Philanthropists’ donations come under scrutiny for diversity

Advocates for the poor are targeting California's largest charitable foundations that donate billions of dollars annually to an array of nonprofits. Next week, the top executives at several foundations are meeting with a San Jose Assemblyman over his bill to require the foundations to disclose the racial, ethnic and gender breakdowns of their staffs and governing boards, as well as a similar breakdown of those who get the money.

The unusual proposal has received limited attention in California but is high on the radar of the national philanthropic community.

"Minorities make up more than 50 percent of California's population, but we believe we are missing from some of the important dialogues on education, the environment, water, transportation," said John Gamboa, president of the Berkeley-based Greenlining Institute. "We've never had the investment that many other, white organizations have had. It's really an innocuous bill. It doesn't require anything but a little transparency."

The Greenlining Institute advocates on behalf of the poor for education improvements and against discriminatory business practices such as redlining by banks.

The legislation was written by Gamboa's group and authored by Joe Coto, the chairman of the Latino caucus. The bill, AB624, would require some 30 private foundations in California, those with more than $250 million in assets, to disclose their own ethnic makeup. It seeks similar information from those who get the grants, although that information already is supplied by some 90 percent of those who get the money, the grantees. The idea is to track the demographic components of the flow of philanthropic money.

A study cited by Greenlining says that less than 4 cents of every grant dollar goes to minority nonprofits – a figure that the foundations contend is flawed.

The stakes are huge, although just how huge is unclear. Nationally, some $40 billion to $80 billion is given away annually, according to an estimate by former U.S. Labor Secretary Robert Reich. California accounts for about 12.7 percent of the nation's philanthropic foundations, which, if California's donations are proportional to the national level, means that the foundations here dispense perhaps $5 billion to $10 billion annually.

The foundations, viewed as the traditional benefactors of worthy causes, were surprised by the legislation. They believe the Coto bill may be the harbinger of a regulatory scheme for the philanthropic community.

"The broadest level of concern is that this is a camel's nose-under-the-tent issue," said Robert Ross, president of the California Endowment, which donates about $150 million to $160 million annually. "Is this the opening salvo for legislators to dictate the philanthropic work of private foundations? The legislation may seem to be just about reporting data, but what about the next (legislative) session? Where do they go if they don't like the numbers?"

Ross also questioned whether the foundations' donations could ultimately be directed to holes in the $154 billion state budget, which faces a $16 billion shortage over two years and which has had a nagging, $5 billion deficit for the past few years. "Taken to its extreme, this bill goes through and then in two years there's another budget deficit at the state level and the Legislature says, ‘Let's regulate the foundations.'" He noted that California foundations have received numerous inquiries from their national counterparts about the legislation.

Coto's bill, over the opposition of Republicans, was approved Jan. 29 in the 80-member Assembly by a 45-29 vote and sent to the Senate. But it has been made into a two-year bill, which means its first Senate vote is not expected until June. In part, the delay was due to wrangling over whether the reporting requirements should be voluntary as opposed to mandatory. Language sought by the Lesbian-Gay-Bisexual-Transgender Caucus to include sexual orientation among the reporting rules was hastily dropped amid complaints that it forced workers to disclose personal sexual matters.

Converting bills to two-year status is a tactic frequently used in the Legislature to kill unwanted legislation, but that doesn't appear to be the case here. The bill emerged easily from the Assembly, and Coto and his allies appear confident that there will be support in the Senate for the bill. The governor has not discussed his position.

Others, however, have weighed in against Coto's bill. "Many charities help individuals and groups who have low incomes or are temporarily in unfortunate situations with a way to lift them up. How is a state mandate on diversity reporting going to further these philanthropic efforts? In my opinion, not one bit. Perhaps, some legislators just want to make sure charities are supporting the ‘correct' people and organizations. How silly is this?" wrote Sen. Tom Harman, R-Huntington Beach, in a newsletter to his constituents.

On Wednesday, the leaders of several of California's charitable foundations are scheduled to confer with Coto and his staff about the bill. The foundation presidents are expected to include Ross, James Canales of the Irvine Foundation and Paul Brest of the William and Flora Hewlett Foundation.