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Philanthropy is Undermining Public Education – Part Three: Local Education Foundations

September 3, 2018

For the past three days I have been making the case that philanthropic giving is having an adverse impact on public education, a case drawn primarily from Gospels of Giving, a New Yorker article by Elizabeth Kolbert that, in turn, draws from several books that have recently been published describing how philanthropic giving is distorting the inequities that exist in our economy.

In today’s installment I look at how the creation of “local education foundations”, or lefs, comprised of small-bore philanthropists undercut the tax structure that could provide a means of equalizing education funding. In her article, Ms. Kolbert draws from the recent wok of Rob Reich, a political science professor from Stanford. She writes:

He begins his forthcoming book, “Just Giving: Why Philanthropy Is Failing Democracy and How It Can Do Better,” by noting that for every foundation that existed in 1930 there are now five hundred.The growth in foundation assets in that time has been even more staggering, from less than a billion dollars to more than eight hundred billion dollars.

Meanwhile, the losses to the U.S. Treasury keep mounting. In 2016, the tax deduction for charitable contributions cost the federal government at least fifty billion dollars. Is there any justification for this arrangement? Reich considers several possibilities. One is that the government, by encouraging giving to private philanthropies, is fostering participation in civic affairs. This rationale he discards, since, if anything, the correlation seems to be negative. “The rise of nonprofit organizations in the United States and the use of the charitable contributions deduction coincides with the decline of civic engagement and associational life,” he observes…

So who are the beneficiaries of these charities that siphon off tax dollars that could be used to provide more equity? It isn’t those in the greatest need:

A recent study suggests that, at most, a third of all tax-deductible giving goes toward aiding the poor. And the donors who are getting the biggest tax breaks are, it turns out, the least likely to be aiding the indigent: Reich cites research that suggests “the inclination to give to help meet basic needs declines as one rises up the income ladder.”

It seems that the group of current billionaires amassing huge sums of money are libertarians at heart. They appear to believe that sufficient opportunities exist for those on the low end of the wage scale to become billionaires themselves and that any money they spend will ultimately provide for the well-being of all.

In reading Ms. Kolbert’s article, the portion that deals most directly with public education is the one describing the rise in the number of less. Here is her description of this phenomenon:

Instead of promoting equality, Reich worries, tax subsidies for philanthropy may actually be doing the reverse. He cites, in particular, local-education foundations, or lefs. These are, essentially, souped-up PTAs, formed to supplement public-school budgets, and they’ve grown dramatically in recent years.Some lefs raise only enough money to buy paint sets or musical instruments, but some, in more affluent districts, raise thousands of dollars a pupil. In the town of Hillsborough, California, just north of Stanford, Reich reports, parents of public-school students get a letter at the start of the year asking for a contribution of twenty-three hundred dollars for each child enrolled. While the contributing parents can’t dictate exactly how the money will be spent, Reich writes, it’s easy to imagine groups of parents pressing the district to hire specialized teachers or to purchase sophisticated equipment that “can be targeted to benefit their own children.”This arrangement, in his view, exacerbates existing inequities in school funding, and, since contributions to lefs are tax deductible, rich districts are, in effect, receiving a subsidy from other taxpayers. 

This kind of nuanced transfer of money is not easily explained or understood to the average voter. But “giving things” to “undeserving poor people” IS readily understood, and, as noted in earlier posts, that kind of messaging is promoted by various 501(c)(3) groups that are also underwritten by subsidies from taxpayers. In effect, instead of creating a system where the need for greater equity is promoted and money flows from the most affluent to those in greatest need, we have created and reinforced a system where the wealthiest individuals have the greatest influence on the development and communication of messages and the greatest influence on the development and influence of policy.

Elizabeth Kolbert concludes her essay with this sobering analysis of where we are now and where we are headed:

In just the next twenty years, affluent baby boomers are expected to contribute almost seven trillion dollars to philanthropy. And, the more government spending gets squeezed, the more important nongovernmental spending will become.When congressional Republicans passed their so-called tax-reform bill, they preserved the deduction for charitable contributions even as they capped the deduction for state and local tax payments. Thus, a hundred-million-dollar gift to Harvard will still be fully deductible, while, in many parts of the country, the property taxes paid to support local public schools will not be. It is possible that in the not too distant future philanthropic giving will outstrip federal outlays on non-defense discretionary programs, like education and the arts… 

Is that the kind of future we want? As the latest round of critiques makes clear, we probably won’t have much of a say in the matter. The philanthropists will decide, and then it will be left to their foundations to fight it out.

This isn’t way things once were and from my perspective it is not the future I wish for my children and grandchildren. The only heartening news is that our country eventually emerged from the era of Robber Barons like Andrew Carnegie who increased their bottom line at the expense of working people. It happened once in this country nearly a century ago. It can happen again.

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