A new study has found that years of economic growth and large gifts to foundations means their assets have outgrown the minimum five-percent annual giving levels foundations are required to meet as part of the tax code, the New York Times reports.

The National Network of Grantmakers (NNG), an organization of progressive foundations, released the results of the study on Tuesday, Oct. 5. The NNG report calls for grantmakers to increase minimum giving levels by a full percentage point, to six percent per year.

The study -- by Professor Perry Mehrling, chairman of the economics department at Barnard College -- has found that, overall, foundation assets have been growing at a faster rate than their grants to nonprofits. Economic growth, the creation of large foundations and low inflation all have combined to increase foundations' total assets, the Times reports.

While NNG -- through its 1% More for Democracycampaign -- is urging foundations to increase their annual minimum giving by 20 percent (represented by six percent of assets), Mehrling found that the minimum level could be increased to eight percent of assets without eroding the asset base, the Times reports.

If the six percent rate was adopted by all grantmaking foundations, the nonprofit sector would receive $4 billion more a year, the Times reports.

The five percent rule has been in effect since 1981, when foundations argued that the old rule -- which required that foundations give out the higher of either all investment income or five percent of assets -- caused their assets to erode due to high inflation, the Times reports.

After adjusting for inflation, foundations gave out 3.6 times as much money today as in 1982, but had 5.6 times as many assets.

Not everyone agrees with Mehrling's study. Officials of the Council on Foundations told the Times that studies in 1991 and 1995 showed that five percent was an ideal amount in order for foundations to keep up with inflation.

No mention was made in the Times article of the effect on foundation asset growth caused by the recent boom in the high-tech sector.

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