A new report commissioned by the Council of Michigan Foundations (CMF) claims that requiring private foundations to pay out more than the existing minimum five percent of their worth each year would result in significant decreases in their asset base over time, the Washington Post reports.
The "Sustainable Payout for Foundations" study, conducted by the Cambridge Associates Inc. financial research group, examined the fiscal health of 33 private Michigan foundations over a 24-year period ending in 1997. The firm also studied the performance of a typical foundation portfolio consisting of 65 percent stock investments and 35 percent in other products, and calculated how this would hold up with five percent, six percent and seven percent minimum annual payouts.
Over three decades, the six-percent payout would reduce the foundation's assets by 12 percent overall, and a seven-percent requirement would have reduced assets by more than 33 percent, the report states.
These findings were disputed by Rick Cohen, president of the National Committee for Responsive Philanthropy (NCRP).
In addition to the much-discussed transfer of wealth between the World War II generation and their children, the Baby Boomers, Cohen said foundations should be less concerned about extended financial self-preservation and more concerned about social issues.
"What are the needs in society that this tax-protected capital should be used to address? We think that the needs that are out there, particularly for disadvantaged populations, warrant a higher payout rate," Cohen told the Post.
The NCRP head also referred to "Spending Policies for Foundations: The Case for Increased Grants Payout", a study published last year by Barnard College economist Perry Mehrling. Mehrling's report claims private foundations could pay out as much as eight percent a year because stock assets have grown much faster than their giving totals.
Mehrling's report also is a cornerstone of the National Network of Grantmakers (NNG) "1% More for Democracy" campaign.
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A23098-2000Apr26.html
