What does it mean to be philanthropic?
Reprinted from the Center for Effective Philanthropy.
In the scheme of the foundation world, the Langeloth Foundation is tiny.
Years ago, at a cocktail party, I met someone on the investment side of a large New York-based foundation who asked me what one foundation staffer inevitably asks of another: “How big is your endowment?” When I responded, “Around $90 million,” he scoffed and said, “That’s what we give away per year!”
In spite of our “tiny” endowment, last year the Langeloth Foundation’s board approved grantmaking that exceeded 25 percent of our assets, totaling roughly $28 million. A large portion of this ($20 million) supported efforts to ensure that every voter in the 2020 U.S. election could cast their ballot in a safe and healthy manner, whether in person or by mail. The grants supported work that recognized and responded to disenfranchisement and misinformation campaigns targeted at BIPOC communities. Part of the remaining $8 million was rapid-response funding for COVID-19-related expenses that enabled organizations to adapt to remote working and/or targeted programmatic efforts.
Throughout the year, we remained committed to supporting our existing core program areas, including Justice Reform (ending the use of solitary confinement and changing hearts and minds in pursuit of a healthier society) and Safe and Healthy Communities (gun violence prevention in Black and brown communities). These two areas have become increasingly relevant as the pandemic has continued. The number of incarcerated people put into solitary confinement under the guise of medical isolation increased by 500 percent as a result of the pandemic. In addition, the number of firearm-related incidents increased dramatically across the country, causing tremendous pain for communities that have also been disproportionately impacted by COVID-19 infections and deaths.
Our increased spending was not part of a spend-down plan. Rather, it recognized the confluence of events in a historic moment: one of the most important federal elections in decades coinciding with a global pandemic the likes of which the world has not been seen in a century, and which—due to deeply embedded structural racism and inequities for which national protests spread across the country—has disproportionately impacted BIPOC [Black, Indigenous, and people of color] communities.
We are a philanthropic entity. Now is the time to fully embrace our values and—to put it plainly—to be philanthropic.
The Langeloth Foundation takes its tax-exempt status seriously in a number of respects, including the gift itself of being tax exempt that we receive from the government. A former president of the Foundation often reminded staff that our assets were “public funds,” a mantra we continue to heartily embrace. We recognize that, because of the tax exemption, we carry an additional responsibility with how the funds are used.
One of the ways we have held onto this mantra is by not including our allowable operating costs within the 5 percent mandatory IRS giving floor, which is permissible under the IRS tax code. The fact that most foundations include their operating costs within the 5 percent means that they actually give away less than that (sometimes a lot less). We like to remind colleagues that the 5 percent is a floor, not a ceiling, on annual grantmaking dollars. And if your board is resistant to spending more than 5 percent on grants, perhaps not including operating costs is a good place to start!
There are many opinions on what constitutes responsible fiscal management of philanthropic dollars. With the ever-growing world of new philanthropies, the emphasis on foundations existing in perpetuity—and sitting on billions of dollars in assets that are desperately needed by those working on the ground—might be served by a re-examination of whether that is actually the best strategy. (Mackenzie Scott is also setting a great example of giving without any strings attached, which is another albatross of traditional grantmaking.) Even if your foundation is not in the process of spending down, that does not preclude your ability to spend more—sometimes significantly more—if the causes that your foundation cares about are facing some of the biggest challenges imaginable.
We at the Langeloth Foundation see our grantmaking as an expression of our values. If our existence in this world is to be philanthropic, well, let’s be philanthropic.