A recent article in the Wall Street Journal headlined “Spending Down the Family Foundation” suggests that more philanthropists are choosing to donate all their wealth within their lifetimes, instead of holding it in perpetuity. The story cites Bridgespan’s analysis of 2010 data showing that foundations planning to spend-down their assets held 24 percent of all the assets controlled by the 50 largest foundations, a huge jump compared to 5 percent in 1960. (See figure below.)
Source: Bridgespan, Six Pathways to Enduring Results: Lessons from Spend-Down Foundations
But the bulk of the increase is attributable to the Bill & Melinda Gates Foundation, which was established in 2000 and is planning to spend down its assets, which stood at around $37 billion in 2010, according to Foundation Center and the Foundation’s 990-PF. We sought to replicate the Bridgespan analysis, but excluded the Gates foundation in our calculations.[1] We estimate the proportion of assets of the largest 50 foundations in 2010 held by spend-down foundations, excluding the Gates foundation, was about 4 percent – pretty much unchanged from 50 years prior. (Even if we use a lower value for the Gates foundation’s assets, which has fluctuated of course, say $30 billion, the proportion of assets in spend-downs would only be about 9 percent – still a jump, but not nearly as dramatic.)
To be sure, there may be more interest among individual philanthropists in spending down, or “giving while living,” borne of a belief that it will lead to greater impact, which the Bridgespan report documents. But, removing the Gates foundation, there may have been less of a jump in actual practice among the largest foundations, if there was even any jump at all, than the Journal article made it appear.
Moreover, the professional staff hired to lead large foundations do not seem to share the enthusiasm for spending down. In a survey of CEOs leading foundations giving $5 million or more annually, CEP found that only 17 percent of CEOs say they believe that sunsetting can significantly or extremely increase a foundation’s impact. Almost half of foundation CEOs believe that spending down has no potential to increase a foundation’s impact.
Perhaps this finding is not surprising, given that most of these CEOs are leading foundations that were set up to exist in perpetuity. Of the 211 foundations in our sample, a minority are planning to spend down – just 13 percent.
More reflection on whether foundations should exist in perpetuity or spend-down their assets is undoubtedly positive, and the Bridgespan report and Wall Street Journal article are helpful in that respect. CEP’s president, Phil Buchanan, has argued over the years that foundations should think about this choice in light of their goals and strategy. He has argued that too many foundations simply “default to perpetuity” without thinking it through.
But the data, both in terms of how much money resides in spend-down foundations and the attitudes of foundation CEOs, suggest that any real spend-down trend may still be very much in its infancy.
Ramya Gopal is a Senior Research Analyst at the Center for Effective Philanthropy. You can find her on Twitter @RGopal_CEP.
[1] In replicating Bridgespan’s figure of the percent of assets of the largest 50 foundations held by spend-downs, we assumed that Bridgespan’s dollar value calculation of these assets, $44.5 billion, was correct because we could not verify this. We used Foundation Center’s list of the top 50 foundations by assets in 2010 for our calculations. We subtracted Gates’ 2010 assets from $44.5 billion, which resulted in a difference of $7,069,849,542 (about $7 billion). We then divided $7,069,849,542 by the total assets held by the top 50 foundations in 2010, excluding Gates, which was $159,584,507,087 (about $160 billion). This calculation gave us the estimate of 4%.
