Overview

A family foundation decides to raise its minimum payout in order to tackle immediate problems, and accepts the possibility of a smaller corpus.

In 2001, the trustees of the Evelyn and Walter Haas, Jr. Fund decided, as part of a strategic planning process, to raise its base payout rate to a minimum of 5% in grants only. The three children of founders Evelyn D. Haas and the late Walter A. Haas, Jr. had become more engaged in the work of the foundation with their mother after their father died in 1995. Ira Hirschfield, the president, says, "The three children are now in their late 50s and early 60s and are actively involved in and committed to the Haas, Jr. Fund's work. They felt so engaged, and believed that the issues that we were working on were so deeply compelling, that now was the time to do more." Hirschfield also cites the close, trusting working relationship between the board and the staff as being crucial to the decision.

The assets of the foundation had been steadily growing since 1995. However, the trustees decided that program, rather than desire for perpetuity, would drive their strategy. The 5% grants-only number is a baseline, and the foundation is contemplating several large initiatives that could make the payout much higher in coming years. "We haven't made the decision to spend out," Hirschfield says. "Because of the markets, last year was a good one, and the corpus actually grew from $549 million to $599 million after grants and expenses. This was more than the inflation rate, so the Fund did more than maintain purchasing power. But even if the assets hadn't grown so well, we wouldn't have changed these decisions. We understand our decision to do a minimum of 5% in grants only could one day decrease our corpus, and we're comfortable with that possibility."

Key areas of interest for the Haas, Jr. Fund are improving the lives of low-income children and families, revitalizing underserved neighborhoods, enhancing non-profit leadership, and promoting equal rights and opportunity. It was an early leader in funding gay marriage and immigration reform, and although these movements have experienced setbacks and backlash, there have also been successes, and other funders have joined in the effort. With rising opportunity to move social change in these two areas, the Fund is prepared to significantly increase its investments. As opportunities to make a major difference develop in other program areas, the Fund is prepared to capitalize on these efforts as well. Hirschfield expects to focus these increased resources, and make larger grants. He says that the change in payout policy has allowed "the possibility for deeper and more expansive thinking." "It changes how and with whom you collaborate," he says. "With $500,000, you could do good work in immigration reform. With $4 million, you can start asking a different set of questions to address immigrants' needs, as well as deepen collaborations with other funders working across the country."

Becoming a large funder in these controversial areas also means greater visibility, which brings its own risks, something that the board discusses regularly. Another practical concern is the cost in excise taxes of radically increasing grantmaking. Since making the decision to pay out a minimum of 5% in grants only, the Haas, Jr. Fund has been steadily increasing its grantmaking, from $16 million in 2002, to a planned $30 million in 2007. However, because of the way taxes are calculated based on payout level, a large one-time grant could penalize the foundation by raising its excise tax in later years. "Let's say one of our big initiatives came through in 2007, and we went up to $45 million, and then back to $30 million the following year," Hirschfield says. "That could cost us $3 million in increased excise tax over the next five years. It is a disincentive."

[ << QUICK SPEND DOWN | GIVING 5.5% >> ]

  Resources

• Executive Summary
• Full Report
• Order Print Copies

  Report Contents

• Introduction
• Focus: The Whitaker Foundation and the Helen F. Whitaker Fund
• The Learning Curve: The Beldon Fund
• Retooling for Spend Down: The Atlantic Philanthropies
• Giving While Living: The Richard and Rhoda Goldman Fund and the Lewis B. and Dorothy Cullman Foundation
• Quick Spend Down: The Haigh-Scatena Foundation
• Raising the Payout: Evelyn and Walter Haas, Jr. Fund
• Giving 5.5%: The Lynde and Harry Bradley Foundation
• More than Investment Returns: The Needmor Fund
• Ramping Up: The HKH Foundation
• Using All the Models: Endswell Foundation / Renewal Partners
• A Different Strategy: Omidyar Network
• Conclusion
• Selected Bibliography
• Resources
• List of Profiled Foundations
• Acknowledgements

  Upcoming Events

• November 29
  10am - Noon
  NCG Family Philanthropy Exchange and the Stanford Center on Philanthropy and Civil Society are hosting a discussion of Beyond Five Percent: The New Foundation Pay out Menu. This funders only event is free for members.
  learn more >>

  Supporters of
  “Beyond 5%”

• Beldon Fund
• French American Charitable Trust (FACT)
• Quixote Foundation

Design by Ian Hewitt-Woods