Abstract
The Tax Reform Act of 1969 introduced formal legal barriers designed to limit the political activities of foundations. How do these constraints affect foundations’ funding decisions and the capacity of public interest organizations that rely on philanthropic support for their advocacy work? We argue that the policy regime governing private foundations’ work has produced two layers of feedback effects that not only shape philanthropic behavior, but also create real obstacles for grantee organizations and their advocacy efforts. We contend that, particularly for recipient organizations who (1) have a primary mission of political advocacy and mobilization and (2) rely heavily on philanthropic support, the policies governing foundation behavior can create incompatible goals between grantors and grantees pursuing policy change. Drawing on records of grant activity, archival material, and elite interviews, we explore this argument using a salient case study: anti-predatory lending reform. Ultimately, we find that policy restrictions on foundation giving may limit the capacity and threaten the success of advocacy organizations engaged in grassroots political work necessary to promote policy change, thus curtailing the potential for the very reforms foundations are eager to pursue.
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Notes
Goss focuses her analysis on the ways in which policies affect civil society organizations with consequences for individual political engagement. Similarly, Goss, Barnes, and Rose (2019) focus on the mechanisms through which organizations affect individuals’ civic inclusion.
Currently, the distributable amount is set at five percent.
Reckhow (2013) notes that the benefactors may speak candidly about their political priorities, even as the foundation itself remains more discreet.
A uniform legal definition of predatory lending does not exist in the USA, but prevalent descriptions include loans that involve unfair, abusive, or high-cost terms or sales practices (OIG FDIC 2006).
Subprime loans are those offered to borrowers who are considered to be less creditworthy or who pose a greater risk of loan default. To compensate for the higher risk to lenders, subprime loans frequently feature higher interest rates and less favorable lending terms than prime loans.
This code is defined as: Prevention of abusive and unfair loan practices such as failure to accurately inform the borrower of terms and conditions or excessive interest rates, payday loans or subprime credit cards, often targeting poor and elderly borrowers. They may include support for individual victims of predatory lenders, advocacy, and policymaking.
On average, two codes were assigned to each grant, and a standard deviation of .88 codes per grant.
Each of these organizations’ records is housed at the CMA. Archival materials include correspondence between these organizations and foundations, internal communications within the organization to make sense of foundations’ expressed preferences, and detailed meeting and retreat notes that capture how organizations sought to achieve their own goals while also attending to foundations’ feedback on policy goals.
Each one-hour interview was semi-structured, with a shared set of questions asking participants to reflect on challenges their organization faced with respect to political and policy advocacy to combat predatory lending. Interviewees were also asked to elaborate on the ways in which resources shaped their decision-making process.
Table A.1 in Appendix gives the full list of foundations, and the number and total grants given by each. Also presented is the amount given that includes advocacy activities, the percentage of that foundation’s giving that was coded as having an advocacy component, and alongside the amount and percentage.
Two foundations, The Moriah Fund and Charles Stewart Mott Foundation, both give at lower amounts but a full 100 percent of their funding is directed to advocacy in some way.
Table A.2 in Appendix provides the full list of recipients, and the amount and number of grants they received. These tables also show the amount each organization received for advocacy, the percentage of grants received that had an advocacy component, and percentage of all funds given in the field of anti-predatory lending for advocacy that the individual organization received.
Annual reports prior to 1975 were not available.
Emphasis added.
The reach of the foundations was felt even in this anonymous assessment. In parentheses next to these particular comments is the following addendum: “careful in comments because of Ford interest and other factors.”
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Shanks, D., SoRelle, M.E. The paradox of policy advocacy: philanthropic foundations, public interest groups, and second-order policy feedback effects. Int Groups Adv 10, 137–157 (2021). https://doi.org/10.1057/s41309-021-00120-5
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DOI: https://doi.org/10.1057/s41309-021-00120-5