California Legislation Pushing Foundation Funding Diversity

Foundations are lining up against mandated diversity transparency legislation in California that could have ramifications beyond the Golden State.

The Democrat-led California Assembly, by a 45-29 vote, approved a bill in late January that requires foundations with more than $250 million in assets to collect diversity-related data for their boards, staff, nonprofit grantees and clients served through their grantmaking, and publish it on the Web and in annual reports.

The measure heads to the State’s Senate Judiciary Committee, which must release the bill before it can go to a vote of the full Senate, where Democrats have a 25-15 majority. If it clears the Senate, the bill then would require the signature of Republican Gov. Arnold Schwarzenegger.

"This is not just a California issue. We’re recognizing it’s an increasingly important issue to policy makers across the nation and even in Congress," said Steve Gunderson, president and CEO of the Council on Foundations (CoF). The Arlington, Va.-based membership association of more than 2,100 grantmaking foundations and corporations joined the Northern California Grantmakers, Southern California Grantmakers and San Diego Grantmakers in opposing the Assembly bill.

The legislation stems from an Assembly hearing on a report by the Greenlining Institute in Berkeley, Calif., a self-described "multi-ethnic public policy research and advocacy institute," that measures giving to minority-led organizations by major foundations.

The report, "Investing in a Diverse Democracy: Foundation Giving to Minority-Led Nonprofits," has been compiled annually for the past three years. Executive Director John Gamboa said it does not measure the impact of the good work that foundations do in minority communities but rather the amount of money given to minority-led organizations. "It’s been quite a struggle to get people to understand the difference," he said, though there are some legitimate concerns.

"For three years they’ve been like ostriches, hoping we’ll go away," Gamboa said. "People are calling us the diversity police; we’re proud of being the diversity police."

The legislation is an attempt to get foundations to report on their Web sites and annual reports data reflecting their own giving, said Mike Welch, legislative director for Assemblyman Joe Coto, the bill’s sponsor and chair of the Latino Caucus. The bill does not change their practice, he said, but only reports who’s on a foundation’s board and staff and who they give money to on issues of diversity.

"We hope it’s that kind of sunshine that will allow them to take a look at what they represent," Welch said. "The concern I think is when big foundations give to nonprofits, it’s not the big foundations that have a problem reporting, in theory it’s potentially for nonprofits that are small that somehow have to provide information to big foundations, about who they are, so big foundations can report who they are," he said.

The California Association of Nonprofits has been working with Coto, Greenlining and foundation members since last April when the bill was introduced, according to Florence Green, executive director.

Green said the measure is still being amended and the version that makes it out of the Senate Rules committee might differ before it heads to the Senate Judiciary Committee. If the full Senate approves the bill, it would have to go back to the Assembly for approval because of the amendments before heading to the governor.

"The bill is now short and to the point but may still be edited," Green said. Foundations with over $250 million in endowments would have to report on Web sites the ethnic makeup of their board and staff and giving to groups representing underrepresented ethnic groups and giving to low socioeconomic groups.

"Our hope was to find a resolution that would cause the bill to go away. We think it’s lousy legislation; it’s not a good policy or a good direction for a bill to take," Green said. "We think it should be a voluntary basis. Bills like this often become a ceiling rather than a floor. It often creates the least people do rather than the most people can do. There’s a whole array of issues that impact this bill."

Most foundations do not have that type of information because this is a new issue, Gunderson said. "If you would’ve asked anybody five years ago about this issue, there would’ve been little knowledge, awareness or commitment to it."

Whether the legislation becomes an administrative burden "depends on how far you go with all of the questions," Gunderson said. "If we’re not taking a look at the makeup of our boards and the makeup of our staff then it’s time that we do that." On the other hand, it could become a challenge if foundations have to track down diversity-related data on their grantees and vendors.

In its work on economic issues facing minorities in California, the institute has realized minorities are not involved in growth issues, Gamboa said, despite making up 80 percent of all new households. "There are as many as 30 people at a hearing representing the interests of fish but nobody is representing the interests of poor people or the growth population; there’s no one of color in those hearings or policy-making events on it."

Foundations gave birth to many policymaking organizations, such as environmental, consumer protection or good government groups, said Gamboa, investing in small ways and continuing to grow those investments. "These organizations grew and multiplied and pretty soon you had a national movement," he said. "We found the same kinds of investments weren’t being made in the minority community. That’s what we tried to point out, and boy we created a lot of attention on it."

Foundations have been invited to submit their own data to clarify or correct any findings presented by the institute, which was rebuffed in initial requests that foundations provide data, Gamboa said. Few have taken the opportunity to clarify any data, he added, but some (up to 20 or 25 percent) have begun to submit their data.

Greenlining’s report indicates that 3 percent of all dollars given went to minority-led organizations. While the argument can be made that maybe those organizations only comprise 3 percent of the universe of nonprofits, Gamboa said: "If it is parity at 3 percent, we think it’s a chicken-and-egg issue. We don’t get the resources to grow and multiply." Gamboa conceded that among the legitimate complaints from foundations is determining what exactly is a "minority-led organization," but he’s been open to changes as well as holding meetings to reach a definition.

Some question the methodology used by Greenlining, said Gunderson, but added: "That’s a debate without a purpose. Whether their science is right or wrong, I have seen no science that shows that our field is doing what we need to do in the area of diversity. Let’s not have a debate about metrics, and about the path; let’s have a conversation about how we all move forward together."

The Northern California Grantmakers, Southern California Grantmakers and San Diego Grantmakers have committed to conduct independent research, create a nonprofit advisory body to review the research and make recommendations to the philanthropic community, on behalf of California foundations, as well as provide a platform for minority leaders to meet and discuss approaches with foundation leaders.

"We really are fully supportive of transparency and diversity, but we have real issues about legislative mandates, about where philanthropy gives its money," Gunderson said. "It’s the diversity of philanthropy that is the strength of this sector."

Added Gunderson: "We want to advocate diversity in our work and in our outcomes, but we don’t want the government to start telling philanthropy where and how to do that."

There is some momentum behind the legislation, Gunderson said, adding that there’s also recognition of some problems in the language of the bill that won Assembly approval. Gunderson has preached voluntary leadership among foundations on expanding the reach and impact of work related to diversity over the legislative mandates they would have to deal with if they do not.

"The real question here that we’re looking at is how much are we going to do, how we do it, and all of that. That’s where I see our role on the council." NPT