Most donations go toward education

Education overtook health care as the primary spending destination for California’s foundations between 1999 and 2009, according to a report recently released by the Sol Price School of Public Policy’s Center on Philanthropy and Public Policy. Philanthropy Center Director and report co-author James Ferris attributes this reversal to the conversion of health care organizations in the 1990s from non-profit to for-profit.

“Education is the top priority of the nation in general, and California was in an unusual situation,” Ferris said. “There haven’t been new big health foundations created in the last 10 years, so their impact has diminished over time.”

The state’s total philanthropic donations also increased from $2.8 billion to $6 billion, a 55 percent increase that outpaced the rest of the nation, which has seen a 52.5 percent increase, the report said.

Chris Yates, the associate senior vice president for Major and Planned Gifts in USC’s Office of Advancement, said the decline in education funding from the state of California might have contributed to the growth in funding from foundations.

“Universities, over time, have become more aware of the fact that foundations have been increasing in size and there’s more money out there,” Yates said. “In turn, universities’ approaches to foundations have been more sophisticated, and there have been more resources put into efforts to reach out to and build relations with foundations.”

The report’s list of “100 Largest California Foundations by Assets, 2009” includes many foundations who have donated to USC, such as the Annenberg Foundation at No. 8 and the W.M. Keck Foundation at No. 13.

The reliance on foundation’s gifts likely means more of the university and individual school’s resources are going toward asking for donations, Yates said.

“Typically, gifts from foundations make up a quarter to a third of what USC raises every year,” Yates said. “I suspect that the amount of resources devoted toward maintaining relations with foundations has increased over time both at the central and specific school levels.”

Yates said the university is generally responsible for coming to foundations with requests.

Yates said. “We propose a certain amount to promote a certain project or purpose. We constantly report back to the foundations about our progress based on the objectives we’ve laid out,” Yates said.

The structure of California’s foundation sector has remained largely constant, the report said. Fourteen foundations hold 46 percent of all foundation assets and account for 30 percent of total giving and private independent foundations dominate the landscape.

Though a few large foundations lead California’s philanthropic sector, community foundations play a larger role in California than they do on a national level. There are more foundations with assets of less than $1 million and their share of total giving in the state went up from 6 percent to 11 percent between 1999 and 2009.

The rate of foundation’s growth, however, has been slower, especially during the two economic recessions between 1999 and 2009, the one triggered by the dot-com bubble burst in 2001 and the Great Recession triggered by the housing bubble in 2007. Though the number of foundations in California experienced a 71 percent increase from 4,208 to 7,184, assets adjusted for inflation were largely unaffected.

“The value of foundation endowments have gone up and down with the market,” Ferris said. “In the decade before [1999 to 2009], there was tremendous growth. During the last 10 years, there’s been a plateau; giving has increased but the asset base of the foundations has stayed relatively constant.”

The report said the increase in foundations will continue, and there will be more small foundations to allow for personal giving by living donors.

“There’s not going to be a big surge in the growth of assets of foundations that we saw in the ’90s,” Ferris said. “But foundations will try to have a greater impact. Instead of through giving, they’re going to develop and resort to other strategies beyond grant dollars to make an impact.”

Foundations are legally required to donate at least 5 percent of their endowment each year, but Ferris said foundations vary in how they choose where the money goes.

“They are governed by boards,” Ferris said. “They set overall policy goals and a mission, and that’s what determines how they actually operate.”

Yates said foundations are likely to continue playing a large role in the state, and for USC.

“California is blessed to have a really vibrant and vigorous community of foundations. We have all types of foundations,” Yates said. “The report shows a very encouraging trend within the state.”