoveOn.org to four groups--Human Rights Watch, the Center for Constitutional Rights, the Brennan Center for Justice and the Advancement Project--that had lost money through investment funds Madoff controlled.
The initiative, which raised $1.2 million, could inspire similar collaborations, though it just as easily may not. The Atlantic Philanthropies is a "spend down" foundation whose mandate is to give away all its assets by 2018. The Open Society Institute is the philanthropic arm of billionaire financier George Soros. Neither operates off an asset base designed to last in perpetuity, as is the case with many foundations that have seen their endowments shrink by 20 to 30 percent over the past few months. Some of these foundations are calling for the creation of a revolving-loans fund, backed by the government, that would provide urgently needed capital to social service and cultural institutions they can't support. Among the speakers at a recent Congressional briefing where this idea was aired was Diana Aviv, president of the Independent Sector, a coalition of foundations and charities, and Ford Bell, president of the American Association of Museums.
At a time when taxpayer dollars have been showered on banks, such a fund seems like the least the government could do for a sector whose leaders did not push for reckless deregulation or pay themselves exorbitant bonuses in recent years. But others argue that the responsibility for supporting endangered nonprofits should fall to foundations, which still command billions of dollars in assets and are accorded nonprofit status in part because it is assumed that self-preservation is not their primary goal. "Large institutions have choices," says Rick Cohen, former head of the National Committee for Responsive Philanthropy. "Do they husband their resources for their own purposes, or do they say, 'At this time we are called on to do more'? As social institutions, aren't they obligated to step up to the plate?"
Pablo Eisenberg, a professor at Georgetown University and columnist for The Chronicle of Philanthropy, echoes this view, pointing to Bill Gates. "In his recent letter, Gates said he's going to increase his giving to 7 percent of net returns," says Eisenberg, "yet the foundation world opposes mandating that everyone must give at least 6 percent because they have to exist in perpetuity. Says who? The frontline defense of nonprofits should be foundations that support nonprofits."