To the Editor:
Craig Kennedy’s recent op-ed — “A Bipartisan Plan to Raise the Foundation Payout Rate” (October 1) — makes many valid points: Communities urgently need more resources, and foundations, and donors can and should do more to help. That’s why the organization I lead, the Council on Foundations, is pleased that Congress encouraged greater giving by maintaining previous levels of foundation excise taxes and increasing incentives for everyday people to donate.
We also agree with Kennedy that charitable foundations shouldn’t take part in politics and electioneering, and as such, we are working to protect the Johnson Amendment.
However, we disagree with Kennedy that payout requirements should rise. The report he cites to help make his case, by the Council on Foundations and Commonfund, actually proves philanthropy is working just as it should. It shows how foundation endowments have risen over the past two years but fell in 2022. Despite those ups and downs, giving has remained steady. In fact, during the COVID-19 pandemic, many foundations gave well above the minimum. This year, several increased payouts again and allocated emergency grants to help nonprofits navigate federal funding cuts.
The 5 percent minimum is just that: a minimum. It allows foundations flexibility to give more when times are especially tough. That’s why the Council will aggressively protect a foundation’s right to exist in perpetuity even while it supports funders that choose to spend down their assets.
The bottom line is that a foundation’s payout rate should be determined by its strategy, mission, and the intent of its donors. Some foundations will go all-in to address crises while others will be there when new challenges arise in 10, 15, or 50 years. The freedom to choose what, how, and when to give is one of the sector’s greatest strengths.
Kathleen Enright
President and CEO
Council on Foundations
