NCPA - National Center for Policy Analysis

Could Foundations Give More?

October 5, 1999

So many wealthy Americans are setting up charitable foundations that they could give away much more money than they presently do without endangering their assets. That is the conclusion of a study by Barnard College economist Perry Mehrling.

The study is being released by the National Network of Grantmakers -- a coalition which is seeking to persuade foundations to increase the level of their distributions.

  • Foundations, which now give away about 5 percent of their assets annually, could increase that proportion to 8 percent -- a 60 percent increase -- without jeopardizing their total assets, Mehrling figures.
  • The coalition has so far only suggested an increase in giving of one percentage point -- to 6 percent.
  • A one percentage point increase in giving this year would amount to an additional $4 billion going to nonprofit organizations if the policy were adopted by all 49,000 charitable endowments that make grants.
  • Congress set the minimum foundation payout at 5 percent of assets in 1981 -- repealing a rule that had forced foundations to give away all of their investment income or 5 percent of assets, whichever was greater.

Another organization, the Council on Foundations, says studies in 1991 and 1995 showed that 5 percent was the optimal payout if foundation assets were to grow enough to keep up with inflation.

Adjusted for inflation, foundations give away 3.6 times as much today as they did in 1982 -- the first year the new rule was in effect. But their assets have grown to 5.6 times as much.

Foundation assets totaled $330 billion at the end of 1997, and they gave away just under $16 billion -- or 4.8 percent of assets.

Source: David Cay Johnston, "Foundations Can Give More, and Protect Assets, Study Says," New York Times, October 5, 1999.


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