*NOTE: This is a very interesting article by Stanley N. Katz, who directs the Center for Arts and Cultural Policy Studies at Princeton University’s Woodrow Wilson School. It was originally posted on The Chronicle.

In a January speech at the University of Michigan at Ann Arbor, laying out his policy for higher education, President Obama opened by noting his agenda: “How can we make sure that everybody is getting the kind of education they need to personally succeed but also to build up this nation—because in this economy, there is no greater predictor of individual success than a good education.” Although the United States still has “the best network of colleges and universities in the world,” he said, “the challenge is it’s getting tougher and tougher to afford it.” Thus his primary policy concerns were high tuition and student debt.

At Ann Arbor, President Obama captured the spirit of the megafoundation program for higher education. Should we be worried about that confluence?

First, consider how the foundation world has changed. Also in January, at the World Economic Forum in Davos, Switzerland, Bill Gates announced that the Bill & Melinda Gates Foundation was contributing $750-million to the Global Fund to Fight AIDS, Tuberculosis and Malaria. That’s a big number. For purposes of comparison, on the same day Japan announced that it would contribute $340-million to the Global Fund, less than half the Gates gift. As of the end of 2010 (the last year for which figures are publicly available), the total assets of the Gates foundation were $37.4-billion, and that does not include the approximately $30-billion Warren Buffett pledged in 2006 to give the foundation. The next largest American philanthropic foundation in terms of net assets is the Ford Foundation (for decades our largest), which at the end of September 2011, had net assets of $10.3-billion.

While, at least for the moment, unique in size, Gates is also representative of an explosion in the net worth and annual-giving potential of the private-philanthropic sector in the United States. According to the Foundation Center, as of March 8, 2012, there were 65 private and community foundations in the United States with net assets of more than $1-billion, 11 private foundations with assets of more than $5-billion, and 30 with assets of more than $2-billion. Total foundation giving in the United States (circa 2010) was about $20.5-billion.

According to a recent Chronicle study, America’s top 50 donors gave a total of $10.4-billion in 2011, rebounding from the $3.3-billion of the previous year, with its recession worries. Those numbers reflect the continued growth in the number of private philanthropic foundations in this country—10,093 were created in the 1990s, and more than 8,500 appeared between 2000 and 2009 (as opposed, for instance, to the 1,264 created in the 1970s). There are now more than 33,000 foundations in the United States.

But what grabs my attention is the number with megaresources, almost all of which have emerged over the past two decades. This is truly the era of the megafoundation.

That, of course, is a function of America’s reinvention of the One Percent. Look at the most recent Forbes 400 (the magazine’s annual list of the richest Americans), headed by Bill Gates (net worth $59-billion), Warren Buffett ($39-billion), Larry Ellison ($33-billion), the Koch brothers ($25-billion each), one of the Waltons (Christy, $24.5-billion), and so on. As of August 2011, more than 40 families had pledged themselves to the effort by Buffett and Bill and Melinda Gates to galvanize other billionaires to give away, inter vivos, the majority of their wealth to philanthropy. Many of them have already set up family foundations (and more will do so), and many of those new foundations have bounded to the upper reaches of the Foundation Center’s list of the top 100 private philanthropies.

They are new foundations, and they are behaving in novel ways, departing from the more reflective, more patient, and generally less aggressive behaviors of the classic 20th-century foundations.

In the past, our large philanthropic foundations, Rockefeller and Carnegie particularly, were what I have earlier characterized as “learned”—much of their grant-making was devoted to trying to understand the underlying causes of the problems that concerned their boards, and the means they used toward that end was investment in research. They had a long-term strategy, hoping to find deep solutions to big problems, and they tended to support investigators who had strong research programs of their own design. Think of the Rockefeller investments in public health, both abroad and in the American South, and the large and long-term Carnegie financing of Gunnar Myrdal’s study An American Dilemma: The Negro Problem and American Democracy.

In the 1990s, however, a mood of impatience and frustration with that approach emerged. Strictly speaking, a private philanthropic foundation must donate at least 5 percent of its assets each year or pay an excise tax, and most foundations give at a rate higher than 5 percent. The larger the foundation, therefore, the greater its required annual payout. But it is not just a question of total giving. The larger the foundation’s assets, the larger its average grants tend to be, partially because big foundations tend to think big. That has been notably true of the Gates foundation, which tends to make a relatively small number of very large grants. While the traditional foundations worried about what they termed “scatteration” (the multiplication of small grants), they always made a considerable range of grants. And they were seldom in the position to make the sort of overwhelming “bets” the Gates foundation can.

More significant, for the most part the new foundations (whose leadership is frequently drawn from business) have turned to “strategic” grant-making geared to “effectiveness.” Traditional grant-giving was unfocused, meandering, and ineffective, they believe. Philanthropy has therefore increasingly been reconceptualized as something akin to venture capital investing.

Accordingly, grantees are required to specify measurable outcomes that can be achieved over the short term. Foundations have tended to reduce the number of program areas in which they give funds, to be more precise and detailed in their program objectives, to restrict project time frames, to establish benchmarks for continued financing, to evaluate grantees in a more precise manner, and to form partnerships with grantees in managing their projects. Paul Brest, the very able president of the William and Flora Hewlett Foundation, has summarized the new position: “The fundamental tenets of strategic philanthropy are that funders and their grantees should have clear goals, strategies based on sound theories of change, and robust methods for assessing progress toward their goals.”

There are, of course, exceptions among the large foundations. The Andrew W. Mellon Foundation, founded in its present form in 1969, remains a classic learned foundation, focused particularly on the role of the humanities in American life. The Robert Wood Johnson Foundation, established on the basis of the Johnson & Johnson fortune in 1972, concentrates on problems in public health and has valued research and stuck with those concerns. There has also been some public pushback against the concept of strategic grant-making. A little over a year ago, Susan Berresford, a former president of the Ford Foundation, asked, “What’s the Problem With Strategic Philanthropy?” in The Chronicle of Philanthropy. She noted, “Most strategic-philanthropy planning exercises involve using benchmarks to measure progress. But sometimes data miniaturize ambition because they focus on what can be measured in the near-term, not what might be the most important long-term goals.”

However, under new leadership, both the Ford and the Rockefeller foundations have now significantly changed their organization and behavior. Rockefeller, led by Judith Rodin, a former president of the University of Pennsylvania, has completely accepted the ideas of strategic philanthropy, and Ford, now led by Berresford’s successor, Luis Antonio Ubiñas, a former McKinsey media executive, is moving in the same direction. I think it is fair to say that most of the newer and larger foundations see themselves as operating in the strategic mode.

What has been particularly interesting to note has been the commitment of the newer foundations to overt policy advocacy, which they see as a logical outcome of their strategic stance. It is not clear to me how aware they are of the historic reluctance of the learned foundations to acknowledge that they played a public-policy role. That hesitancy grew out of the intense public opposition to the potential political influence of philanthropic organizations that had been founded by the robber barons. The early foundations mostly danced around public policy and denied that they sought policy influence, and that remained characteristic until the mid-20th century, when the overtly policy-oriented behavior of the Ford Foundation, under the leadership of McGeorge Bundy, evoked the congressional backlash of the Tax Reform Act of 1969. After that episode, the major foundations were once again ostentatiously careful about taking strong positions on matters of political contention.

All that has changed in the 21st century. The new strategic foundations behave as though they are entitled to make public policy, and they are not shy about it. Perhaps the most obvious, and important, example of the new philanthropic aggressiveness is the financing of organizations and projects concerned with the reform of public elementary and secondary education.

As Diane Ravitch, a historian of education and policy analyst, has pointed out in her book The Death and Life of the Great American School System (Basic Books, 2010), in 1998 the four largest outside contributors to elementary and secondary education were the Annenberg Foundation, the Lilly Endowment, the David and Lucile Packard Foundation, and the W.K. Kellogg Foundation, providing 30 percent of all the funds given by the top-50 donors. But by 2002, the top two were the Gates Foundation and the Walton Family Foundation, and they were soon joined by other foundations created by the new class of billionaires—the Broad Foundations, the Robertson Foundation, and the Michael & Susan Dell Foundation. Ravitch notes that the nouveau education granters converged in significant ways on their policy preferences—for charter schools, rigorous assessment of teacher effectiveness, strong leadership in school buildings, data-based decision-making, high-stakes student testing, administrative efficiency, mayoral control of schools, and against teacher tenure and unions.

The foundations (especially Gates, Broad, and Walton) have supported existing organizations and have helped to create new 501(c)(3) ones devoted to their research agendas. Examples include Teach for America, New Leaders for New Schools, the New Teacher Project, the KIPP Foundation. The sums involved are not trivial. The Foundation Center database for “elementary and secondary education” reveals that in 2010 the top 50 foundations spent nearly $983-million on schools. That included new foundations like Gates (No. 1), Walton (No. 2), Dell (No. 4), the Robertson Foundation (No. 6) and Broad (No. 9). The historic leaders in elementary- and secondary-school grant-making were Ford (No. 15), Kellogg (No. 3), and Carnegie (No. 7). Added to that, in 2010 the Facebook founder Mark Zuckerberg pledged $100-million worth of company stock to establish his foundation, Education, and which he plans to donate over five years. The foundation will support programs to improve public schools in Newark, N.J. While the details are not known, city and state school officials are known to support many of the reform proposals.

Note, too, that the foundations’ school-reform agenda has been incorporated into the Obama administration’s Department of Education policies under Secretary of Education Arne Duncan, who was supported by some of the same foundations as the superintendent of schools of Chicago, and has appointed leading Gates-foundation program officers to his department staff. (Margo Rogers, from Gates, was Duncan’s first chief of staff, and the former Gates officer James H. Shelton III runs the department’s Office of Innovation and Improvement.) Federal adoption of philanthropically supported policies has long been a dream of activist foundations, and that dream has now substantially become a reality in the Obama White House.  


 “With so much money and power aligned against the neighborhood public school and against education as a profession, public education itself is placed at risk,” worries Ravitch. She is not alone. In one of the few journalistic exposés of what is happening, last year Joanne Barkan, in Dissent, traced the influence of the new foundations. Taking the news media to task for handling big donors with kid gloves, she warned, “The cozy environment undermines all players—grantees, media, the public, and the foundations themselves. Without honest assessments, funders are less likely to reach their goals.” Indeed, as Barkan noted, to date the results of the government-foundation programs in terms of student achievement have been far from stellar. School reformers, presidents among them, love to cite statistics, warning us how poorly American students score on reading, writing, and mathematics tests compared with students in other countries. Yet for all our measurements, money, and makeovers, American students’ academic progress has been, at best, slow—again, compared with significant gains abroad.

Turn now to higher education. It’s too early to make any final judgments about how deeply the megafoundations are influencing higher education. To date, surprisingly little has been written on the subject. But it might serve us well to heed the experience of elementary and secondary education.

The Foundation Center database on “grants for higher education” shows that the top 50 foundations together gave slightly more than a billion dollars to higher education in 2010. For once the Gates foundation is not the largest donor. That honor belongs to the Walton Family Foundation, which awarded $111,566,772, not much more than the No. 2 Duke Endowment ($103,850,000). The Lilly Endowment (No. 4) gave about $62-million, Mellon (No. 5) about $44-million, and Gates came in at No. 8 with $39-million.

Those are not, in themselves, small numbers, but unlike the situation in elementary and secondary education, they need to be compared with the existing institutional wealth in higher education. There, the wealthiest university (Harvard) has an endowment worth more than $31-billion (for the fiscal year ending June 30, 2011), and 75 North American universities have endowments of least one billion dollars. Furthermore, it is certain that the foundation investment in higher education is much larger than the billion dollars in the Foundation Center table, since that must exclude many grants for research and other purposes that are categorized elsewhere in the database. More important, since “higher education” is not broken down into subcategories, one cannot tell how the money was actually invested in particular educational, research, or other activities. In other words, universities are receiving considerable support from foundations, much of it from family foundations of their wealthiest alumni. And at least the wealthiest among them also have significant internal resources of a sort not available in the elementary and secondary sector. How much that can insulate them from the pressure of advocacy we have seen in the schools is an open question.

While it is difficult to extract figures for private-foundation research investments, it is fairly clear that the shift from learned foundations to strategic foundations has substantially reduced direct foundation investment in university research, previously the largest single category of investment. Disillusioned with the slow pace of most university research, grant makers are redirecting their research investments to nonacademic centers, think tanks, and the like, which depend on that revenue and are more likely than universities to produce what is wanted, and on time. Since World War II, STEM research financing has also become predominantly the responsibility of the federal government, so that private philanthropic support is less significant than it was 50 years ago.

Nevertheless, several of the new large foundations have developed higher-education programs. What seems to characterize them is their strategic focus on broadening the access and impact of postsecondary education for those Americans who have not traditionally attended college. The announced goals of many of the programs are to create more economic opportunity for poorer Americans and to expand the American economy. Recall President Obama’s Michigan speech.

It is true that some of the new megafoundations also invest in university research, but normally only insofar as that research serves their immediate strategic interests. Prominent among those, again, is access, raising degree-completion rates, shortening time to degree, enhancing student learning through the use of educational technology (especially online), strengthening the data collection necessary to track educational performance, improving the openness of higher-education institutions, and reducing both college costs and student indebtedness.

Such strategic programs deal with the process of higher education. By and large, the new foundations are not much interested in the content of undergraduate education—except insofar as curriculum relates to the paradigm of “school to work.” Their major focus is in getting previously excluded Americans into and through college so that they can become productive workers and earners.

Those themes recur in the higher-education programs of some of the largest new foundations. Gates currently has five programs in postsecondary education. Its interest is not new, since more than a decade ago the foundation “pledged $1-billion to fund college scholarships to deserving students.” But in contrast, the current Gates programs focus on ways to improve college performance by previously underserved students, including through remedial education, better financial aid, and new technology to help meet the needs of more students at a lower cost. The programs are committed to the support and improvement of the two-year college system, in which so many underserved students begin their postsecondary education.

The new foundations also stress methods that are fully in line with the emphases of strategic philanthropy: In explaining its focus on increasing graduation rates, Gates, for example, stresses that “our investments are aligned with proven or promising practices” and that “progress is effectively measured.” Accountability means that institutions should be judged by student results (degree completion) rather than by raising the number of students enrolled. “Until recently reform efforts and national policies have focused on increasing access to higher education for more students, particularly among low-income and minority populations,” a foundation release proclaimed a few years ago. “But access means little if students never earn the credential that will open the door to high-paying jobs and a better life.” As a result, Gates, like other new foundations, is seeking accurate information from colleges on degree-completion and job-placement rates and other concrete indexes of educational success.

This is a very coherent approach, consistent with current federal policies, and in line with the thoroughly instrumentalist attitude that most grant makers, politicians, and, perhaps, Americans have toward college education.

A second example of this approach is the Kresge Foundation. Kresge is an old (created in 1924), Michigan-based foundation that until recently devoted its funds to campaigns for capital projects like libraries, hospitals, and community centers. But in 2007, the foundation joined the strategic philanthropy sector and abandoned its historic mission in favor of partnerships with “those committed to the needs of poor individuals and communities: small, midsize, and large nonprofit organizations; intermediaries; and the public and private sectors.” Kresge decided to limit grants to “seven narrowly defined programs,” among them, education. Three of the education programs deal with domestic higher education, focusing on “underserved students” and “institutions that focus primarily on the needs of low-­income and underrepresented students.” Kresge seeks “a more efficient, productive higher-education system” so that students can have “more opportunity to launch productive careers.” It strives to “remove barriers to access and success.”

Those goals lead the foundation to be concerned with issues of accreditation, community engagement, leadership training, and “student persistence.” And, like Gates, it is impressed by the potential of digital and communications technology “to build efficiencies into new ways of teaching, advising, and evaluating.”

A third large higher-education grant maker is new and quite different—the Lumina Foundation for Education. Unlike the traditional foundation created by a single donor (or family), Lumina is a “conversion” foundation, created in 2000 when the USA Group (one of the largest organizations in the student-loan business) was sold to Sallie Mae and the proceeds were used to create an endowment dedicated to education. Lumina, which operates only in higher education, has recently emerged, along with Gates, as a dominant philanthropic policy player in higher education.

It has a straightforward institutional purpose (referred to as the Big Goal): “to increase the percentage of Americans with high-quality degrees and credentials to 60 percent by the year 2025.” Lumina asserts that there are “three critical outcomes” that will lead to the achievement of the Big Goal—preparing high-school students for success in college; significantly improving college-completion rates; and increasing the productivity of higher education to “expand capacity and serve more students.” Lumina’s Web site uses much the same language that President Obama has used to criticize the current performance of colleges, and its strategies are mostly those of policy advocacy.

It wants to “promote the alignment of K-12 and higher education systems,” “expand national postsecondary access outreach and action campaigns,” support “sustainable, high-quality student service and advocacy networks,” further policies that “support low income students.” One research-based strategy is, like those in strategic philanthropy, instrumental: to find “innovative approaches to support low-income students.” In all of this, Lumina understands that putting its preferred policies into effect “will require immediate efforts to build public and political will for policy change.”

Mind you, I applaud the efforts of the megarich to give their wealth to philanthropy. Moreover, the Obama and megafoundation strategy makes both political and educational policy sense, although I confess that I find it deficient in its understanding of the content of undergraduate education necessary to achieve its goals. But that is a different essay. What interests me here is another matter. It is how we make the decisions about those goals—and how to achieve them. Those are questions about how to make democracy work under current world conditions.

Here are three very different and very large foundations, among today’s biggest philanthropic investors in higher education, that share not only a common programmatic agenda (making college degrees accessible and affordable for all Americans, especially for those previously excluded from college) and a common set of strategies to put them into effect. They all openly assert that they seek to shape public policy. Gates is more focused on the federal level, whereas Lumina has a strong interest in state higher-education policies. But they see their role as articulating policies and financing 501(c)(3) intermediate organizations to assist them in policy formulation, advocacy, and execution.

What is obvious to me, as a historian of the emergence of private philanthropic foundations almost exactly a century ago, is how far we have traveled from the fears of the first foundations that they would be perceived as antiegalitarian and threatening to the democratic process. For years Rockefeller and Carnegie pussyfooted around financing economic and social efforts that might be perceived as politically sensitive. Ford got into trouble with Congress when it immersed itself in school reform in New York City and had to back down. But while Gates is often seen as antiunion and pro-charter school—politically contestable positions—it shows no signs of hesitating to push its overtly political agenda. Gates and Lumina are clearly untroubled to be, and to be seen as, players in education policy.

Universities—and their associations—have been silent on this development, perhaps reluctant to bite the hands that feed them. But shouldn’t we all be concerned when public officials defer to private institutions when reforming higher education? Are we outsourcing parts of our education policy to the private philanthropic sector? I think so.

For more on grants and grant writing, visit Grant Pros.


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