Philanthropy Winter 2014 by Philanthropy Magazine

HOWARD BUFFET T’S “40 CHANCES” • TED TURNER’S EVOLUTION • SMART KIDS ABROAD A PUBLICATION OF THE

W I N T E R

2 0 1 4

AT A TIME OF GOVERNMENT EXHAUSTION

Philanthropy is Solving Public Problems Keeping the lights on in Detroit • Fixing the public pension crisis • Humanizing foster care Finding deficit solutions • Educating the needy • Protecting elderly independence Getting wounded vets on their feet • Providing health for the uninsured

Detroit’s abandoned Michigan Central Station

BLENDED LEARNING

ow students are ion of computmastered) with ctures.While so extraordinarily t excitement for here there are ishment toward date practical VANDERKAM

BLENDED LEARNING A Wise Giver’s Guide to Supporting Tech-assisted Teaching Laura Vanderkam

Today’s Best Hope for Powerful School Reform? The combination of online instruction and personalized small-group teaching—known as “blended learning”—may be the future. This is the definitive book on how donors can take a leading role.

Available without charge to Philanthropy magazine readers. To order a FREE printed copy of Blended Learning: A Wise Giver’s Guide to Supporting Tech-assisted Teaching email main@PhilanthropyRoundtable.org or call (202) 822-8333 To download an e-book or PDF, please visit PhilanthropyRoundtable.org/guidebook

to transform how students are educated as the rise of blended learning—the artful combination of computerized instruction (personalized for each student to make sure topics are mastered) with small-group teaching that is closer to tutoring than to traditional mass lectures. While so far put into practice in only a handful of schools around the country, some extraordinarily promising results have made this new style of pedagogy a source of great excitement for contemporary school reformers. opportunities for savvy philanthropists to lead the education establishment toward a more excellent future. This highly readable, 148-page book provides rich, up-to-date practical

table of contents

PHILANTHROPY

features

departments

10 Philanthropy Keeps the Lights on in Detroit

4 Briefly Noted

How philanthropists are tearing down problems, building solutions, and stopping bad guys in the Motor City. By Liz Essley Whyte

20 S olving the $2 Trillion Problem

The Laura and John Arnold Foundation mixes research and politics to help solve today’s public-pension crisis. By Zachary Janowski

28 Making Forever Families

Churches and donors lift thousands of children out of the foster-care bureaucracy. By Naomi Schaefer Riley

Giving for the religious. A Black Friday for donors. A Grinch-like plan for parks. The cost of a tax change. Medical marvels. Catholic schools for the future.

6 Nonprofit Spotlight Volunteers in Medicine is recruiting retired doctors to help the poor.

7 Interview Howard Buffett takes on hunger.

48 Reviews & Commentary Real Opportunities for Veterans Disabled soldiers deserve better than a handout. By Thomas Meyer

52 Books

36 Economia!

How Pete Peterson’s donations are helping Washington find budget balance. By Megan McArdle

40 Healthy at Home

Keeping older Americans independent with timely acts of charity. By Andrea Scott

44 D onating a Motive to Strive

Oil-money pipeline funnels kids to college. By Carrie Besnette Hauser

A Man Out of Time Ted Turner’s life has changed, and his philanthropy is still fascinating. By Tom Riley The Tough Road to Excellence A reporter looks at what makes overseas schools good. By Dustin Petzold

56 Face to Face Photos from Philadelphia and southern California meetings.

60 President’s Note Philanthropy does not shut down. By Adam Meyerson

A P U B L I CATI O N O F THE

Adam Meyerson PRE SI D E NT

Karl Zinsmeister

VI C E PRE SI D E NT , P U BL ICA T IO N S

Caitrin Nicol Keiper E X E C U TI VE E D I T O R

Liz Essley Whyte

MA NAG I NG E D I T O R

Andrea Scott

A SSI STA NT E D I T O R

Taryn Wolf

A RT D I RE C TO R

Emily Holmstead I NTE RN

Arthur Brooks John Steele Gordon Christopher Levenick Bruno Manno John Miller Tom Riley Naomi Schaefer Riley William Schambra Evan Sparks Justin Torres Scott Walter

C O NTRI B U TI NG E D IT O R S Philanthropy is published quarterly by The Philanthropy Roundtable. The mission of the Roundtable, a 501(c)(3) tax-exempt educational organization, is to foster excellence in philanthropy, to protect philanthropic freedom, to assist donors in achieving their philanthropic intent, and to help donors advance liberty, opportunity, and personal responsibility in America and abroad. For editorial or subscription inquiries, please contact: The Philanthropy Roundtable 1730 M Street NW, Suite 601 Washington, DC 20036 Phone: (202) 822-8333 Letters to the editor: letters@PhilanthropyRoundtable.org Advertising inquiries: advertise@PhilanthropyRoundtable.org Reprints: reprints@PhilanthropyRoundtable.org Subscription inquiries: subscribe@PhilanthropyRoundtable.org Copyright © 2014 The Philanthropy Roundtable. All rights reserved. Cover: Yves Marchand and Romain Meffre

WINTER 2014

briefly noted

Central Park could see donations drop.

An especially charitable day With the doorbuster deals touted by retailers on Black Friday, Cyber Monday, and increasingly on Thanksgiving Day itself, our holiday for expressing gratitude is in danger of being overwhelmed by a week of getting more. But a new annual tradition aims to restore the spirit of the season. Giving Tuesday—in the week following every Thanksgiving—had its inaugural year in 2012, when more than $10 million in donations was processed by tech partner Blackbaud, a 53 percent increase from the same day in the year before. In 2013, the donations reached $19 million. The gifts are paltry compared to the more than $820 million Americans give each day, but they are impressive considering the numbers count only the 3,800 nonprofits Blackbaud was tracking. Word spread on social media and through outreach from 10,000 partner organizations in all 50 states and overseas. Proponents hope the custom 4

An ugly parks plan If New York’s new mayor, Bill de Blasio, gets his way, the Big Apple will undo one of the most successful philanthropic experiments of the past three decades: transforming Central Park from decaying and dangerous to vibrant and verdant in just a few short years. Millions of people who use and love Manhattan’s green oasis can thank the Central Park Conservancy for this makeover. A private nonprofit that manages the park and raises the bulk of the funds needed to restore and operate it, the conservancy’s success has spawned similar efforts in other parts of New York and across America, attracting hundreds of millions of donated dollars for providing natural sanctuaries to ordinary people who live in cities. (See “Philanthropy on the Green” in Philanthropy, Fall 2012.) De Blasio has endorsed a plan to raid the coffers of the Central Park Conservancy and others. Every year he would take funds representing a fifth of their operating budgets from conservancies with budgets totaling more than $5 million, and redistribute them to other municipal parks. This will damage the parks that rely on conservancies (Could you manage your business with a 20 percent across-the-board budget cut tomorrow?) and alienate the donors who have made voluntary offerings to specific parks they cherish. What donor wants his gifts vacuumed up by the New York City government? De Blasio’s plan is an assault on the liberty that Americans have always enjoyed to choose the objects of their private giving. Why would he want to stymie the spontaneous and voluntary sharing of private wealth that has made green spaces across his city such delights for everyday residents? —Evan Sparks Tax tabulations The American Enterprise Institute’s Arthur Brooks recently released a paper calculating that a 28 percent cap on charitable tax deductions, as proposed by the Obama administration, would likely lead to a $9.4 billion reduction in charitable giving in the first year of the change. And the contraction would

PHILANTHROPY

Giving religiously It is well known that America’s religiosity has a great deal to do with our unusually high levels of giving. Americans donate about $300 billion to charity every year, and people who go to church more also give more. (See “Donation” in Philanthropy, Summer 2013.) A new study shows that 73 percent of the dollars donated by households in the U.S. go to organizations with religious ties. According to research for the Connected to Give project, which is supported by a consortium of Jewish foundations, 41 percent of personal giving goes to churches and synagogues, and another 32 percent is directed to religiously affiliated nonprofits, such as Catholic Charities, Jewish Federations, and the Salvation Army. The study also found that among Americans who give, 55 percent say their commitment to religion is an important or very important motivation for doing so.

will catch on permanently and lead to more people giving more money to good causes. For helping turn our collective attention to the satisfactions of generosity, Giving Tuesday is something fresh to be grateful for.

be more severe in some sectors. Religious giving and giving by the middle class are not likely to shrink much, but discretionary donations from earners in the top tax brackets will decline much more sharply. Nonprofits dependent on high-earning donors—like universities, hospitals, orchestras, and environmental groups—would lose 24 percent of their donations, according to the study.

American philanthropists. Some of them are fascinating stories—how Uncas Whitaker’s $700 million fortune almost singlehandedly made biomedical engineering the thriving field that it is today, giving us cochlear implants, artificial hearts, lab-grown skin, and more. Some are harrowing—how at least eight researchers working for the Rockefeller Foundation died trying to find a yellow fever vaccine. All are inspiring for donors interested in medical research and saving lives. The Philanthropy Roundtable has researched and compiled a roster of the most important U.S. philanthropic achievements in medicine throughout nearly three centuries. It is now online at the Roundtable’s website, or use the shortcut bit.ly/philanthropymedicine. More roundups of major philanthropic achievements are on the way as part of our creation of a comprehensive almanac of philanthropy.

Lifesaving charity Eliminating hookworm in the South. Instituting high standards at American medical schools. Saving diabetes patients by testing and distributing insulin. Discovering the flu virus. Decimating HIV’s death rate. These are just a handful of the many notable achievements in medicine that owe their success to the generosity of

Q&A WITH TIMOTHY SCULLY The Reverend Timothy Scully founded the Alliance for Catholic Education at the University of Notre Dame in 1993. This highly successful program trains teachers and administrators for service in needy Catholic schools, and has attracted many top-ranked graduating college students to the cause. Philanthropy recently spoke with Scully about ACE and the role Catholic education plays in America.

challenges that faces us are to maintain our Catholic character, strengthen academic excellence, and make sure these schools are financially sustainable.

Q: What is the role of philanthropy in Catholic schools? A: Thoughtful philanthropists can have their great-

est leverage on Catholic education by investing in leadership programs. The next 10 to 15 years of the Alliance for Catholic Education at Notre Dame are going to be focused on forming principals and superintendents. School leaders establish the culture of high expectations; they hire the teachers. One thing we know about school achievement is that great teachers deliver great results. That’s why we are going to focus on the principal.

Q: Why did you start ACE? A: To respond to the changing needs of inner-city

Catholic schools across the country. The religious orders that founded these wonderful, extraordinary little islands of hope and served them for more than 100 years were dying out as vocations in our church. We knew we needed to replace that talent, so we founded ACE to form a new generation of Catholic school teachers and leaders who were lay people.

Q: Why is Catholic education good for America? A: Imagine a country where the only schools

available to inner-city children and low-income families are state-run schools. The vibrancy of America is its rich, diverse civil society. To lose this wonderful asset of faith-based education available to underprivileged people would be a real tragedy. The evidence suggests that Catholic schools form citizens who are more tolerant, who vote more frequently, who are two and a half times more likely to graduate from college, who have high expectations, who volunteer more often, who are more generous philanthropically. Those are the kinds of schools we need to form America’s citizens.

Matt Cashore / University of Notre Dame

How have you seen Catholic education change in the past few decades?

A: The most important change has been that 25 or

30 years ago, 95 percent of the teachers in Catholic schools were religious brothers and sisters—a wonderful asset that has largely disappeared. That not only changed the culture of our schools, but presented financial challenges as well, because these religious sisters and brothers were paid very little. We’re creating a new generation of teachers who are committed to the same mission as those earlier apostles. The biggest WINTER 2014

nonprofit spotlight Volunteers in Medicine

A nurse checks a patient's vital signs at the Parker Family Health Center, a VIM clinic in Red Bank, New Jersey.

donations from the local community. Hamlin’s central office, with a lean staff of four and an annual budget of about $300,000, provides technical assistance for the whole network and works to get more clinics up and running across the nation. Meanwhile, the original branch in Hilton Head, South Carolina, is going strong. It recently received an anonymous $40,000 donation to expand the pharmacy, which has seen a tenfold increase in the prescriptions it dispenses annually. Looking back over the past two decades, Hamlin takes pride not only in the clinics they’ve helped start but in many more that were inspired by VIM without officially joining the network. “Hundreds of free clinics have come as a result of Jack McConnell’s vision,” she says. The American Medical Association Foundation named one of its annual leadership awards for him. Like McConnell, many VIM staff are retired nurses and physicians who offer to serve their communities without pay after a full career. Others are active professionals who carve out a few days each month to volunteer. “It’s the kind of experience that motivates people to go into medicine in the first place,” Arthur Peisner, chairman of a clinic in Massachusetts, told the Berkshire Eagle. Individuals who were called to PHILANTHROPY

medicine by a strong desire to serve people, only to find the bureaucratic realities of practice dispiriting, often discover that the mission of VIM renews their sense of purpose. The volunteers and supporters “are just the most amazing people,” says Hamlin. “It’s very joyful work.” While the free labor of thousands of medical professionals drives these facilities, donors cover building rents, lab charges, support staff, and medication costs. The end product is a half-million annual patient visits, all produced at a modest philanthropic outlay of $316 per visit (as of 2011), including all lab work and medicines. Various federal and state laws protect the volunteers from malpractice claims. Because the clinics don’t take government funding, each has the flexibility to tailor its operations to the needs of the community, and they don’t stand or fall according to political priorities. “They were established from the get-go to be sustainable,” says Hamlin, who has been awarded the William E. Simon Social Entrepreneurship Award for “nonprofit leaders who have found innovative, private solutions for America’s most pressing social problems.” “Safety-net clinics,” notes Hamlin, “are going to be needed for a very, very long time.” —Caitrin Nicol Keiper

Volunteers in Medicine

This winter, as the bulk of the Affordable Care Act goes into effect, there are still tens of millions of people in the U.S. without health insurance. Immigrants, the self-employed, temporary workers, and others can fall between the cracks of private plans and government programs. For these people, Volunteers in Medicine is a network of pro bono clinics that offers free, high-quality care. The first VIM clinic was founded 20 years ago by Dr. Jack McConnell, a pediatrician and pharmaceutical researcher who helped develop Tylenol and MRI technology. He and his wife had retired to Hilton Head, South Carolina, where the seasonal tourist economy left one in three local residents periodically unemployed and uninsured. “It was not until I stopped saying, ‘Someone should look into this problem,’ and realized I was speaking to myself that it really turned around,” McConnell recently explained. Retired doctors, nurses, and dentists came forward, eager to volunteer their skills. When word spread, and other communities expressed an interest in opening their own free clinics, McConnell set up a separate organization, the Volunteers in Medicine Institute, to help them navigate the process. Under the institute’s executive director Amy Hamlin, the VIM Alliance has grown to 96 clinics and counting, staffed by more than 11,000 dedicated volunteers, in locations ranging from Farmville, Virginia, to Indio, California, to inner-city Baltimore. They offer their patients a full range of services, including dental work, mental health care, nutrition counseling, and referral to a nearby hospital when necessary. Much of the care is aimed at chronic conditions, in an effort to prevent these long-term afflictions from debilitating their victims. Patients are treated free of charge, with perhaps a nominal fee to fill their prescriptions. Each clinic is independently managed and supported by grants and

interview

HOWARD BUFFETT Farmer, philanthropist, photographer— Howard Graham Buffett wears many hats. Growing up, his father Warren made it clear that it was his responsibility to make his own way. When he came into possession of a broken tractor, he knew he had found his calling, and dedicated himself to grain farming in the Midwest. Meanwhile, an interest in photography took him to the far corners of the world, where he became involved in conservation projects. In 2006, with a major gift from his father and the help of his son, Howard Warren, he expanded his philanthropic operations and focused on hunger. The two Howards recently collaborated on a book, 40 Chances: Finding Hope in a Hungry World. Philanthropy sat down with Buffett to discuss the lessons in the book.

Howard G. Buffett Foundation

Philanthropy: What are the 40 Chances? Buffett: I saw a talk at a John Deere dealership. The speaker said farmers really get 40 growing seasons, 40 chances to make their best crop. It’s pretty much like life. In our foundation, we think about, “What are our 40 chances?” We need to act with urgency. We need to take more risk and find new things. It really drives us differently than if we just sit there and think, “Well, we’ve got a big endowment; the grandkids will do this; life goes on.” It’s really a mindset for us now. Philanthropy: How are your two passions of conservation and hunger linked? Buffett: In 1992 a guy said to me, “No one will starve to save a tree.” Around that same time I would go off to the Serengeti and photograph the cheetahs and look at conservation projects, but then I would talk to the villagers. From their perspective we were spending money on cheetah populations while the cheetahs were killing their livestock. I realized that if we didn’t focus on people and their needs, there isn’t any way we’re going to be able to preserve the environment.

Howard Graham Buffett (right), with his son Howard Warren Buffett in the nation of Georgia, studying its agriculture and visiting with people displaced by Russia's invasion.

Philanthropy: Why else is your foundation battling hunger? Buffett: Once you start looking at hunger, you realize it causes conflict. You also realize conflict causes hunger. It works both ways. You can’t really get away from it. In eastern Congo, we’re going to spend more than $40 million directed just at one province this year. What we’re trying to do is meet people’s hunger needs, offer hope, and use that to promote peace. The conventional wisdom is to wait for peace and stability, and then invest. We’re saying, “No, let’s invest now.” With more hope for the future, people will demand peace, or at least allow for it. WINTER 2014

And conflict, of course, loops back around to conservation, too. The biggest source of capital for many African militia groups and rebels is ivory. We’re providing elite K-9 units to go after poachers. We’re also going to use intelligence systems, aircraft, and rapid-response teams to interrupt capital flows to rebels and militia groups who are creating conflicts that we deal with down the line as humanitarian problems. T he great byproduct is we’re also going to save elephants. But it’s funny because that’s the other end of where I started. Twenty-five years ago I would have been doing this to save the ele7

On the other hand, I have no problem with failing. We fail all the time. The only bad failure is if you don’t learn something from it.

“I use photography to explain what I’m doing and why— to share the nobility and dignity of people I see,” Howard G. Buffett says. He took this picture.

phants. Today I’m doing it to stop that governments and nonprofits depenconflict. It’s a complete turnaround. dent on outside donors can’t. What are you able to achieve in that position? Philanthropy: How does your experience Buffett: We see our foundation as risk as a lifelong farmer inform your philan- capital, because we do have a tremendous thropic work? amount of flexibility. If I have to put on Buffett: To increase agricultural produc- a fundraiser or five every year, I have to tivity, you have to figure out the local make sure my donors are happy. That impediments and solutions to fit them. drives a certain kind of behavior: doing It’s sometimes pretty frustrating because safe things, making sure it looks good, you see a lot of money and a lot of effort taking less risk. We can use our indebeing put into programs or policies that pendence to be more innovative and try really push an American or Western way things that others may not want to try. of doing it. In agriculture, that absolutely A year ago, we funded a pilot projisn’t going to work. If I look at 600 million ect for a small hydroelectric plant in small farms across 54 countries on a conti- the Congo. I don’t know anybody else nent like Africa, they won’t look like a farm who would have funded it. Within a in Nebraska. They can’t look like a farm in few months of that pilot, there were two Nebraska—not in an effective and efficient European companies that wanted to set way. What should they look like, and what up processing plants using our power. One should we be doing to help them look like was a company that extracts enzymes from they need to? We’re doing a lot of research papaya. They now employ about 30 people, in Arizona and South Africa on small farm and they’ll probably grow. The other comsystems that are conservation-based. We’ve pany came in and started producing soap, talked to farmers, just figuring out what they which no one else in eastern Congo was can and can’t afford. doing. That hydroelectric plant wouldn’t exist if we weren’t willing to put money Philanthropy: You’ve written that as an into it. That’s a success from something independent foundation you can take risks that was highly risky. 8

PHILANTHROPY

Philanthropy: How about private versus government aid? Buffett: Both need an exit strategy that allows the people you’re working with to have their own exit strategy. If I do a project for three years and I go home, have I created dependency? Have I left them with some kind of conflict? The key is whether I helped them solve their problems. Our government has a great legacy of assisting and feeding people around the world. This is something to be proud of, but there are drawbacks, too. One is the requirement that the primary kind of food aid we give today is in commodities instead of cash for local purchase. Back in 20052006, I had an experience in Angola where we tried to get food to villages and the U.S. couldn’t deliver. It would take months. But we could have gone into the region and purchased food within weeks. More fundamentally, when we take our commodities to a place like Nigeria where farmers are struggling, we undermine that market and ruin the community’s ability to support itself. We’ve learned that using cash to purchase local or regional products to address food issues is a quick and efficient way to solve humanitarian crises without undermining the local economy. Philanthropy: How can business and philanthropy collaborate? Buffett: Many international charities are automatically suspicious of business, thinking “because a company did this, we can’t be associated with them.” That’s been a huge lost opportunity. If you want to pull people out of poverty, they need jobs. They need economic independence. Businesses provide that. If you look at Africa, the largest single employer on the continent is Coca-Cola. Creating jobs is ultimately the long-term answer. The challenge is that no matter where you go, there’s always a division of people below a certain line where they’re just really, really poor and they have really, really big hurdles. Business isn’t necessarily going to help that group of people right

away. But it doesn’t mean you shouldn’t use business to help a huge sector of people in the middle that can be pulled out of poverty permanently. We’ve worked with Coca-Cola, Starbucks, and Green Mountain Coffee in Central and South America. When we get done with a project with them, the people that we serve don’t need us anymore because they’ve got jobs. Farmers selling in the marketplace understand contracts, quality, and delivery. The role we played was to find somebody who could make sure that that training took place.

Buffett: I was planting soybeans in Illinois when I got a phone call. A friend connected with the Ugandan army said, “Caesar Acellam, the number-two general, has been captured.” There was already a rumor among the remaining fugitives that the Ugandans had killed him, or that he was being tortured in captivity. My job was to get some photographs to put on flyers and drop into the jungle to show others who might want to defect that he wasn’t tortured, that he’s still alive. My friends wanted an image with a big smile to show that he’s in good health and he’s happy that he came in. My solution was to make him a peanut-butter sandwich. Everybody told me it was crazy, but it worked! I made the sandwich—a new and special meal for him—which got him to relax in front of my camera. Those flyers brought more defections from the LRA in the last year than in the previous three or four. About 30 fighters came out of the LRA last year and went back to their families. Most of those defections happened because of the flyers. You think about how to fix big problems, fundamental issues. Then all of a sudden you get a chance to do a very specific thing. And you see that sometimes you need to focus on the smaller and more personal things.

Howard G. Buffett Foundation (3)

Philanthropy: You make a point of getting out and meeting the people you’re working with, which can be both uplifting and challenging. One particularly sad story in your book concerns a woman in Angola with a sick baby. You really wanted to reach out to her and ran the numbers on ways to help her village, but ultimately made the difficult decision not to get involved. How do you make such a tough choice? Buffett: I’ll never forget driving away from that village, knowing that many of those kids are going to die and there’s nothing we can do about it. That’s a sinking feeling. The woman was trying to hand me her child, but from a legal and moral standpoint there just wasn’t any way for me to take her baby and go home. I did think maybe we could set up an emergency intervention for the whole village. Long story short, one village became Philanthropy: What else has surprised you 18, and when we did an assessment of every- in your philanthropy? thing it would entail, we realized we couldn’t spend $5 million for a small group of villagers, not knowing what happens to save them again six months or a year later. That was a hard lesson to learn.

Buffett: My dad gave us $3 billion! We started right here in Omaha back in the 1980s. We set up a little foundation and each of us kids got $100,000 to work with. We did that for a long time, and later we set up individual foundations for each of us. But I never dreamed that we’d get to the point where we could spend $140 million a year trying to deal with big issues. It’s been a great opportunity and really the biggest surprise in my life. Philanthropy: You might say that philanthropy is now the Buffett family business. What advice would you give to other philanthropic families on how to involve the next generation? Buffett: Engage your kids early. Take them around the world to places out of their comfort zone. Go to the food bank in your own community. Most of the people who go the first time to help will go back a second time. Philanthropy: Who are your inspirations? Buffett: Besides my dad, of course, my inspirations are the people we work with. The truth is that it all comes down to the people you are trying to help. You think big, but actually you give more for the individual people you’ve met than for something in the abstract. What’s inspirational to me is that suffering people can keep the faith and not give up. If they aren’t going to give up, we can’t give up. P

Philanthropy: You use photography as a philanthropic tool. Buffett: I’ve seen so many things that I don’t know how to describe. But when you’re using a camera, you can take the image home and use it to show people what’s going on. The camera has been an amazing tool for me. Philanthropy: Your camera played a key role in your work rounding up African fighters from the Lord’s Resistance Army.

“Photography played a huge role in what I came to understand about hunger. I could not look away,” Buffett says.

WINTER 2014

French photographers Yves Marchand and Romain Meffre traveled to Detroit to capture the abandoned buildings pictured here and throughout the story.

IGHTS ON IN

HILANTHROP

DETROIT

Donors hope to tear down problems, build solutions, and stop bad guys in the Motor City By Liz Essley Whyte

he city in which Jane Fisher Sherman grew up can now be found only in memory and sepia photos. As a young girl, the now-grandmother and philanthropist took the bus from her leafy urban neighborhood to downtown Detroit, where trolleys scurried, store windows shone, and people flocked to the streets for business, food, and entertainment. The Motor City was alive, active, growing. No longer. There are no traffic jams downtown, and in the surrounding neighborhoods decay is rampant. Up to one third of city land is deserted, and boarded-up houses dot almost every street. In 2012, one out of every 1,800 residents was murdered. Residents are afraid to pump gas in city limits, lest they be carjacked. Police take an average of 58 minutes to respond to 911 calls. The public schools are some of the worst in the country. In the 1950s, Detroit was a city of 1.8 million; now it has shrunk to about 701,000. With a shriveled tax base and enormous pension obligations to public employees, Detroit filed for the nationâ&#x20AC;&#x2122;s largest-ever municipal bankruptcy in 2013. The cityâ&#x20AC;&#x2122;s state-appointed emergency manager declared that Motown was between $18 billion and $20 billion in debt. So now Sherman, the eldest daughter of multimillionaire businessman Max Fisher, finds herself returning to Detroit to plant trees and help impoverished mothers in a part of the city where blight is rampant and streets

Liz Essley Whyte is managing editor of Philanthropy.

WINTER 2014

139

square imiles

90,000 vacantihouses

residents per acre

in 1950

8 residents per acre

in 2010

35,000 streetlights work out of the city’s 88,000

are strewn with trash. In Brightmoor, the neighborhood adopted by the Max M. & Marjorie S. Fisher Foundation, one third of households live on less than $15,000 per year. Sherman is part of a large cohort of private donors, foundations, and corporate givers working overtime to keep Detroit alive. In this city, like nowhere else in America, philanthropy is keeping the lights on. Sometimes literally. A shadow administration Sue Mosey sits in her midtown Detroit office, a wall of glass letting in light from the overcast sky. She talks fast, like someone with no time to waste, ticking off a list of things her nonprofit is doing that are normally reserved for public agencies: rezoning the neighborhood, installing streetlights, repaving roads, maintaining parks, picking up trash, planting flowers, paying government salaries, wooing development. “We stepped into a vacuum, especially a governmental vacuum,” she says, adding that outsiders are shocked at the types of work her group does. She recounts some recent visitors from an Atlanta foundation. “I don’t think they could ever really get their head around it. But when you’re in a city that has lost so much of its tax base, if you want to move forward you just do what needs to be done.” The area Mosey serves, midtown Detroit, is experiencing a revival. Much of that is due to her team, and the philanthropic dollars pouring through them. Donors have given millions to help Mosey’s group turn around this neighborhood adjacent to Detroit’s downtown, betting that a vibrant central residential district will prove to be the fertile ground Detroit needs to grow again. Mosey has worked for her nonprofit, now named Midtown Detroit to match the neighborhood, for 26 years. During that time the group bought up parks, gave out loans to otherwise-wary developers, and branded and marketed the neighborhood with zeal. It turned a block of vacant historic houses into a boutique hotel. Now Mosey is beginning to see her hard work pay off, as the neighborhood becomes an attractive destination. More PHILANTHROPY

than two dozen small businesses opened in Midtown in the past year and a half, and Whole Foods—a frequent marker of neighborhoods on the up-and-up— opened a grocery in recent months. The area’s residences are now 96 percent occupied, and 277 people sit on a waiting list for a 58-unit apartment building her group helped open for business in 2012. But it hasn’t been easy. “One thing you learn in Detroit pretty quickly is as you do things, you pretty much have to address other problems that go with them. You can’t just do an intervention and then think it can work,” Mosey says. As a result, the group has its fingers in every pie in the neighborhood. It maintains all the nearby public spaces for the city, under a contract in which it does not get paid. It hires private companies to clean up trash, remove graffiti, and keep the streetlights on. “The only lights in Midtown that consistently work are the new ones that we’ve paid for and put up,” Mosey says. “Most of the other lights are off most of the time. The whole thing’s crumbling. There are all kinds of wiring and circuit issues, transformer issues. If you don’t maintain the system, and it’s very old, then this is what you get.” A new lighting authority created by the city will make things better, Mosey hopes. They’ve hired the private contractor that Midtown Detroit already works with. Now the nonprofit is drawing up a rezoning plan for the neighborhood, which it plans to take to the city for approval, to allow for more modern, mixed-use development. “We’ve hired the zoning guy who was laid off from the city,” Mosey explains. Midtown Detroit also pays the salaries of two workers in the building and safety department who are working to streamline business licenses and permits, to cut red tape that binds the city’s home-grown entrepreneurs. The Hudson-Webber Foundation was Midtown Detroit ’s sole funder for many years. Now other donors are involved in the work there. “That set of investments has kept the infrastructure from crumbling, and now the market has caught up,” says Hudson-Webber president Dave Egner.

Yves Marchand and Romain Meffre

These efforts reflect the new reality of Detroit philanthropy: The scale of the city’s setbacks demands an “all hands on deck” approach. Between 2007 and 2011, area foundations like Hudson-Webber, Skillman, Kresge, W. K. Kellogg, and others poured at least $628 million into Detroit, according to a Foundation Center analysis done for the Chronicle of Philanthropy. And big national players like the Ford, Charles Stewart Mott, and John S. and James L. Knight foundations have also directed more resources to the city in the last few years. The Ford Foundation, for instance, reports devoting $60 million to the region since 2007—up from the $38 million the foundation gave during the previous ten years. So donors are giving more. But are they giving differently than during Detroit’s decades-long spiral into dysfunction? Ford, Kresge, Kellogg, and Mott have long pedigrees as leaders of the philanthropic left. But with the sobering realities of Detroit’s social and economic bankruptcy, even the “progressive” foundations are dabbling in programs not normally associated with the left: bits of school choice, enhanced law enforcement, a friendlier business climate, private solutions to public problems. Just as a practical matter, the severity of Detroit’s collapse seems to have pulled philanthropists into more hard-headed work. The Kresge Foundation and corporate partners last year donated 100 police cars to the city. The Skillman Foundation has set up neighborhood and after-school patrols, and is now working with city police to improve tactics and create neighborhood safety zones. “We just finally came to a conclusion that lack of safety undermined everything we were trying to do,” says Skillman president Tonya Allen. “We were trying to do good schools. Safety undermined it. We would see kids who were doing really well, wearing uniforms, and they were getting attacked when they walked out of the building,” she says, recalling a 2009 incident where seven teens were shot at a bus stop while traveling home from a summer-school program funded by her foundation. “Violence and a lack of safety are demoralizing and heart-wrenching. So we made this conscious decision that we were

It is estimated that Detroit has up to 90,000 abandoned homes, many of them crumbling like this one, the William Livingstone home, built in 1893. Blight is one of the city’s biggest problems.

no longer going to sit on the sidelines on safety, we were going to stop letting the bad guys win.” The Kresge and Kellogg foundations ventured into new territory for them in this union-dominated city when they lent support (along with other donors) to Excellent Schools Detroit, a group which offers parents information not just on conventional public schools but also on charter schools, parochial schools, and private schools, encouraging parents to select the best match for their child. Ford, Mott, Kresge, and Kellogg have all embraced the New Economy InitiaWINTER 2014

tive. A prime example of this more urgent philanthropy being seen across the city, NEI started with the recognition that Detroit will never prosper with so few private-sector jobs—it currently has only one for every four residents. So in 2008 ten foundations joined forces (Fisher, Kresge, Skillman, Ford, Hudson-Webber, Kellogg, Mott, Knight, the Community Foundation for Southeast Michigan, and the McGregor Fund) pooling $100 million to spend over eight years to revive the region’s economy. Given the varied philosophies and priorities of those foundations, it took the leaders several years to 13

agree how to spend the money. Eventually, though, they placed a big bet on attracting private entrepreneurs. By 2012 (the latest year for which numbers are available), with $70 million spent, the results seem impressive. A third-party audit of NEI grantees showed 423 new companies started in the Detroit region, with $22 million in annual revenue booked by these growing businesses, resulting in 6,898 new jobs, and $255 million in additional investments leveraged by the NEI startups. The initiative’s backers concentrated on fueling Detroit’s startup culture, in an attempt to diversify the regional economy beyond the area staples of government and 14

PHILANTHROPY

automobiles. The region was “a victim of 70 years of our own success. We had started to protect this culture that was built on paternal relationships with large employers, particularly in manufacturing,” says Egner, who is the NEI’s director in addition to running Hudson-Webber. “The foundations knew this needed to change.” Now foundations are even being called upon to help untangle the city’s bankruptcy. U.S. District Judge Gerald Rosen petitioned a group of 10 national and local foundations to provide $500 million to protect the city’s art collection and employee pensions, both targets of creditors. At least one individual donor has already given

Yves Marchand and Romain Meffre

$5 million to the cause. The story continues to develop as Philanthropy goes to press. Betting on the city Drive along the main center-city drag, Woodward Avenue, and you’ll see a large sign in window after window: “Opportunity Detroit.” The moniker is plastered on the buildings owned by Quicken Loans founder Dan Gilbert, who is the hottest name in town right now. A United Way billboard looming above a highway pictures a young boy and reads: “The next Dan Gilbert. The Detroit of tomorrow starts with a donation today.”

The ballroom of the Lee Plaza Hotel. Native Detroiters call images like this “ruin porn” and point to more hope-filled pictures of a reviving Detroit.

Seemingly everyone sings his praises. And he returns the favor, as the city’s number one cheerleader. In 2010, Gilbert moved his company headquarters from the suburbs to downtown, bringing 1,700 employees along with him. He brought along another 2,000 the year after, and wooed more businesses to follow him. (The Mackinac Center for Public Policy notes that the Quicken Loans move and other prominent corporate WINTER 2014

shifts to downtown often came with giant tax breaks.) He then went on a shopping spree for the city’s skyscrapers, nabbed them at rock-bottom prices—one sold for $8 per square foot—renovated them, and courted about 200 retailers and businesses to fill them. He stands to earn a hefty sum if Detroit really does pull off a revival. But Gilbert, a signatory of the Giving Pledge, has also poured his money into downtown parks, housing aid, small business development, and transportation improvements. A tour of some of Gilber t ’s once-abandoned buildings, now turned into a series of hip offices with the help of his design firm dPOP!, leaves no doubt that he is physically transforming downtown Detroit. In what used to be empty brick space filled with trash, brightly colored cartoonish chairs populate one office; in another, chandeliers hang in a vault-turned-meeting-room. At every turn are professionals who weren’t here a few years ago. In addition to working in Detroit, about 2,000 of them have made the city home, some aided by a rent incentive program Gilbert and other business leaders fund. Gilbert has given “tens of millions of dollars that have been extremely important to talent attraction and creation of a bustling central business district,” according to Egner. But is it business or philanthropy that motivates Gilbert to pour millions into Detroit? “We frame it as doing good and doing well,” says Matt Cullen, CEO of Gilbert’s umbrella organization for his 70-plus companies. “Philanthropy alone won’t work in the city of Detroit,” he says. “A philanthropic intervention doesn’t create a sustainable economic environment.” Cullen is not shy about the possibility of Gilbert’s investments paying off in a big way. “We fundamentally believe the city of Detroit is an undervalued asset. And we fundamentally believe that now is the time to get in at the bottom floor of economic development in this city, and that we will benefit as a result of it.” Scoffers say Gilbert’s efforts to renovate skyscrapers and make downtown more inviting are cosmetic changes that ignore social and systemic problems in the surrounding neighborhoods. Others doubt 16

that the regional economy will ever bounce back to the point that Gilbert’s investments will pay off. But Cullen says he and Gilbert are contributing where they think they can give the most help. “Downtown and the neighborhoods are a single organism. There’s no way to be successful with an either-or solution,” he says. “We want the whole city to come back.” To lure more businesses to Detroit, Gilbert started a nonprofit, Bizdom, to provide office space, training, and up to $125,000 in startup funding for budding entrepreneurs. Bizdom, which has received funding from the New Economy Initiative, sits in one of Gilbert’s downtown buildings, decked out with shiny Mac computers, bright green paint, and white boards that cover entire walls. “Please erase the walls after your meeting,” reads a sign. Gilbert has also boosted a 3.3-mile streetcar planned to run along Woodward Avenue. He pledged $8 million to the $145 million project, which has received an unprecedented $100 million in private donations, including $35 million from the Kresge Foundation. Construction is also backed by $25 million in federal grants. Skeptics point to the city’s failed People Mover, built in 1987 to circle downtown but now requiring millions in annual government subsidies to operate. But Laura Trudeau, who heads Detroit giving for Kresge, insists M-1 Rail will connect downtown with neighborhoods, and people with jobs, in a way that the People Mover and city buses can’t. “The area needs a stronger economic core, with more people living there and more jobs within the city itself,” Trudeau says. “People are just demanding better mass transit.” Gilbert’s latest volunteer work has a not-very-lucrative focus: ridding the city of blight. The federal government recently appointed the billionaire to a task force to deal with Detroit’s estimated 78,000 abandoned structures. The news was seen as a shift for Gilbert, who until then seemed focused solely on downtown. The morning of his interview with Philanthropy, Cullen toured decaying homes in Brightmoor, the neighborhood the Fisher Foundation adopted, where 30 percent of houses are vacant. PHILANTHROPY

Cullen says Gilbert’s new work on blight came out of conversations when he and other business leaders convened at the White House in late summer 2013. “They had invited us to talk about what the federal government could do within their existing programs in order to make a difference,” Cullen says. “Dan brought forth the idea that, ‘It’s hard for the city to really move forward until we get rid of all of this blight.’” The feds agreed to chip in $150 million for blight removal, with most of the funds coming out of existing budgets, and asked Gilbert to sit on the task force. Gilbert’s committee wants to remove every decrepit structure in the city in three years. Considering that no one really knows how many abandoned buildings Detroit has—some estimate up to 90,000—the goal is “audacious,” as Cullen puts it. “We’re working together to see if we can provide a plan that would provide the necessary financial resources, the technical capacity to take it down, and the legal authority to get it done.” Experts say demolishing a single-family home can cost between $8,000 and $15,000. Cullen thinks the project can be done for $1 billion in private and public support; Gilbert estimates only $500 million. How much of that will be his own contribution is yet to be seen. Future planning Blight clearing and mass transit aren’t the only tasks traditionally managed by government that Detroit donors find themselves investing heavily in. Kresge gave $50 million to build a three-mile promenade along the city’s riverfront in 2008. With a more recent $5 million donation, Kresge became the primary funder of long-term city planning for Detroit’s 139 square miles. City government started the effort, but faced raucous neighborhood meetings, with residents worried the city would shrink its borders and they’d be forced to leave their homes. Officials passed the project to philanthropy, where it could be completed in a less politicized way. The new inch-and-a-half thick “Detroit Future City” plan required intensive community involvement—meeting after meeting.

“This city needed to come to terms with where it was,” says Dan Kinkead, now the director of the plan’s implementation team. Planners needed to hear from residents and businesses about what wasn’t working and what improvements sounded appealing, he says. Detroit Future City now offers detailed strategies for stabilizing Detroit’s depleted population, multiplying its jobs, and fixing its transportation problems. It offers solutions for fixing the city’s lights, sewers, and roads, and ideas for what to do with the multitude of empty lots. Kinkead’s implementation team will help city officials, businesses, philanthropists, and community leaders develop neighborhoods and fix broken infrastructure. Marjorie Fisher, Jane Fisher Sherman’s stepmother, has already given $1 million to be spent in line with Detroit Future City, funding some of the plan’s top priorities, such as blight removal and job training. Stopping the bad guys In Palmer Woods, the same neighborhood in which Sherman spent her girlhood years, the streets are dark on this chilly October night. Eleven neighbors gather in a lamp-lit living room, modern art adorning the walls. This relatively welloff enclave of Tudor brick homes has only dozens of abandoned houses in its midst, instead of the hundreds found in other Detroit neighborhoods. Yet residents here, outfitted in blazers and pearls, are seeking solutions to the crime that plagues them as well as the rest of the city. They’ve gathered to hear what the Manhattan Institute has to say about how they might help the police in their area. The Palmer Woods residents tell the think-tank representatives that criminals must stop invading their homes and cars. One woman says she is afraid to walk from her garage to her front door. The man sitting across from her seems less worried—but he has a gun visibly stashed in his leather belt. The discussion continues as a large SUV drives by, ablaze with colored security lights. “There goes our private patrol,” one resident says. The group has already paid for a hired security firm to keep watch over the neighborhood.

Now they are listening to ideas from a New York nonprofit on how to prop up city police operations. The institute’s George Kelling pioneered the “broken windows” theory of crime prevention: Follow up on the small crimes, and the big ones will also go away. With the help of an anonymous donor, the Manhattan Institute brought Kelling and Michael Allegretti, vice president of programs at the think tank, to Detroit’s neighborhoods to work with residents and the police on reducing home invasions. In a pilot program that wrapped up in another neighborhood last year, the institute helped residents come up with a list of behaviors that often preceded home invasions. For example, a stranger pacing in front of a house while talking on a cell phone could be a thief casing a home. Residents then listed those behaviors on flyers and distributed them, telling neighbors to call police if they saw something fishy. Meanwhile, area police agreed to be more visible, adding “community engagement” to their everyday to-do lists, which led to 1,200 conversations with community members. And parole officers visited criminals known for home burglaries and threatened harsher prosecution, simultaneously offering them help getting jobs from a local nonprofit. After a year, home invasions in the neighborhood were down 26 percent. “Citizens suddenly said, ‘Wow, the cops care. They’re here,’” says Allegretti. “Potentially, lives were saved.” In addition to helping the residents in Palmer Woods, the institute is hoping to work with police next to reduce crime at Detroit’s gas stations, notorious for carjacking and theft. The group is still looking for a donor to fund those efforts, which Allegretti believes it is likely to get. Other local philanthropists are also taking measures to tackle safety problems in Detroit. In addition to their donation of 100 police cars, the Kresge Foundation and corporate partners last year gave 23 ambulances to the city. Kresge has offered money to fund local patrols of off-duty cops, and gang violence prevention. Kresge and Skillman both gave money to support AmeriCorps volunteers working with Detroit police to analyze crime statistics. WINTER 2014

minutes

average police response time

vs.

minutes

national average police response time

8.7% Police dept. clearance rate on cases

1/3

Detroit residents would leave the city within

years,

a survey found, citing safety as a top reason 17

An abandoned police station in Detroit. The city is notorious for its unsolved crimes—police solve only 8.7 percent of cases, officials say.

Yves Marchand and Romain Meffre

Hudson-Webber paid for innovative videoconferencing arraignment technology so that police wouldn’t have to leave their patrols to go to court to get criminals locked up. The foundation also helped fund the police at Wayne State University to target crime in their midtown Detroit neighborhood. In downtown Detroit, Dan Gilbert’s companies established a “command center,” where video feeds from about 1,000 cameras—some owned by Gilbert, some by other downtown employers—are monitored by security personnel. The presence of these donated cameras has helped deter crime in the area, observers say. The private security teams also monitor social media and tell the Detroit police when trouble seems to be brewing. “I’m confident that working together we’re going to reduce crime a lot,” says Cullen. Building neighborhoods Things are looking up for midtown and downtown Detroit, but in the neighborhoods surrounding them, residents face dire circumstances. “There’s a lot of fear. It’s sad,” says Maria Salinas, a neighborhood leader working in southwest Detroit for the Skillman Foundation. “Kids go to school and they have to pass abandoned buildings, burnt out buildings, prostitutes sometimes, drug dealers,” she says. “They don’t know there’s a better way.” For the last seven years, Salinas has been trying to show her community a better way. She’s one of several leaders chosen by Skillman to act as liaisons in six areas targeted by its Good Neighborhoods Initiative. Much of the work is to build what the foundation calls “civic muscle.” Salinas and her nonprofit, Congress of Communities, help residents band together to solve problems. The congress has painted murals and helped get cops and parents to patrol a park adjacent to several schools when bells announce the end of the academic day. It steers residents seeking nonprofit services, and supports Skillman’s efforts to get more kids into quality schools and extracurricular programs. In other neighborhoods, Skillman’s local leaders have zeroed in on problems such as job creation and cutting red tape for businesses. In the last few years, says Salinas, “city and state services kind of just came to a halt. That’s where the residents started to lose faith. Their garbage isn’t getting picked up. Our lights are being turned off.” Skillman already had five years of hands-on experience making these neighborhoods better when these services started to disappear. So they were able to help neighbors cope, she says.

It remains to be seen whether the $100 million Good Neighborhoods Initiative will meet its 10-year goals. So far, Allen says, Skillman has seen a 10 percent increase in the neighborhoods’ high-school graduation rates (while citywide graduation rates remained stagnant), 15 percent more kids enrolled in extracurricular programs, 100 percent more teenagers holding summer jobs, and nearly 70 percent of graduating high school seniors applying to college. “We in philanthropy…have to create condition-changers— strategies that influence the broader context. We’ve tried to do that in Detroit.” In the Brightmoor neighborhood, the Fisher Foundation has committed more than $2 million to training daycare providers. Partnering with mothers and daycare workers, the foundation helps the adults understand child development. The aim is for young children growing up in a neighborhood worn down by blight and drugs to start kindergarten ready to learn. In addition to helping kids, the program frees up single moms to get jobs. Detroit’s philanthropic collaboration is on display here. “One of the reasons we went into Brightmoor is we felt we weren’t going to be working alone,” says Jane Fisher Sherman. “Because Skillman was already working there, we would have a partner and we would be able to work together and make a difference in the area.” The foundation has also helped created parks and gardens where families and children can be outdoors in the neighborhood. One day last September, four generations of the Fisher clan descended on one of the parks to help about 30 residents plant fruit trees. “This is something that five years ago would not have happened,” Sherman says. “You now see the neighbors taking great pride in their neighborhood.” The current mobilization of private money that keeps Detroit breathing on life support is remarkable in scope. Whether or not the city will ever grow and thrive again—and whether philanthropists will be steely enough to support the hard decisions necessary for that to happen—remains to be seen. After all, most of these foundations poured millions into the city for decades, only to have debt, crime, and poverty soar while the middle class fled. Critics believe some philanthropists joined Detroit’s politicians and public employees in maintaining misguided fiscal and social policies that led to the city’s mortal afflictions. Today, private donors are keeping the city’s bones from crumbling. Whether they can help lead a resurrection is still uncertain. P WINTER 2014

1490161+ 490 5 52178 6- 2 รท + 3 2 9 9 1 1 4- 0 6 4 3 52 37 รท5 0 8 3

3- 2

SOLVING THE

$2 Trillion PROBLEM

LARG E HOU STON FOU NDATION SEEK S PART NER S. Research-driven dreamer, with a hard-nosed practical streak. Attracted to leade rs deter mined to keep commitments and clean up fiscal messes. Not into politics, but if you are, has some friends you’ll like.

A foundation mixes research and politics to fix the public-pension crisis By Zachary Janowski

he Laura and John Arnold Foundation isn’t actually placing personal ads. But it is seeking compatriots willing to engage on one of today’s most pressing public problems. The policy-oriented foundation, seeded with $890 million from the fortune John Arnold earned trading natural gas, is helping a range of cities and states face the reality of their pension promises. Preferably before things end in tears, as is now happening in Detroit. “The public-pension challenge is the single gravest economic threat to our country today,” says LJAF president Denis Calabrese. That’s a strong claim, but some scary numbers give it substance. A joint venture between the Arnold

Foundation and the Pew Center on the States has been quantifying the problem across the U.S. They’ve found that the shortfall in funds promised to state employees now totals $757 billion, with another $627 billion gap for promised retiree health benefits. And that’s just the states. According to Pew, 61 of the most populous American cities collectively owe more than $217 billion to current and future retirees for their pensions and health care, suggesting a total public-employee debt nationwide approaching $2 trillion. Zachary Janowski is an investigative reporter for the Yankee Institute for Public Policy.

WINTER 2014

Laura and John Arnold are spending money to help states and municipalities get their pension funds back to the black.

PHILANTHROPY

Henrik Olund Photography

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“It is a tremendous problem now and it has the potential to become an enormous problem—an absolutely gigantic problem—going forward,” warns Laura Arnold, who left her job as a corporate executive in 2008 to focus on work at the foundation. LJAF vice president Josh McGee compares underfunded public-sector pensions to an oil spill. Communities need to make serious efforts to clean up the oil that’s been spilled—the money already owed to workers. And they must also stop the leak—the unrealistic promises and faulty systems that created today’s overhang of future debt. That’s the only way to protect workers and taxpayers from future blowups. “If you don’t fix both problems,” McGee said, “you’re just asking for it to happen again.” Rhode Island gets the message When the small city of Central Falls, Rhode Island, went broke in 2010, it was facing calamity. It couldn’t pay firefighters, repair roads, buy schoolbooks, or maintain parks. The meltdown awoke not only locals but also residents and politicians across the state to the danger they were in. In Rhode Island, ten cents of every public dollar—on the way to 20 cents in the future—was being sucked up simply to pay for the retirement of public workers. With that much taxpayer money going to old obligations, it became hard to address current needs. Rhode Island’s crisis birthed a pension reform trailblazer. State treasurer Gina Raimondo, a Democrat and newcomer to elective office, took the initiative. Her June 2011 report, “Truth in Numbers,” outlined the dire straits of Rhode Island’s public-pension system, and sketched a path toward security. Her message: “It’s not politics. It’s math.” Raimondo traipsed across the state with graphs and pie charts. She pointed out libraries, bus lines, and homeless shelters that had been closed as unfunded pensions had begun to gobble ever larger portions of the general budget. She emphasized that the pensions themselves would not be secure if the system collapsed in bankruptcy, as in Central Falls. The Arnolds were impressed by Raimondo. “She certainly has tremendous charisma and is incredibly bright, and we thought that she had a great deal of promise,” says Laura. “And all of that has proven to be true.” As Raimondo’s initiative gained momentum, the Arnolds sensed an opportunity to help establish a positive precedent that could later be followed by other American cities and states. Outside their foundation, they donated more than $100,000 to support EngageRI, a 501(c)(4) that advocated for repair of the state’s pensions. “Many would have thought this was a third-rail type issue,” says EngageRI spokesman Jon Duffy. But Raimondo “depoliticized it and made it an ‘everybody’ issue.” Motivated by concern that “truly draconian” cuts

would have to be made to other parts of the state budget if there was no reform, more than 100 groups joined the coalition, Duffy notes. “The social services agencies were taking it on the chin.” “Rhode Island came together,” says Raimondo. In the end, the state legislature took 29 hours of public testimony, and legislators were convinced that “the increasing cost to taxpayers would have dramatically impacted the state’s ability to invest in education, transportation, housing, and many other critical issues involving the well-being of all Rhode Islanders,” according to Rhode Island House Speaker Gordon Fox. In November 2011, the Rhode Island Retirement Security Act passed the House 57-15 and the Senate 35-2. Raimondo describes it as “the culmination of a long process of study and discussion that engaged all stakeholders.” The law made a raft of adjustments to the system, creating a “hybrid” plan that moves toward guaranteeing pension contributions more than guaranteeing benefits. It also raised the retirement age to match Social Security, suspended cost-of-living increases until the fund is solvent, strengthened accounting standards, and required that the state fulfill its annual contributions from now on. Fox is confident that these measures “will stabilize the state’s pension fund to preserve its solvency for future generations.” The fight isn’t over yet. Having been beaten in the legislature, public-employee unions filed suit. They “challenged the law on constitutional grounds, essentially saying that the changes for current employees and retirees were a violation of the state contracts clause,” explains LJAF’s McGee. State courts have yet to rule on that. Meanwhile, the Arnold Foundation and Pew offered research and other help to Rhode Island municipalities with underfunded plans, to help them meet requirements set out in the 2011 reform law, and to guide cities and towns that run their own pensions toward necessary reforms. As for Raimondo, whose friends and colleagues had all warned her to stay away from public pensions, “her stature as leader was enhanced by pension reform. It

The shortfall in funds promised to state employees now totals $757 billion, with another $627 billion gap for promised retiree health benefits. WINTER 2014

8 14+ 5 0÷

wasn’t diminished,” says LJAF’s Calabrese. “That’s good for other leaders to see—that to take this on isn’t dangerous. It’s actually productive.”

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Changing politics Along with Raimondo, Calabrese points to San Jose, California, mayor Chuck Reed (who oversaw a similar pension reform in his fiscally strained city) and Chicago mayor Rahm Emanuel (who is publicly acknowledging the dangers to his city) as good examples of the changing politics of pension reform. “These are all prominent Democrats. Obviously something has changed in the political dialogue around this issue, and that’s very much for the good.” Public alarm is driving the growing realism. Ballot initiatives to rein in public pensions recently passed with 66 percent support in San Diego and 69 percent in San Jose. Citizens in more and more communities are showing they understand the danger of the issue. “This isn’t now just an insider’s problem,” he says. “The public is willing to step up.” Hard numbers, detailed solutions, and non-partisan problem-solving, though, have been scarce. Public-employee unions and some activists are resisting pension reform by portraying it as a plot to exploit public workers for “profit.” That antagonism gets directed at anyone involved. One group of opponents called the Arnold Foundation’s pension-research partnership with Pew an “unholy alliance.” “That’s not really what the debate is about,” says Calabrese. “As we see in Detroit and other cities, the taxpayer may lose all the way down by trying to keep paying in to make up for the shortfall. But when it all collapses, it’s actually the working people who lose the most. And even before that, it starts to compress budgets, so people don’t get raises, replacements are not hired. It hurts all the people in the system.” “The burden is falling entirely on defenseless people,” agrees David Crane, a California Democrat and political consultant who is an outspoken advocate of pension reform. Once a city goes into bankruptcy proceedings, as Stockton, California, did in 2012, everything

“Detroit is a high-profile example. The taxpayers pay it all the way down and feel pain to the end. And then the pensioners lose their money also. It’s the worst of both possible worlds.” PHILANTHROPY

is up for grabs. “In one single day, they got rid of retiree health care for employees who had done nothing wrong.” “Detroit is a high-profile example of a collapse where pensioners are being asked to take 10 cents on the dollar,” says Calabrese. “That’s shocking. People will say, ‘Well, that’s the extreme case,’ but that’s the natural conclusion of not addressing a problem.” He adds that “the taxpayers pay it all the way down and feel pain to the end. And then the pensioners lose their money also. It’s the worst of both possible worlds.” Ways to nudge public policy In an effort to head off these lose-lose scenarios, the Arnold Foundation has spent about $11 million on pension reform since 2011. In addition to the work done by its internal research staff, the foundation seeds studies and policy ideas at an array of think tanks and educational organizations across the country. The Arnolds, separate from their foundation, have made parallel donations to advocacy groups that build public campaigns and provide political cover to politicians willing to make a vote for fiscal rectitude. The foundation also provides assistance to localities assessing their pension shortfalls and identifying possible solutions. In all, the foundation has been involved in more than 25 jurisdictions. Many original, detailed calculations and policy analyses go into each of these interventions. “Each solution is really tailored to the municipality or state, because each locality has a different set of issues and a different set of commitments,” says Laura Arnold. McGee, an economics Ph.D., heads the foundation’s work on this issue. An expert in pension lore, he has produced a growing library of resources on the causes of the crisis, as well as proposals to address it. “Politicians often don’t understand the riskiness of their plans,” says McGee. Take the expected rate of return. Public-pension systems are often built on the assumption that their invested funds will earn annual returns of 8 percent or higher. If they miss that target year after year—and actual returns for many funds throughout the last decade have been under 3 percent—then gaping financial shortfalls will open up in the accounts. One problem is that when the investments have a good year, politicians often redirect the surpluses for

Drake Busath, City of San Jose, Office of General Treasurer Gina M. Raimondo

Dan Liljenquist, Chuck Reed, and Gina Raimondo are politicians who have championed pension reform with the help of donors.

popular causes. Then when below-average years come along, the entire system falls behind. Politicians love to “shave off the top of the good markets” with benefit giveaways and pension holidays—breaks from making contributions—notes McGee. “We have a structural problem,” he says. “The structure of the system allows politicians to promise one level of benefits and not pay for it.” The system, says Laura Arnold, incentivizes politicians to please employees today and “kick the can down the road for payments tomorrow, when those politicians would not be in office.” Whether you blame insufficient contributions, gold-plated benefits, the financial crisis, or some other reason, what matters is that “you’ve got this gap between what you have and what you owe. You can have lots of conversations about the reason. Regardless, the shortfall is still there.” One of McGee’s solution papers, “Creating a New Public Pension System,” notes that a favorite style of public pension is the “defined-benefit” model, in which civil servants are promised a specific level of retirement payments until death—no matter what investment returns are like, no matter how much elected officials have set aside to pay them. “My argument is this is just a bad system for what we want to accomplish, and that we can provide the protections for workers that we want in a simpler, better system,” he summarizes. The alternative form used by most private-sector employers is the “defined-contribution” plan. Employers pay a promised amount every year into an account controlled by the employee. Often the employee makes

supplementary payments of his own. This is similar to the 401(k)-type plans that are ubiquitous at corporations, nonprofits, many universities, and increasingly some states. For many of the most egregiously underfunded public pension systems, the proposed solutions involve some form of migration from defined-benefit toward defined-contribution plans. Rhode Island now provides a small defined-benefit plan as the baseline, with defined-contribution accounts for each individual worker on top. Bolstering good ideas with bold action Careful, customized research on problems and solutions is just the starting point. “In order to have lasting impact and achieve the change in policy that is needed, you have to turn innovative ideas into law at some point,” says Laura Arnold. “That’s where our (c)(4) comes in.” The Action Now Initiative, the Arnolds’ 501(c)(4) organization, has spent more than $1 million on pension reform efforts. Like every other (c)(4), one of the main things that makes it different from the 501(c)(3) foundation is that it can engage in direct advocacy. ANI has, for instance, contributed to campaigns in support of pension-reform ballot initiatives in a number of states as well as San Jose and San Diego—generally with six-figure investments. “All of this work is local,” Laura Arnold emphasizes, noting that every jurisdiction has its own advocacy needs. “Generations from us forward will be dealing with this problem if it’s not addressed now,” says Alison Ferguson, the executive director of the Action Now Initiative. “One of the motivations is to make sure that it’s WINTER 2014

Unfunded pension liabilities of state and local governments

(in trillions of dollars)

$0.5 1999 $0.3 2000

$0.06 2001 $0.2 2003

$0.2 2006

$0.3 2004 $0.4 2002

$0.3 2005

a sustainable pension program, that when a person does retire, there’s something there, and the promise is kept.” Former Utah state senator Dan Liljenquist, who led his state’s successful 2010 pension reform, is a consultant for the Action Now Initiative. Like most public pension funds, Utah’s relied on investment growth to defray the cost of paying for benefits. The financial crisis intervened. As the freshman senator dug into the accounts, he found that market losses had reduced Utah’s funding level so severely that the state would have to spend 10 percent of its general budget for the next 25 years just to make up the shortfall. This is in Utah, he notes, a scrupulously well-managed state that avoided the bad practice of skimping on its annual contributions to pension funds that so many other states have been guilty of. “We always pay our bills,” says Liljenquist, but even Utah’s good behavior didn’t spare it from the crash. Tallying up the damage nationwide, he concluded, “we’re in a full-on tragedy as a country.” As he grappled with alternate ways of covering his state’s pension hole—a 16 percent budget cut across the board, a gaping $500 million shortfall, leaving 8,000 teaching positions unfilled—he came to the conclusion that Utah urgently needed fundamental pension reform. What he didn’t calculate was the animosity he would stir up by facing the problem. One weekend, out with his kids in the family van, he turned a corner into a crowd of 4,500 protesters chanting his name. He received thousands of outraged missives from public employees. He told them he respected their work, and explained that his priorities were to ensure that the state would be able to meet its obligations to them, while also protecting taxpayers, and setting up a sounder system for new public hires that would provide them with a secure retirement in the future. 26

$0.2 2007

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$1.1 2009

$1.3 2010

$1.3 2008

$1.6 2011

$1.5 2012

Source: The Federal Reserve

A Republican, Liljenquist encourages philanthropists and others hoping to encourage pension reform to keep in mind that public workers generally “did not cause this problem.” He and the experts from the Arnold Foundation have stressed that civil servants have just taken advantage of what politicians offered them. “It is not productive to blame them for it. My recommendation is to keep it a reality issue.” In the end, Liljenquist led Utah to a plan that gives public workers a choice—between a generous defined-contribution plan in which the state contributes 10 percent of pay, or a traditional defined-benefit pension with a capped employer contribution. Although pension debt is one of the biggest economic issues we face as a nation, says Liljenquist, “it’s also the most solvable of our issues.” To help precipitate solutions in as many states and cities as possible, the Arnolds’ Action Now Initiative has joined forces with Liljenquist to send him around the country. He travels

A foundation-led compromise in Kentucky In 2012, the Arnold-Pew pension team played perhaps its most active role in catalyzing a major pension reform. Legislators in Kentucky knew they had a big problem. But while the Republican-controlled Senate wanted to go all the way to 401(k)-type plans, the Democratic House wanted to stay with traditional pensions. As a compromise, legislators created a bipartisan task force. The group received extensive advice and support from the Arnold-Pew team of experts, who advised adopting a hybrid “cash balance” approach. State Senate majority floor leader Damon Thayer, who co-chaired the task force, credits the foundations for breaking the stalemate. “I would give them the highest recommendation,” he says. “I’m not sure we would have been successful without them.” Bryan Sunderland of the Kentucky Chamber of Commerce says the Arnold-Pew experts were able to “help provide an unbiased, nonpolitical approach.” The Chamber got involved because the pension system “was drawing needed resources away. We were seeing less money invested in colleges and universities,” and schools had to delay purchasing text books. As elsewhere, the (c)(3) research and education assistance from the Arnold Foundation was undergirded with (c)(4) investment in political advocacy from the Action Now Initiative. ANI, for instance, paid for a media campaign run by the Chamber of Commerce and the Kentucky League of Cities, which cost more than $100,000. Kentucky’s reform bill passed in its House 70-28 and in the Senate by 32-6. It was signed into law in April 2013. Its three main components are an agreement that retirees get increases only when there is money to pay for them, an increase in contributions to the fund amounting to about $100 million a year, and a new hybrid cash-balance system for all future enrollees. Employees now have a much more certain future. And “taxpayers will save $10 billion over the next 20 years,” according to Thayer. Stand and deliver This string of successes has not been achieved without some bruising. Implementation of the reforms in Rhode Island, San Jose, and some other places remains

to advise pension-repair efforts underway in Pennsylvania, Oklahoma, and other places, talking to legislators about their options. However useful the intellectual ammunition supplied by the Arnold Foundation may be, legislators are especially comforted by Liljenquist, says ANI’s Ferguson. “Let me talk to the guy who did it,” she recalls them saying. “He’s walked through the fire and passed pension reform in Utah.”

7 0 453 315 6 ÷ 2 8 -

bogged down by lawsuits. And John and Laura Arnold have endured some personal excoriation from representatives of public-employee unions. They answered critics in an August 2013 op-ed after Detroit declared bankruptcy. “Local elected officials have knowingly and irresponsibly made unsustainable promises of large future benefits, often in order to avoid wage increases that would impact short-term budgets. They have done so with full knowledge that not they, but future elected officials and taxpayers, would be held accountable for delivering on these promises. Meanwhile, unions shortsightedly exert enormous pressure on politicians to make these deals,” the couple wrote. By the time pension funds run out, “the politicians who promised the undeliverable, and the union leaders who encouraged those promises, will be long gone. Our public employees deserve more than false promises. They deserve to be part of a system that is fiscally sound, responsibly managed, and that ensures that their retirement benefits will be paid when due.” With the help of the Arnold Foundation and its sister advocacy organization, more than two dozen states and cities have taken measures to put themselves on a more secure path. “It is a joy to be able to actually fix a problem,” says Calabrese. “We don’t get to do that often enough in the foundation world.” With pension reform, “we are permanently solving real systemic challenges in society.” “The hope is that we’ll create sufficient momentum where this will become the norm,” adds Laura Arnold. “People will now ask, ‘Why is it that our town has this pension shortfall? Why is it that we’re not addressing it?’ Human nature is such that you often don’t act until it’s an emergency, a fire drill. The challenge for us is to inspire people to act before the situation is on the brink of disaster.” P

“We have a structural problem that allows politicians to promise one level of benefits and not pay for it.” WINTER 2014

a ministry in Kansas that recruits, trains, and supports foster and adoptive families from the faith community.

ProjectBelong.org; istockphoto.com / ÂŠ malerapaso

Brandon and Melissa Hoffman have adopted 12 children and now have 14 grandchildren. They founded Project Belong,

MAKING forever FAMILIES CHURCHES AND DONORS LIFT CHILDREN OUT OF THE FOSTER-CARE BUREAUCRACY By Naomi Schaefer Riley

very two minutes, another child enters foster care in America. Four hundred thousand children live in these temporary homes in the U.S. today, a quarter of them permanently separated from their biological families and available to be adopted. The lucky ones wait an average of more than three years, and many never find permanent families at all. The New York Times recently described a child who bounced through more than 40 different homes since she entered the New York City foster system at age 12. In 2011, 26,000 foster children turned 18 and aged out of the system—up from 17,000 in 1998. Foster children who reach adulthood with no family connection have a very difficult road ahead: By their mid-20s, 80 percent of the young men have been arrested, and nearly 70 percent of the women are on public assistance. They are more likely to be homeless, to be unemployed, and to be involved with drugs. A 2009 report found that the costs of letting a single year’s cohort age out of foster care without a permanent family were nearly $8 billion. Meanwhile, children still in foster homes face challenges. Many have psychological and behavioral problems that need to be addressed. Some suffer additional neglect or abuse from foster parents themselves. With a chronic shortage of people willing to take these

kids in, states’ standards of selection for foster homes are not as high as might be desired, and the agencies tasked with monitoring and supporting those homes are often understaffed or overly bureaucratized. Atlanta businessman Rick Jackson grew up seeing these problems—as well as the abundant good and kindness in the foster care system—firsthand. Born to a dysfunctional family, Jackson was sent to a foster home at the age of 13. “It was the first time I ever saw a family sitting around the dinner table eating together,” he recalls. The idea that a family would pray together and have conversation in the evening had never occurred to him. “It gives a vision to children of the way life could and should be. It’s not like being at the ‘knife and gun club’ every Friday night.” As much as he was aided by his experience with foster care, he saw problems with the system: foremost that his foster family was barred from talking to his biological family. “It takes a village when you’re dealing with Naomi Schaefer Riley, a contributing editor to Philanthropy and a former editor at the Wall Street Journal, is a columnist for the New York Post and the author of, most recently, ’Til Faith Do Us Part: How Interfaith Marriage Is Transforming America.

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temporary orphans from families that are dysfunctional,” says Jackson, now a successful health-care entrepreneur. It is important for the child to form long-term relationships and to have everyone on the same page, he says. “You have a better outcome if you have ten people watching a child during the week than just two.” These ideas, and a desire to do something to improve the foster care system, were already percolating in Jackson’s mind when Bill Hancock approached him with a business plan. FaithBridge, Hancock’s nonprofit brainchild, would build that village that Jackson thought was needed for children, through a faith-community-oriented foster and adoption program. It was the solution Jackson was looking for. Finding purpose Jackson and Hancock formed a natural partnership. While considering teaming up with FaithBridge, Jackson found that Hancock’s life story resembled his own. Now an eloquent expert on the problems faced by children without families, Hancock came out of a home marred by domestic violence and alcoholism. By the age of 15, he was homeless on the streets of Birmingham, Alabama. He was among the 65 percent of maltreated children who do not find their way into a foster home or protective custody. At 21, he became a practicing Christian and went to college in Florida, thanks to the support of his local church. He found a job in an emergency children’s shelter at Florida Baptist Children’s Home in Lakeland, Florida. He still recalls one of his first nights on the job, when a 6-year-old named Rosie was brought in. “Dropped off like a UPS package by a local sheriff,” Hancock says. “She was supposed to go to bed and be okay in a place she had never been before,” surrounded by adults she didn’t know. “I saw terror in the eyes of that child,” Hancock recalls chillingly. “This was our best solution, to put them in a government vehicle, drive them to an institution, and deliver them like a package.” Hancock soon discovered what he calls his “purpose in life”—helping children whose families for one reason or another cannot care for them. He worked with churches to start residential treatment programs for emotionally disturbed teenagers who had already cycled through several different foster families. These centers

“It is possible for people of faith to step up and to open their lives and their hearts, and that a foster care system can be emptied.” 30

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serve as alternatives to juvenile detention for first-time offenders. Set up like homes, the centers consist of married couples overseeing groups of six to eight kids, making sure that they go to school, find productive work, and learn the social skills needed to succeed as adults. During the time they lived in these centers, kids often did well. Hancock was disappointed, though, to see that “as soon as they left the environment and the support they had to go back to their local communities, many kids would gradually descend back into the disruptive choices they were making before.” In retrospect, Hancock thinks that this outcome “should have been obvious.” Though “the best place for them to be would be in a family,” he knew that too few families were willing to take in foster children. Especially when kids are older, when they are part of a sibling group, or when they have behavioral problems, it is very difficult to find people to help. Hancock began to wonder why churches weren’t more involved in the issue. He noted that in Cobb County, Georgia, there were 1,100 churches and 300 children in foster care. He liked the odds. There were plenty of people he knew with an extra bedroom who understood the needs of children. And so he began to break down the problem. He would find out the number of children in a particular zip code in need of a foster home, go to a church in the area to present their stories without using their names, and see what happened. He announced at one church that there were 11 kids in his own zip code, representing four sibling groups. Four dozen people showed up at a meeting to volunteer. Some of those went through the training required and eventually became foster families. And the remaining ones formed the kind of support network that Hancock and others now believe is vital to making a foster placement or adoption a success. Some of those support families offered to shuttle children to and from sports practices or doctors’ appointments. Others offered to watch the kids for an evening or a weekend to give foster parents a break from what can be an emotionally taxing responsibility. Each foster family had between 12 and 15 people serving as a support network. Today, the organization Hancock founded and still runs—FaithBridge—also has a “care coordinator” for each child, someone who will help a family navigate the public bureaucracy. The coordinator’s job is not simply to monitor the well-being of the child, though that is paramount, but also to make sure that the foster family is getting the support it needs. “A child is an agitant to a family system,” says Hancock. Whether biological, adopted, or foster, the addition of a child to a family can cause tensions between mother and father, problems with siblings, financial strains, and a variety of other issues. Hancock sees Faith-

Courtesy of FaithBridge Foster Care; istockphoto.com / © malerapaso

Bridge’s role as minimizing stress for children and also for families, so they can continue to volunteer to foster. The typical foster child is in a placement for about five months. When children in the FaithBridge network return to their biological parents, they keep their connections with foster families and volunteers in the sponsoring church. From spiritual support to job banks, biological families now have a greater connection to the local community and greater support for their youngsters. Being part of the solution This is the model that Hancock took to Rick Jackson, who had created about 25 companies in his lifetime and had agreed to look at Hancock’s business plan as a favor to a mutual friend. Hancock was not asking Jackson for money. The businessman liked Hancock, and saw the value of his program. Hancock had a profound grasp of three major problems the foster care system was facing. The first, and perhaps the most important, was recruitment. The second was the lack of a support system for foster families. And the third was the absence of a “quality indicator.” As Hancock says, “If we are taking children out of these difficult situations and putting them in a foster home, what should be the desired outcome?” What interested Jackson most about Hancock’s business plan was that it made foster care into something that wasn’t “all or nothing.” “It used to be at church someone says ‘We want to talk to you about foster care.’ You say, ‘I have too many children.’ Or ‘I don’t have the time.’ But now you don’t have to be the parent,” Jackson explains. You can be there to support the parents who do volunteer. You can offer respite care on the weekends or babysit during a date night. Or you can buy a child clothes. “There are a lot of ways to get involved, to be part of the solution.” Jackson had been looking for a way to make a difference in foster care. Like Hancock, he also looked at institutional models but found them expensive, often ineffective, and hard to bring up to scale. With FaithBridge, Jackson knew he had hit upon something different. And so he offered to fund the organization singlehandedly for five years. “Most small startups focus so much on getting money that they can’t create a good business model. I wanted Bill to focus on getting the model and the business and procedures down, not to focus on fundraising. Once we have a compelling story, we can get other people to donate to the program. I felt like long term we’d get there faster if we didn’t have to drag along a bus of donors,” he says. Jackson also wanted to do more than give money. “I wanted to create something no different than any other business I’ve been involved in—in terms of transparency and accountability.”

400,000 children are in foster homes in the U.S. today.

Seeing results In the past five years, FaithBridge recruited more than 200 families for Georgia’s foster care system through churches. It also recruited 400 volunteers, and offered training in ten locations. The organization spends about $3,600 per case. Hancock compares that with the $90,000 that the state government spends annually on a child in a regional detention facility. Building on its work in Georgia, FaithBridge’s team next identified 17 metropolitan areas, representing three quarters of the foster-care needs in the country, where it believed its model could be duplicated. The organization picked communities that had at least two of three key qualities: a critical mass of volunteers, a willing funder, and a government official who would facilitate the program. When FaithBridge arrived in these metropolitan areas, it often found that people were already familiar with the organization’s message. In the past decade, a quiet revolution has occurred in America’s churches, making adoption a central issue. Russell Moore, recently installed as the head of the Southern Baptist Convention’s Ethics and Religious Liberty Commission, is one of the pioneers of the movement. He adopted two children from Russia a decade ago and wrote a book called Adopted for Life about the Christian mandate to become involved in “orphan care.” From Focus on the Family to Christianity Today, the world of institutional evangelicalism fully embraced the cause. And so more and more WINTER 2014

religious leaders and government officials are coming to realize that churches offer a standing army waiting to be deployed to solve the foster-care problem.

non-family members willing to attend four hours of training themselves to provide help to the adoptive parents. Project 1.27 accomplishes all this for $5,000 per adoption. Individual donors provide most of its funding, with about 15 percent coming from churches and 5 percent from foundation support. The group collaborated with other public and private agencies to achieve an astonishing success: By the end of 2012, there were no children waiting to be adopted in the state of Colorado. Project 1.27 thrilled state child-welfare officials. Sharen Ford, manager of permanency for Colorado Children’s Services, recalls the program’s first informational meeting held at a large local church. “It was a snowy night, but several hundred people showed up. I was blown away.” She realized that Project 1.27 had “put out a call to families that we had never been able to reach before…. It taught us about the value of collaborating with faith-based organizations.” The project is now taking its inspirational message and valuable practical training to other states. Founder Robert Gelinas, a Colorado pastor and father of five adopted children, recently told a church audience in Arizona that “it is possible for people of faith to step up and to open their lives and their hearts, and that a foster care system can be emptied.” Arizona now has 50 families signed up through the program and undergoing training. Another group is starting in Washington, D.C. Leif Houkom, chairman of Project 1.27’s board, has been a donor since its inception. A CPA and a member of Gelinas’s church, Houkom remembers hearing the first pitch for the organization. “I wanted to spend my money where it will do the most good. When we can effectuate an adoption, we will be affecting a life forever,” he says. “And not just the life of an adopted child, but a whole family.” Houkom notes that many Project 1.27 donors work in finance and appreciate how cost-effective the program is. The organization spends only 4 percent of its budget on development. “We’re very lean,” he says. He doesn’t have to give a hard sell to most people. “If it touches your heart, especially if you’re a Biblical person, you will give.”

Looking after orphans The best known church program tackling foster problems is Project 1.27, an adoption and foster parent training program based in Colorado. Since 2005, the program has partnered with more than 20 churches and helped families adopt 243 children. Project 1.27 takes its name from the Bible verse James 1:27: “Religion that God our Father considers pure and faultless is this, to look after orphans and widows in their distress and to keep oneself from being polluted by the world.” The project started as a simple recruitment organization. But then, president Shelly Radic says, its leaders realized: “Once you inspire families to adopt, where would they go?” Some families went to their local county’s training sessions and “found that some things ran counter to their faith and biblical values,” Radic says. One person reported that a county trainer “screamed profane words for 30 minutes at participants with the idea that you might have a child in your home like that and you should get used to it.” Radic supports the idea of preparing families for the difficulties they may encounter, but the training offered by Project 1.27 (which is certified by the state) assumes that its participants are coming from a religious background. “God has a purpose for you,” the program teaches participants. While it is not an adoption agency itself, it helps to educate parents regarding the legal, financial, and emotional issues involved. Prospective parents pay a $100 administrative fee and receive 28 hours of training. Church leaders and community members are also offered the organization’s services, with the understanding that adoptive and foster families will need the support Spreading the message of friends and neighbors. Each family must bring four In Jackson, Mississippi, a local attorney provided money to create a church-based recruiting and training effort similar to Project 1.27. The program is now called 200 Million Flowers, and Rick Valore, Project 1.27’s former executive director, is in charge. The new program’s name comes from the widely publicized estimate that 200 million is the number of orphans in the world (counting children who have lost one parent, which is more conservatively thought to be around 150 million; there are an estimated 18 million who have lost both parents and have not found a home with relatives or another family)

“I wanted to spend my money where it will do the most good. When we can effectuate an adoption, we will be affecting a life forever. And not just the life of an adopted child, but a whole family.” 32

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Courtesy of Bowers Media Group, Inc; istockphoto.com / © malerapaso

MAKING GROUP HOMES WORK In twenty-first-century America, orphanages seem to be relics of the past. Modern research in attachment theory and other areas has taught us that kids need human connections, so today every effort is made to place children needing homes with families, rather than in institutions. Yet for some kids, particularly those with special needs or behavioral problems, this simply isn’t feasible—there just aren’t enough foster homes available, or enough foster parents equipped to handle the challenges these kids bring with them. The default option is to send these children to state-run group homes— by most accounts miserable places, often not far removed in character from detention facilities for juvenile criminals (with a revolving population between the two). The average cost of these institutions tops $200,000 per child each year. But thanks to private donations, alternatives exist. A number of high-quality independent group homes and residential education centers are spread out across the country, offering help to children with severe challenges, many of whom have been abused, neglected, or traumatized, and who have cycled through multiple failed foster care placements. One of the most iconic of these institutions is Crossnore, a 100-yearold Christian residential school. Set in the Appalachian hills of North Carolina, Crossnore was founded by Mary Martin Sloop, a doctor determined to help impoverished mountain children. It now houses about 100 kids whose needs aren’t met by the foster care system or public schools. Students live on campus in cottages, supervised by couples, and attend classes and activities that promote healing,

balance, and faith. Special touches include the School Labyrinth, a spiral garden for meditation and prayer; the Weaving Room, a reminder of Sloop’s dedication to the productivity of the original students; and the Miracle Mountain Stables, which offer equine therapy. (For more information about Crossnore and similar institutions, read The Home: A Memoir of Growing Up in an Orphanage or Rethinking Orphanages for the 21st Century, both by Richard McKenzie—or watch the documentary Without Perfect Answers by filmmaker Bruce Bowers.) Similar facilities include the Safe Harbor Boys Home of Jacksonville, Florida, where boys ages 15 to 17 suffering from behavioral issues or the death of a parent live aboard boats and receive both traditional education and vocational training, and the Hendrick Home for Children of Abilene, Texas, which offers both family-style cottages and a 43,000-acre cattle ranch to give homeless children the skills to be economically self-sufficient. Private group homes, which offer housing and care separate from educational facilities, offer another option to abandoned children. The Alabama Baptist Children’s Homes & Family Ministries provides homes to groups of six to eight children under the supervision of house parents in cities throughout the state. Hope Village for Children in Meridian, Mississippi offers cottages and care to teenagers, as well as a new transitional program to residents who turn 18 and are preparing to enter the world as adults. Private group homes and residential schools can help a child make the best of out a bad situation, but there are drawbacks to this type of care. Though children gain the stability of a permanent

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Some recent (above) and not-so-recent (below) residents of Crossnore, a Christian residential school for kids needing homes.

home and school, rather than being shuttled from one placement to the next, they don’t become a permanent part of a traditional family they can lean on later. Children are under the supervision of trained professionals, but there are limits on the amount of individual attention they get from caregivers, who can be responsible for many residents. While most homes try to keep sibling groups together, brothers and sisters in gender-specific institutions end up separated. Despite the drawbacks, donors and caregivers at these institutions are doing heroes’ work. One homeless boy came to Crossnore after being arrested several times for selling drugs with his partner in crime, a neighborhood prostitute. At his new home, the boy dedicated himself to education. He recently graduated from New York University, where his tuition was paid for by the Crossnore board. With the help of thousands of donors, this boy and others like him defy the odds every year. —Emily Holmstead 33

Debra Steigerwaldt Waller (shown here as an infant with her mother and grandfather, and as an adult) was adopted as a baby. She took over as CEO of the family company, Jockey International, after her mother’s death.

and a quote attributed to Mother Teresa: “How can there be too many children? That is like saying there are too many flowers.” Valore believes the 1.27 model is “very replicable.” Because churches often allow small faith-based organizations to operate out of their facilities, Valore estimates the startup costs for someone willing to make the connections to local churches and do some marketing would be less than $100,000. Similar organizations now include the CALL (Children of Arkansas Loved for a Lifetime), Project Belong in Kansas, the 111 Project in Oklahoma (One Church, One Family, One Purpose), and Embrace Texas near Dallas. Some states, too, are learning from Colorado’s lesson: Instead of waiting for faith-based agencies to come to them, they are putting out calls for proposals to have more private organizations do this kind of recruitment. Chris Barras, a pastor in Richmond, Virginia, recently responded to his state foster-care agency with a proposal for an organization called Change Who Waits. The name comes from the idea that it should be families waiting to adopt children, not the other way around. 34

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Encouraging “forever families” The problem of getting families to volunteer is not just about reaching the right people. As Bill Hancock and others have found, when adoptive or foster parents are supported by their friends and families and churches and communities, they are more likely to volunteer again and more likely to encourage others to sign on. In 2004, Debra Steigerwaldt Waller, the CEO of Jockey International, started doing some research into how she personally and Jockey as a company could make a difference in the area of adoption. “What we found was that there are 50,000 children adopted in the U.S. each year from foster care, and about 10 to 15 percent of those adoptions fail,” she says. The notion of a failed adoption horrified her. “I don’t think it’s right or fair that other children should not have a similar experience to me, that they shouldn’t have a ‘forever family’ too.” When Waller was in second grade, she remembers her mother sitting her down to explain she was adopted as a baby. “I’m not sure I understood what she meant,” but over time Waller started to have questions about her background. She appreciated her parents’ transparency about the subject. “But adoption wasn’t really talked about as much like it is today.” In fact, when Waller took over as CEO of Jockey International from her mother in 2001, many of the employees who had been there since Waller was a child had no idea she was adopted. Since Waller’s childhood, the entire landscape of adoption has changed. For instance, many adoptions are now open—adopted kids can meet their biological parents. But it is also now much harder to adopt a baby. The end of the stigma on unwed motherhood combined with

Jockey International, Inc. ; istockphoto.com / © malerapaso

Barras, who with his wife has fostered kids and offered respite care to others who have, says there are 1,300 children in Virginia waiting for a permanent home. Change Who Waits held well-attended rallies in Richmond, Virginia Beach, and the D.C. suburbs. “Some of the most highly receptive people to this message are in churches,” says Barras. “Churches have a different call. We have a responsibility from Scripture.” Barras says he is not suggesting that “only Christians do this,” but that “the best bang for your buck is this kind of targeted recruiting.” He cites a 2005 Harvard study showing that for every 28 people who contact a child placement agency about adoption, one follows through. That’s about a 3 percent return. Project 1.27 has a 20 percent return. “We’re just saying we’re a good niche market to go after.”

the widespread availability of abortion means that fewer “unwanted” babies wait for adoptive parents. Many foreign countries have restricted international adoptions. Parents wanting to adopt a healthy infant can easily wait years. But there are as many older children needing homes as ever. In many cases, says Waller, “the adoption journey is a fabulous thing. The child gets to a family, the family gets all excited, everyone celebrates.” Yet after all that, there can sometimes be problems. Families prepared in principle to cope with emotional issues may not be sure how to deal with them in real life. Even otherwise “normal” children can start acting up, says Waller. To help fill this gap, Jockey has put $3 million into “post-adoption” education and counseling since 2005. It has funded scholarships for parents and kids to attend classes where they learn how to manage behavior, resolve marital tension, and deal with various government agencies that may be involved. In Wisconsin, where Jockey has its headquarters, the company helped sponsor a program called Our Home, Our Family, in which adoptive parents take a rigorous course on managing new family realities. Waller notes that some of the families “were in complete disarray.” There were couples who were ready to divorce, children who wanted to leave. Yet “the families who went through this program did not dissolve,” says Waller. Mark Courtney, who teaches at the University of Chicago School of Social Service Administration and studies this area, confirms that foster care and adoption preservation are areas where philanthropy can do a lot of good. “Parents want to know, ‘Will the government be there to back me if my child needs significant mental health treatment?’ In many cases, the answer is no.” He says many families don’t have the resources for the kinds of high quality support programs that are important to making adoption successful. Jockey provides kids adopted out of foster care a monogrammed backpack, filled with games and toys chosen specifically for each child, as well as a handmade blanket and a teddy bear. “Most of the time children coming out of foster care have nothing but the clothes on their backs,” Waller says. Often a caseworker brings the backpack to the child at his or her new home. “It helps the caseworker start a conversation with the family” about the help that is available to them now that the adoption process is complete, Waller adds. These backpacks also include information about post-adoption services for the families. About 200 Jockey employees have put together 7,000 backpacks so far, and the program is currently being expanded nationwide through the Center for Adoption Support and Education. Jockey volunteers also help on other projects, such as home renovations for families adopting children with

physical disabilities. Jockey employees who adopt themselves are given a $10,000 stipend for each child. Jockey sponsors bus tours in Wisconsin that go from town to town drawing attention to adoption. These “Journey Home” tours engage with family court judges, police officers, school principals, and other people who affect the lives of adopted and foster kids. Stopping a vicious cycle Education is Waller’s primary focus. Last year, she worked with the Dave Thomas Foundation for Adoption, where she sits on the board, to put together a guide for pediatricians to help adopted children and families adjust. They’ve distributed 200,000 copies so far. The Dave Thomas Foundation is the biggest player in the world of adoption philanthropy. It has set its sights on drastically reducing the number of children in foster care, particularly the kids who age out of the system. President and CEO Rita Soronen describes how the foundation, through years of research, arrived at some best practices for helping kids find families. It funded the hiring of additional counselors, tasked with meeting with children at least once a month and getting to know all the important people in that child’s life. Of the program’s 8,800 kids aged 12 and older, 5,700 have been matched with a family so far. Thanks in part to Waller, says Soronen, the Dave Thomas Foundation realized that “adding post-adoption services is a critical piece of this work. Many of these kids have been through such trauma that adoption is not the end of the story.” “Jockey,” she continues, “has been a long-term and generous partner in this process. We love when corporations step forward and say, ‘We have to make this commitment in our community.’” Waller’s work with the Dave Thomas Foundation opened her eyes to many ways that she and her employees can help contribute to the lives of children in foster care. “I know the Lord put me here for a reason,” Waller recently told the Milwaukee Journal Sentinel. “The stars were aligned.” “There are children that need these families,” she says. “There are families that need extra help. Don’t let them flounder. When that happens, this vicious cycle can happen all over again.” P

The Dave Thomas Foundation is the biggest player in the world of adoption philanthropy. Of the program’s 8,800 kids aged 12 and older, 5,700 have been matched with a family so far. WINTER 2014

How Pete Peterson is helping Washington find budget balance By Megan McArdle

welve and a half trillion dollars. That’s how much our federal government owes to others as the U.S. rings in 2014. Add to that our hidden debt: the additional trillions not yet on the books but promised to millions of people to pay for their retirement and health care in the future. How is our nation going to pay these mushrooming bills? That’s the question that Pete Peterson would like to see answered, and as soon as possible. The 87-yearold billionaire created the Peter G. Peterson Foundation with an aim very different from the usual charitable aspiration: to advocate for the budget balancing he believes the nation so desperately needs. To nudge the U.S. in more fiscally cautious directions (even at the price of tax increases that many of his natural allies think would create their own economic problems), his foundation has poured tens of millions of dollars into everything from video games on responsible finance to annual budget conclaves on the dangers of a large national debt.

pullquote pullquote pullquote pullquote pullquote pullquote pullquote pullquote pullquote pullquote pullquote pullquote pullquote pullquote pullquote Education and ire pullquote pullquote pullquote The Peterson Foundation’s first task is education. It expends

a serious problem in our federal treasury. If you hear someone talking about entitlements or debt today, chances are they have had their thinking informed by a Peterson report or event. The foundation’s annual Fiscal Summit is rapidly becoming a Who’s Who of serious thinkers on this topic— and the ones who aren’t on the podium are often in the audience, furiously taking notes. The foundation’s educational outreach extends not just to experts but to the general public, particularly college students—who after all will be stuck with the check. It has sponsored the production of an array of multimedia, from the 2008 documentary film I.O.U.S. A., which premiered at the Sundance Festival, to an array of perky if grim digital leaflets. One program that’s having an impact in Washington is the Solutions Initiative, which in 2011 gave six think tanks $200,000 apiece to come up with plans to get America’s fiscal house in order. The participants were asked to look out 25 years into the future, and

Megan McArdle is a columnist for Bloomberg. Her book The a lot of money and effort making people aware that there is Up Side of Down will be published in February.

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Peter G. Peterson Foundation

to use the same basic economic projections to allow easy comparison of their options. Spanning a broad ideological range, from the Heritage Foundation and American Enterprise Institute on the right to the Roosevelt Institute and Center for American Progress on the left, the program produced a portfolio of ideas. Roosevelt suggested rolling back defense spending. The Heritage plan radically simplified the tax code and reduced federal spending to 18.5 percent of GDP. A second Solutions Initiative was held immediately after the 2012 election. The goal in all of this is to show that runaway debt is not inevitable, that solutions are available, and to get policy experts of all stripes talking about how to begin making progress.

Economy and opportunity Pete Peterson looks like what he is: a nice Greek boy from the Midwest. His autobiography, The Education of an American Dreamer, traces a personal and national evolution from immigrant ancestors to farm towns in America’s rural heartland, through midcentury manufacturing to global financial triumph in the new millennium. In 1926 Peterson was born in Kearney, Nebraska, to Greek immigrants who owned and operated a 24-hour café (they didn’t even have a key to the front door of the never-closed business). From an early age he worked in the restaurant, which struggled as the Great Depression scoured the Great Plains. Peterson got his first sales experience before the age of ten, trying to cajole

As philanthropic efforts go, attacking the nation’s budget deficit may seem curiously unrewarding. Donors to colleges and art museums get prominent buildings named for them. Donors to African poverty get their pictures in glossy magazines along with Bono. Donors promoting debt reduction get fan mail from accountants and small businessmen. Deepening national thinking about deficits, though, is important. Indeed, it is one of the most important national issues of our age. A budget crisis, after all, has the power to override every other policy priority. Yet it’s also a thankless cause. In today’s fiscal environment—with the economy drifting, tax revenues lackluster, and all those entitlement promises coming due—budget sanity means taking things away from people. Spending will have to be cut, taxes may have to be raised. Confronting austerity tends to spark a lot of ire. And much ire has been poured onto the courtly figure of Pete Peterson. Liberal economist Dean Baker has called him one of “the granny bashers, intent on privatizing Social Security.” Peterson can be a lightning rod, particularly for left-wing groups that revile the idea of reforming entitlements. So why is Peterson doing this? What makes him want to dedicate his golden years, and a considerable chunk of his personal fortune, to being the somber voice of warning instead of the sunny voice of assurance?

the cash-strapped clientele into renewing their prepaid meal tickets. “Here my parents are, immigrants with a third-grade education. So my father took a job on the railroad cooking. No one else would do it because it was steaming hot.” Yet that difficult job ultimately led to business ownership. That lesson gave Peterson a long-term focus. The other thing he learned from his childhood in the café was a relentless drive to save money. Encouragements to thrift—“economia! ”—were everywhere, even in the restaurant’s bathrooms, where a homemade sign exhorted customers to use fewer paper towels. In American Dreamer Peterson writes that even today he finds it impossible to leave a room without turning off the lights. Peterson lived through a tug of war between the worlds of his parents and his peers. “I wanted to be 100 percent American while my parents clung to their Greek customs,” he writes. “They pulled furiously one way, I the other. All children struggle to escape their parents so they can define themselves, but mine had roots deep in another world.” Eventually Peterson ended up at MIT, where he worked as an 18-year-old clerk at the radiation laboratory, tracking down parts for what he later learned was the Manhattan Project. After the war ended, he transferred to Northwestern University, where he completed his bachelor’s degree. From there, Peterson went on to earn one of the first MBAs from the University of Chicago, becoming, in turn, a market researcher, an ad executive, a professor at WINTER 2014

Chicago’s business school, the CEO of manufacturer Bell and Howell, Nixon’s secretary of commerce, the chairman and CEO of Lehman Brothers, and eventually, the co-founder of private equity firm the Blackstone Group. The Blackstone Group’s 2007 IPO supplied the windfall that he is now dedicating to straightening out the cricks and crooks in the federal budget. In his ramble through advertising, academe, manufacturing, politics, then finance, Peterson showed an uncanny knack for being in the right place at the right time. “I’m a great believer in dumb luck,” he told me, but both in person and in his biography, the picture that emerges is of someone who is always open to opportunity, and willing to pursue it with inexorable resolve whenever he stumbled across it. Just as his father took the worst job on the railroad and turned

acquainted with Peterson, invited him to his home in the Hudson River Valley, where he suggested that Peterson head up the commission, with Rockefeller providing the funds and staff. They didn’t want someone from the eastern establishment of inherited wealth. Peterson, a self-made man from the Nebraska plains, had the outside perspective they needed. After a visit to Washington, he concluded that the commission wouldn’t have the necessary credibility if foundations were providing the money and the staff. Populist politicians were enraged, and ready to go to war against what they characterized as mere tax shelters for the rich. Given the “deep resentment” Washington felt towards foundations, “I saw foundations being legislated out of existence unless they changed,” Peterson writes in his autobiography.

it into a small business capable of supporting a family and multiple employees, Pete Peterson turned accidents into successes. It probably helped that he was a bit of an outsider, someone with a different perspective on things (starting with the times his mother made him go to school in a frilly Greek blouse, which will make any boy a fighter). There are many points in Peterson’s long career that contributed to his current crusade against deficits: his father’s thrift, his long career in finance, his various episodes of public service. But the first time the world got to see Pete Peterson in action as an outsider who quietly steps in and finds a way to help a broken system heal itself was when John D. Rockefeller III called.

The commission had to raise its own money, hire its own staff, and have members from outside the foundation world, Peterson insisted. He got his way. The Peterson Commission, as it came to be called, became what some might call a strongly moderate voice for reform. On the one hand, Peterson proposed strong new safeguards against self-dealing by donors creating foundations. He called for new rules requiring foundations to pay out a percentage of their assets every year. These provisions became law in the 1970s and are still with us today. On the other hand, Peterson was determined to save foundations as an independent part of American civil society. He is credited with fending off more extreme proposals from the likes of Senator Al Gore, the future vice president’s father. It’s clear that this episode also shaped the way Peterson would approach his own giving when he later became wealthy enough to create his own foundation. Asked how the experience shaped his thinking on philanthropy, he paused for a moment, then smiled shyly. “I thought it was important for foundations to be innovative and do things in areas where no one else is going.”

The Peterson Commission In the 1960s, charitable foundations were in trouble. As tax rates steadily mounted throughout the middle of the century, wealthy people with a variety of motivations, not all of them charitable, sought out tax-free foundations as places to protect their funds. Politicians went after that money in a variety of ways; one bill floating around Congress would have imposed a nearly 50 percent tax on foundation income. To police themselves and head off more hostile legislation, philanthropists organized a commission to A cool head in a crisis recommend reforms of foundation rules. John Rocke- Peterson had the funds to put that belief into practice feller’s grandson and namesake, who was socially once his Blackstone investment firm went public. And 38

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by then, he’d developed a cause that didn’t already have its own telethon: restoring America to sane budgeting. A solid Midwestern Republican, Peterson was shocked by the accumulating budget deficits of our current generation—from a slight surplus in 1960, to a deficit of 2.1 percent of GDP in 1971, 2.7 percent in 1980, 5.0 percent in 1986, 10.1 percent in 2009, and 7.0 percent in 2012. This offended his deep-rooted drive for “economia!,” and since 2008 he has committed $1 billion to his deficit-fighting foundation. For Peterson, ringing a fire bell on this topic feels like his philanthropic calling. “I would find it difficult to spend all of my time and energy on kind of reacting to standard requests,” he recently told the Bridgespan Group in a video interview. “It just wouldn’t be exciting and challenging…. I need challenges.”

Pete Peterson, above, has spent millions to educate Americans about the national

Pete Peterson (Photo by Len Irish)

debt. His foundation supplied the numbers found in the orange and blue bar.

Even with $1 billion and an army of advocates on the job, though, can the man with a passion make the necessary impression in Washington, where challenges often turn out to be mystifyingly complicated, and common sense isn’t all that common? Can he overcome today’s special interests and reservoirs of political inertia? Peterson has navigated himself, and his companies, through some tight spots before. That’s why Lehman made him CEO just a few weeks after joining the firm, when losses in its government-bond department caused an internal crisis. Perhaps someone with a passion for budget balancing is just what Washington needs. One of the most interesting things about the Peterson Foundation’s efforts is that it hasn’t pushed a specific agenda on the public, or funded ideological forces to do so at arm’s length. Its politically broad investments have encouraged scholars of all perspectives to take ownership of the problem. It has made brainstorming and raising of awareness its work. Yet if no one takes action, all of this will eventually be for naught. Peterson would rather that the U.S. fix the situation now. Budget problems are easiest to control when tackled early, for the same reason that retirement experts urge people not to wait until they’re 50 to start funding their 401(k)s. But Wash-

ington’s short-term thinking has, if anything, gotten worse in recent years. Observers used to lament that policymaking was dominated by the two-year House of Representatives election cycle; now lawmakers lurch from crisis to crisis with political cycles measured in months or weeks. At some point, Washington is going to have to make some adjustments. Either voters will get anxious enough about our debt to force politicians to act in time, or insolvency is going to make all the terrible choices for the nation. Plans made when things are falling apart can be clumsy ones, and all the mathematical momentum is against you at that point. The U.S. will be better equipped to make good policy if it has already made the hard calculations and had the necessary discussions about economic realities and tradeoffs long before the time of financial reckoning. Those are the undertakings that the Peterson Foundation is trying to encourage right now, well before an economic emergency unfolds. The Greeks have recently illustrated many of the bad things that can happen when national spending exceeds resources over an extended period. Greece offers a vivid example of a fate that no one wants. Luckily, Greece has also provided America with a man willing to use his money to help our country find a more responsible way to proceed. P WINTER 2014

Taryn Wolf

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Home Healthy at

Keeping older Americans independent with timely acts of charity By Andrea Scott

t’s Saturday morning, and volunteers meet at a local church to receive assignments. With address and phone number in hand, a small group breaks off and drives a few blocks away to an old, musty apartment building to visit 90-year-old Hilda Reynolds, or as they call her, Ms. Hilda. “My hips are hurting today,” the bright-eyed woman tells her guests, as she struggles to prop herself up in bed. She had a minor stroke earlier in the week and is having trouble moving her legs. But she is freshened up for her visitors, and offers each guest a piece of chewing gum from a purse at her bedside. The last living sibling of 12 children, Ms. Hilda has seen her Washington, D.C. neighborhood go through many changes. The low-income housing she has lived in for 22 years is one of the last local buildings not renovated for luxury apartments. A “Rosie the Riveter” bomb maker during World War II, the now-delicate woman describes how she would return home each day, her hands stained with gunpowder. It’s easy to see that she still has spunk, but she is now connected to an oxygen tank and mostly confined to her one-bedroom apartment. A Bible and a magnifying glass are strewn on her bed, and her dressers and nightstand are cluttered with medicine bottles, condiment jars, and fake flowers. “How do you know an old person lives here?” she asks with a grin. “Just look at the

dressers!” Her radiant glow and sparkling eyes make it clear she is overjoyed to have guests. A local nonprofit is the reason for the visit. In addition to providing fellowship, the organization, We Are Family D.C., brings groceries to more than 600 isolated, low-income seniors each month. The organization supplies handwritten birthday cards, rides, and cleaning assistance to the elderly in five neighborhoods in the district, and helps them understand their legal rights in dealings with landlords and government agencies. We Are Family looks at what seniors want and need to live happily and safely, says founder Mark Anderson, and that almost always means special efforts to keep them comfortably in their own homes. The nonprofit was started in 2004 with funds from the multiplatinum pop-punk band Good Charlotte, working with a D.C. nonprofit called Positive Force. The model is based on the “village concept” of senior care, which combines self-help, neighborly organizing, volunteers, and a small paid staff to aid seniors with everyday tasks so they can retain their independence. The village movement began spontaneously among neighbors in Boston’s Beacon Hill neighborhood who wanted to “age in place” and avoid nursing homes and Andrea Scott is assistant editor of Philanthropy.

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forms of dependency.1 This little bit of self-organized civil society soon spread to other neighborhoods, supported by donations. It’s about neighbors helping neighbors and building trust as they get to know each other. We Are Family relies on free labor and donated goods; Anderson is the only full-time staff member. The aim is for Saturday volunteers to connect with those they serve and take the initiative to visit on their own. The group’s goal is not to reach the greatest number of seniors, which would mean expanding out of its community, but rather to serve each senior in it well. What the volunteers bring that is most precious is a human connection, Anderson says. “They are the invisible bonds that make our communities truly nurturing places to live and also ultimately to die.” Aging America On top of its other woes, our health care system is facing one of the most monumental demographic bulges in history: the aging of the baby boomers. There will be about 72 million adults older than 65 by 2030, more than twice the number in 2000. Medicare spending alone is projected nearly to double as a share of gross domestic product, according to the Congressional Budget Office, rising from

There will be about 72 million adults older than 65 by 2030, more than twice the number in 2000. 3.7 percent in 2013 to 7.3 percent in 2050. According to studies, a typical senior with multiple chronic illnesses will make 37 visits to 14 different physicians in the course of a year, and receive 50 separate prescriptions. Meanwhile, the median annual cost of a room in a private nursing home jumped from $67,525 in 2008 to $83,950 five years later. The costs of institutionalization are more than just a burden on families, insurance companies, and taxpayers; most seniors dread the step. So initiatives that help older Americans remain in their current homes as long as possible offer both humanitarian and fiscal benefits. Seven-dollar solutions Government agencies are beginning to realize that the small ameliorations worked out through various village-movement charitable efforts could create a winwin solution, making seniors happier and saving heavy public expenditures. A study now taking place at the Johns Hopkins University School of Nursing with public funding, the CAPABLE project, offers tantalizing hope. The program offers home visits by a nurse, occupational therapist, and handyman to about 800 A good short history of the village movement can be found here: manhattan-institute.org/pdf/SE2008.pdf

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Baltimore-area elderly. By providing simple improvements like a raised toilet seat or shower grab bar, or help in charting out what pills should be taken on what day, significant improvements can be made in the health and independence of the elderly. Principal investigator Sarah Szanton says the project is showing success across the spectrum, from participants who are bedridden to those capable of going to church or buying their own groceries. “We go in asking the question, ‘How can you function best in this house so you can stay?’” she says. Though final results aren’t yet in, researchers are finding very inexpensive interventions can help dramatically. For example, one participant had a torn rotator cuff and thus had trouble driving. The team found that inserting a $7 knob on her steering wheel allowed her to keep driving effectively and stay engaged in the community. “There’s a lot of $7, $10, $15 solutions,” Szanton says. Sometimes a $5 gadget is all someone needs in order to live safely at home a bit longer. Previous experiments that brought therapists, nurses, handymen, and other helpers to seniors’ homes (averaging five to ten visits during the course of several months or a year) found that for an average expenditure of roughly $4,000 to $7,000, they could head off rehospitalizations and other problems that would cost in the range of $9,000 to $11,000. This assistance more than pays for itself, in addition to allowing the participants the satisfaction of living in their own homes. Compared to the expense of hospitals and nursing homes, says Szanton, “we think that spending the $4,000 makes a lot of sense.” A Baltimore nonprofit called Civic Works, funded by the Harry and Jeanette Weinberg Foundation, provides the handyman help in the CAPABLE project. Teams identify mobility and safety risks, such as uneven carpeting or missing banisters, often associated with falls that lead to nursing home admissions. The project includes an average of about $1,110 in home repairs free to beneficiaries. A 67-year-old man wrote in after a team installed railings on his stairway: “I used to crawl up and down the stairs on all fours. Since the railings I can walk up and down the steps standing up.” All in the family The Weinberg Foundation has long had an interest in caring for older adults. The foundation’s main focus is low-income and vulnerable individuals and families, and seniors within these populations are specially targeted with $30 million of spending by the foundation every year. “We’ve found if you give people lighter supports earlier, they tend to need fewer heavy supports later on,” says Michael Marcus, who oversees Weinberg’s grants to senior causes. The help offered includes need assessments, home care by volunteers and paid aides, respite care, home modification, transportation, meal prepa-

Liz Essley Whyte

ration, shopping, on-the-spot care consultation with experts, support groups, legal and financial planning, and training for unpaid family caregivers. “As much as 80 percent of all long-term care for chronically ill and disabled older adults is delivered by family and friends,” says Marcus. “We know that we have no organization or governmental capacity to deliver those services at that level. There’s no way we can afford to spend that.” Almost 62 million Americans provided care to family members at some point in 2009, according to an AARP study. The estimated value of their unpaid contributions was about $450 billion (up from about $375 billion in 2007)—a figure almost equal to total Medicare expenditures ($509 billion) for the same year. Caregivers can become overwhelmed, depressed, anxious, or socially isolated. This increases the risk of hospitalization of the elderly person. The extra stress can also take a significant toll on the caregivers’ own employment, family life, and health. Recognizing these difficulties, the Weinberg Foundation launched its Caregiver Initiative in 2009 to support family members, friends, and neighbors who are helping an elder. The three-year program offered more than $8 million to 14 nonprofits and asked them to demonstrate the best ways to support unpaid caregivers for chronically ill or disabled older adults. A preliminary analysis indicates that this added support helped caregivers keep their elderly beneficiary out of a nursing home for at least an extra six months. Even applying the most conservative nursing home costs, the Weinberg Caregiver Initiative estimated savings of approximately $38 million in either caregiver out-ofpocket expenses or government reimbursement. Help in hospitals The John Hartford Foundation has invested more than $451 million in aging and health since 1982. The foundation has magnified its influence by allying itself with other donors, including the Atlantic Philanthropies, the Robert Wood Johnson Foundation, and the Donald W. Reynolds Foundation. One researcher supported by Hartford funds found that in one year, 2 million Medicare beneficiaries bounced back into the hospital within 30 days of their discharge. The federal government has stated that the cost of early readmissions for Medicare patients alone is $26 billion annually. Many of these rehospitalizations are unnecessary, due to things like taking medications improperly. I n response, the Hartford-funded Care Transitions Program gives seniors additional tools, skills, and confidence before they leave the hospital. Patients go home with a personalized written plan, knowing what medicine to take, an understanding of the “red flags” they should watch out for, and how to call for

help before they are really ill. The Gordon and Betty Moore Foundation and Weinberg Foundation have each funded expansions of this project to lower rehospitalization rates. “One hospitalization on average costs about $15,000. Prevent these and you save money,” Szanton said. Another cost-saver is providing home-delivered meals. Brown University researchers recently calculated that increasing home-delivered meals to adults 65 and older would significantly decrease nursing home admissions. Szanton thinks philanthropists can be a major help in this area. “Philanthropy has the ability to be more innovative and to work faster, and there’s really a big role for philanthropy in figuring out how to conquer this whole problem of people aging in place rather than in institutions,” she says.

We Are Family D.C. relies on volunteers to help the elderly stay in their homes. Ninety-year-old D.C. resident Hilda Reynolds, pictured here and on page 40, is a beneficiary.

“By the time I’m 80,” says Weinberg’s Marcus, “nearly a quarter of the population in the U.S. will be over the age of 60. Just within the next few years, there will be a greater need for paid caregivers than for K-12 teachers.” And much satisfaction awaits those who do help. We Are Family D.C. recently helped throw a 90th birthday party for Ms. Hilda. The refreshments were donated by the local grocery store where she was a regular, riding her electric scooter to buy food until her recent stroke. Mark Anderson has seen Ms. Hilda’s abilities slowly but steadily dwindle, but he says it is clear that her apartment is where she wants to be. “It’s her home,” he said. “Living in her home gives her so much joy and strength.” P WINTER 2014

PHILANTHROPY

Denver Scholarship Foundation

DONATING A MOTIVE TO

STRIVE Oil-money pipeline funnels kids to college By Carrie Besnette Hauser

ven in the Mile-High City, college is out of reach for many low-income students. But in 2005, Denver high-school kids were getting a boost from the state of Colorado. A concurrent enrollment program allowed students, many from poor or immigrant backgrounds, to get a head start on higher education by earning high-school and college credit at the same time. But when the board of education had to eliminate the tuition subsidy, many students were unable to pay for the courses on their own. That’s when Colorado oilman Tim Marquez and his wife Bernadette read an article in the Denver Post about the program folding and decided they should do something about it. As the couple began to research the issue, they realized how big the problem was: Many students from low-income urban neighborhoods never made it to the finish line in high school and certainly not on to post-secondary education. For Tim, the son of two teachers, this was unacceptable. True, he had “made it” on his own. A graduate of Denver’s Abraham Lincoln High School, he put himself through college at the Colorado School of Mines as a petroleum engineering major. But, as he readily admits, “It was $300 a semester then, so I made it work with a few partial scholarships and a job at the Coors plant in nearby Golden.” After his graduation from Mines in 1980, Tim went to work for the California oil company Unocal. One Christmas, while home in Denver for the holidays, he met

Bernadette Bott in a club and asked her to dance. They were married in 1983. Bernadette, or “Bernie,” also understood how important education is to a bright future. One of eight children from Kalamazoo, Michigan, her dad had a high-school diploma and worked for General Motors his entire career. Her mom never completed high school and worked part-time over the years. Watching her parents and older siblings struggle made Bernie want a secure career so that “no one would have to take care of me.” Earning a degree was her path. She liked science and knew there would always be a demand for health care. She became a registered nurse, practicing for nearly 30 years. After 13 years with Unocal, a large firm with a sometimes messy bureaucracy, Tim and a partner struck out on their own, founding Venoco in 1992, financed by a small severance and a $3,000 advance on Tim and Bernie’s credit card. While many larger companies were walking away from California’s aging oil fields, Venoco came in with new techniques and watched its profits and success grow dramatically. But Venoco’s efforts and elevated status also made it a target. The company was named in a class-action lawsuit Carrie Besnette Hauser is president of Colorado Mountain College. She assisted in the early efforts that shaped what is now the Denver Scholarship Foundation. WINTER 2014

(eventually dismissed) instigated by Erin Brockovich, the environmental paralegal who became the subject of a major Hollywood movie. Around the same time, one partner and investor, the Enron Corp., attempted to gain control of Venoco with the intent to sell the company. Tim wound up in the middle of the dispute. Consequently, the board fired him as CEO in 2002. He spent the next few years regaining majority control, taking the company public, and growing Venoco’s value to an estimated $1 billion by 2008. In October 2012, the Marquezes bought back the public shares and became the sole owners of Venoco. Success has many mothers Vaulted into the top tier of Denver wealth-creators in these years, the Marquezes felt a sense of urgency to reinvest their resources in the community. News of the canceled college subsidy—and their discovery of how leaky the pipeline to higher education was for Denver’s lower income families— came at just the right time. In 2004, Denver’s new mayor, John Hickenlooper (now governor of Colorado), visited Cole Middle School, one of the worst-performing schools in the city. In so many words, he told a group of students in the auditorium that if they worked hard, did well, and graduated from high school, he promised they would be able to go to college and have the money to do so. Denver media heavily publicized what became known as the “Cole Promise.” Not one to shy away from a commitment, Hickenlooper seized the moment to raise private funds to help more Denver Public Schools students go to college. If his efforts succeeded, he said, not only would kids have better opportunities, but benefits would overflow to the city: Especially talented teachers could be recruited, and the city would become a more desirable destination for new families and companies looking to relocate. 46

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Denver Scholarship Foundation

The Denver Scholarship Foundation has given scholarships to nearly 4,000 students.

At the time, Hickenlooper’s former chief of staff, Michael Bennet (now a U.S. senator), was the new superintendent of the capital city’s school district. He, too, was looking to make bold moves to improve the Denver Public Schools and the expectations of its students. Together, Bennet and Hickenlooper approached the Marquezes for support. The popular mayor’s political muscle, combined with cooperation from the school chief and the generous gifts of the Marquezes, evolved into what is now the Denver Scholarship Foundation. And the Marquezes were in a good position to be generous. In 2006, Venoco went public. By that time, Tim had bought back a 50.3 percent share of the company and was serving as its chairman and CEO. After the proceeds were allocated and fees paid, the Marquezes pledged $100 million to philanthropy—and nearly half of that went to seed the scholarship effort. As children of lower middle-class families, both Bernie and Tim realize their lives would have been very different had not others encouraged them to value education. Just as Venoco extracted natural resources from abandoned oil fields, the Marquezes set out to identify and help students who might otherwise be left behind. As Tim explains: “We look for the hidden jewels, kids who maybe haven’t worked so hard because they didn’t think they could go to college, or who felt they had no reason to try. They are not in the top 10 to 15 percent of their class, but have natural abilities. Someone just needs to say, ‘You can do it,’ and they go from having a 2.2 in high school to a 4.0 in college.” But the Marquezes knew that a scholarship alone would not be enough to help the students they wanted to reach. Although he finished near the top of his class, Tim confesses how little he knew when he was in high school about going to college and how to pay for it. Bernie recalls vividly when their three daughters, all alumni of Denver’s public schools, were approaching high-school graduation and considering their options. “It was so complex that we hired a college coach. We couldn’t count on the school when there were 2,200 students and five guidance counselors. If we had to seek help, what were kids with fewer resources or tools supposed to do? And, for many students and families, it doesn’t matter if college costs $160 or $160,000. They convince themselves it isn’t possible because they don’t know how to get there.” Because of these experiences, and after extensive “best practices” research while creating the Denver Scholarship Foundation, the Marquezes equipped every high school participating in the scholarship fund with a “Future Center”: a one-stop shop to help more students and families navigate post-high-school options. The information provided at these centers comes with a mandate to use it: DSF requires participating students to apply for at least three other private scholarships and all federal and state aid for which they are eligible.

The program partners with institutions at the other end as well: The colleges and universities that DSF students attend kick in financial aid—an estimated $2 for each $1 from the foundation—and support students with on-campus mentoring and retention efforts. The goal is not just to get students on campus, but to help them graduate, Tim explains. To date, 80 percent of DSF recipients are still enrolled or have completed their programs of study. Without these partnerships, programming, and resources, few if any of these students would even know where to begin. As Tim says, “Most don’t think they can graduate from high school or go to college without motivation to do so or someone who believes in them.” He recalls a problem at one of the schools where the program was piloted early on. The school was in a poor part of town, had 80 percent free and reduced lunch eligible students, and had low high-school graduation and college-going rates. Its new principal had created a college track and corresponding personal plan for all students. But parents and teachers criticized the principal for “getting students’ hopes up” and said that ultimately kids and families would not be prepared or able to pay for college. The Denver Scholarship Foundation became the big investor in these students and subsequently invited all students from across the district to participate. Since the couple’s initial $50 million challenge grant to the foundation in 2007, the organization raised another estimated $28 million in private donations and pledges, and awarded nearly $19 million in college scholarships to 3,900 DPS graduates. District enrollment is up from 73,013 in 2006 to 84,424 in 2012—numbers that make Denver one of the fastest-growing urban school districts in the country. High-school graduation also climbed 22 percent, and college matriculation increased by 28 percent, due in part to the incentive for students to stay in school and receive funding for college. More to Come Back in full control of Venoco, with some promising business opportunities lying before the company, Tim and Bernadette Marquez have begun considering what their future charitable efforts should look like. From the 2006 IPO, they created the Timothy and Bernadette Marquez Family Foundation, which supports education and health-related issues. Two other sizable donations have gone to capital projects at their respective alma maters—$10 million to fund Marquez Hall at the Colorado School of Mines, and $7 million for a nursing addition to the life sciences building at Michigan State University. Tim and Bernie plan to give away 99 percent of their fortune. Their first priority will continue to be championing young people who otherwise might not have a chance to pursue college. They are convinced that no other use of resources has a greater return on investment.

One DSF recipient, Edgar Robles, is now a senior at the Colorado School of Mines. He recalls seeing ads about college on TV when he was a freshman in high school and assuming that path was only for the select few and those from wealthy families. But his good grades got him noticed, and a drafting teacher encouraged him to consider Mines. With the support of the DSF Future Center at his school and a counselor named Renae Bruning—herself the product of a similar scholarship program aimed at “diamonds in the rough” and operated by the Daniels Fund—his future began to take shape. He recalls seeing Mines for the first time on a college visit supported by the DSF. “It blew my mind,” he says. “That I could go there with the financial support my family could not provide was simply life-changing.” After seeing doors open for Robles, his older brother also made his way back to college; he’s now working on a master’s degree. Robles’s younger sister was recently awarded a scholarship from the DSF and now attends Metropolitan State University of Denver. “It has not just affected me,” Robles says. “My path has been a model for my family and friends.” Getting to college is one thing. Successfully completing a degree is another. “I knew of Mines’s reputation as one of the most difficult schools in the country,” Robles admits. “But it is much harder than I ever expected, and as one of the few students of color on campus, my support network is small.” Ongoing guidance from the DSF and his involvement with a multicultural engineering center at Mines have helped. He also has a mentor who navigated the same course. One day Robles stopped by Tim Marquez’s downtown Denver office intending to thank him; what he assumed would be a 15-minute encounter stretched into nearly two hours. The two discovered that they grew up on the same street and came from nearly identical backgrounds. Robles hopes their shared experiences won’t end when he becomes a Mines alumnus like Tim. “When I am successful in my career, I hope to be a philanthropist like Mr. and Mrs. Marquez,” he says. “Education is the solution to so many of society’s problems, but those who could most benefit can’t afford it. I know the investment in me by so many and am forever grateful. I also understand my responsibility to help others and give back to society. It is my plan.” P

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We look for the hidden jewels, kids who haven’t worked so hard because they felt they had no reason to try. Someone just needs to say, ‘You can do it,’ and they go from a 2.2 in high school to a 4.0 in college. WINTER 2014

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Anybody Interested in Nation-changing Philanthropy? Help veterans with disabilities stand on their own BY THOMAS MEYER

America’s system for compensating disabled veterans is in crisis. It encourages talented young men and women to think of themselves as broken, coaxing nearly half of all separating servicemembers these days into investing time and effort in identifying themselves as disabled. This tidal wave of new disability claims drives up processing time and hinders prompt attention to severe cases where lifelong support is truly necessary. Worst of all, the siren’s call of disability payments is luring hundreds of thousands of men and women in their prime of life out of the spirited, mission-oriented, teamwork of military service and into the isolation of a mailbox economy—waiting at home for disability checks that disconnect them from the active habits, personal satisfactions, and social linkages of self-supporting work. What’s more, this soaring reliance on entitlements is becoming a heavy burden on taxpayers. The lifetime cost of just the Iraq-Afghanistan veterans already enrolled on disability compensation exceeds $425 billion. That price tag will grow a lot more as upward of one million new veterans of these wars enter civilian life during the next five years. Our military disability system is old and outdated, based on medical diagnoses that date back to World War II, with little acknowledgement that revolutions in assistive technology, in new workforce structures, in legal protection, and in mainstreaming of the disabled have taken place over the last generation. We should be experiencing much more activity, employment, and self-support among today’s disabled, but thanks to the perverse incentives in today’s entitlements there 48

are actually fewer of the disabled working now than in the past. With the best of intentions—to create a safety net for those injured in service to our country—we are encouraging veterans to invest their time and effort not in overcoming or making accommodations for their injuries, but in proving that they can’t. This system is reinforced by powerful and long-standing political interests that protect the status quo. So even though our current mechanism is not sustainable, not necessary, and not in the best interests of many of today’s veterans, it grinds on. It will continue to shamble along, backlogged and often harmful, until someone can demonstrate that there is a better way—an alternative built on independence and earned success for veterans with injuries, rather than monetary patronization. Investing up front What if, rather than giving veterans a lifelong trickle of monthly payments, we instead invested heavily up f ront in treating and accommodating their injuries and training them to succeed at their dream jobs? Private philanthropists could kickstart this very process by setting up a voluntary trial for injured veterans transitioning to civilian life. Participants could surrender all or part of their lifetime entitlement to disability pay in return for a one- to three-year stream of medical, rehabilitative, educational, and job-placement resources that would prepare them to thrive. For the first time, veterans would have a choice. They could stick to the old system of modest compensation checks for life if they wanted, or they could avail PHILANTHROPY

themselves of intensive resources focused on maximizing their strengths and future potential. There is evidence that the challenge of rising to a major personal remake will appeal to many 9/11-era vets. This alternative track would begin with a battery of diagnostic evaluations to determine physical and mental health, innate aptitudes, interests, and personality traits. Then intensive training and accommodations would be offered to enable professional and social success. Private disability insurers have offered such supports for years, and a potent, personalized course could be crafted for each vet by a range of nonprofit, private, or government vendors competing on the basis of their long-term success rates. Veterans already have training options on paper, but few high-quality programs exist in practice. This track would offer the nation’s best resilience and rehabilitation programs for physical and mental health, drawing from projects like the Shepherd Center’s SHARE Program and the University of Texas’s Brain Performance Institute. It would enroll participants in programs that strengthen individuals mentally and physically through adaptive sports, peer support groups, wilderness training, addiction and depression programs, and other proven tracks. It would offer top-level internships, mentoring, and entrepreneurial training for those interested in self-employment. There could be training and assistance for family members. Thomas Meyer is manager of The Philanthropy Roundtable’s veterans program and author of the guidebook Serving Those Who Served.

This alternative track would supply equipment like specially adapted computing devices, smart-home features, Segway transporters, and other new technologies. Research shows that these technologies can make a real difference in getting veterans back to work, yet they are not broadly available. Intensive doses of independence-bolstering resources like these would be made available on the new track. The old technique of pensioning veterans off, effectively placing them up out of the way on a dusty shelf, would be avoided. Much of today’s pressure for veterans to opt into a permanent stream of disability payments plays to financial insecurities— they must all at once change careers, adapt to new medical conditions, move into civilian communities, and start budgeting for expenses the military previously covered, like housing, health care, and child care. Disability entitlements can be alluring in the face of these changes. But real financial security doesn’t come from a string of small government checks. The alternative path for disabled vets would include an intensive financial planning element focused on helping them reach major goals (car ownership, home ownership, college tuition for their children, retirement), prepare for unforeseen expenses, budget their resources, and figure out how much they need to earn to achieve all of these. As an added benefit, the financial security component of this track could offer incentives like matched savings accounts. Organizations like the Corporation for Enterprise Development have years of experience with such incentives. Perhaps most importantly, this program would work with veterans to set education and career goals, connect them with the right schools and training, provide guidance as they navigate the academy, and ease transitions into family-sustaining careers. For a veteran

interested in software development, this might mean supporting him or her through an undergraduate degree in computer science, arranging summer jobs and mentoring, and eventually offering headhunter services. For another interested in starting a business, this program might put him or her through top-notch entrepreneurship training, arrange for membership in an incubator, and provide seed funding for an initial business investment. Veterans interested in vocational career paths would be provided the training they need, funds for tools and equipment, and access to workshops. Temporary wage subsidies might be employed to create a powerful updraft of job opportunities for new graduates. Much work has already been done along these lines. Programs like the Wounded Warrior Project’s TRACK offer lessons in higher education. The Posse Foundation has begun to group veterans into cohorts and put them through a kind of academic boot camp that allows them to succeed at high-caliber colleges. Companies like GE and Microsoft have piloted intensive training courses that give servicemembers the skills to fill great jobs. Syracuse University’s Entrepreneurship Bootcamp for Veterans with Disabilities and the Kauffman Foundation’s FastTrac programs have shown how to prepare veterans for business ownership, and could be beefed up even more for veterans on this track. Organizations like Workforce Opportunity Services have pioneered new approaches that strongly link veterans and employers. Philanthropists could draw from

many existing models to create a whole new approach to compensating for disability. The immediate goal for this recovery track would be to put veterans into meaningful long-term careers. Give them the tools to get hired and stay employed. Any number of excellent service providers could lead such career and life-success programs. Ultimately it would be best to have many organizations compete to empower and place disabled vets in jobs. The best providers would grow, and the weaker ones would be shed. An appropriately modest revolution The program outlined here would revolutionize our nation’s approach to reintegrating injured veterans. Rather than treating them as irreparably broken victims, we would treat them as talented national assets who are undergoing a life transition. This program would not disrupt the other benefits veterans receive after service. The only entitlement it would change is disability compensation. GI Bill benefits, health care, home loans, and other Department of Veterans Affairs support would remain. And no one would be forced onto this alternate route; veterans would simply get a choice: modest compensation for permanent disability, or a jolting jumpstart into an active life and career. This program would not be entirely new, just new to American veterans. Private disability insurers like Cigna, Hartford Life, and Prudential discovered long ago that investing up front in helping individuals return to satisfying work after a disabling injury makes great economic sense, in addition to increasing human

Rather than treating veterans as irreparably broken victims, we would treat them as talented national assets who are undergoing a life transition. WINTER 2014

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happiness. These companies routinely provide financial incentives for claimants to receive treatment for their injuries and return to employment and self-sufficiency. Another precedent that philanthropists and program designers could borrow from is the set of 1990s disability reforms enacted in the Netherlands, a country which at one point made the highest cash disability payments in the world as a percentage of GDP. The Dutch required employers, physicians, and claimants to develop, within eight weeks of injury, a joint return-to-work plan overseen by a case manager. Under this practice, disability rolls declined dramatically, workforce participation increased, and the welfare of the disabled improved. Even foreign militaries like those of Canada and the United Kingdom are starting to shift disability compensation away from endless payment streams to upfront payouts or temporary support aimed at rehabilitation. There is no reason why American veterans should lag behind these more modern approaches. Not every veteran will be ideal for this program. Some are so catastrophically injured as to be appropriate candidates for lifelong disability pensions. But a large proportion of the surge in cases since 2002 goes to veterans with moderate disability ratings between 30 and 60 percent. These are prime candidates for front-loaded rehabilitation instead of lifelong pensioning. Demonstrating success So what would the role of philanthropy be in all of this? Isn’t taking care of veterans a classic governmental responsibility? Yes, it is. The problem is politics. The reason we have such a dysfunctional system and such perverse incentives is because political timidity and special-interest pressures make it almost impossible for

even enlightened leaders of government to touch veterans’ benefits right now. In situations like these, philanthropy has long served as a kind of R&D force and prover of experimental principles. Demonstrating to politicians and the VA that there is a better way to compensate injured veterans would be a classic way to serve the public good. Donors don’t need to retrain every veteran. They don’t need to make payments for years and years. All they need do is set up a rigorous trial, with a volunteer experimental group and a control group that continues on the old path. A careful scientific assessment would track results for a few years. All available knowledge about modern ways of treating disability suggests that a front-loaded, independence-building, rehabilitating alternative like the one sketched here would be a great success. And at that point the VA and policymakers will beat their own path to this new door to the future, so helpfully opened by philanthropy. Nobody wants a system that cripples young men and women with bad incentives. Every sane observer is alarmed as VA commitments for disability payments spiral beyond the trillion dollar mark. But risk aversion and political blowback make it difficult for government to innovate in this area on its own. That makes this prime territory for philanthropic invention and leadership. Philanthropists have a golden opportunity here to pioneer a new, healthier solution for a serious social problem. They can do this by staging a voluntary trial that would run a couple years and cost a few million dollars, thus providing a base of evidence for a subsequent and long overdue update of government programs. A final possible twist to this appealing opening: Because the investments

The immediate goal for this recovery track would be to put disabled veterans into meaningful long-term careers. Give them the tools to support themselves with dignity. 50

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described here would ultimately cut off a 40-year tail of government entitlement payments for each successful graduate, there could be large net savings available to be shared among service providers, participants, and government. This program could thus be an ideal candidate for payfor-success financing, or so-called social impact bonds. This involves private investors putting up money to head off social problems that would otherwise entail large government expense, for which they are later compensated by the government if they succeed. Everybody wins. N early all the large investment banks today, along with myriad organizations like Social Finance, the Nonprofit Finance Fund, and Third Sector Capital Partners, are now setting up divisions charged with finding opportunities where private capital could be used to repair public problems such that the considerable long-term savings could be shared out by the government as earnings on the initial investment. These organizations might find it financially attractive (as well as patriotically appealing) to compete to train veterans, knowing that they could share in the ultimate savings (cumulating to billions of dollars) if they succeed at placing these men and women on their feet as long-term successes, rather than wards of the state. So public-spirited donors who want to help injured veterans blossom and thrive today needn’t lobby Congress or badger the VA. All they have to do is sponsor a high-powered rehab program. The voluntary experiments that result wouldn’t eliminate the current disability system. They would just offer injured veterans a choice: Do you want to be pensioned off, or do you want to be launched into proud self-sufficiency? If even 10 or 20 percent of injured veterans volunteer for a recovery-based alternative, the 40-year difference in improved personal outcomes and reduced government spending would be enormous: hundreds of thousands of lives improved, and hundreds of billions of dollars saved. And philanthropy can lead the way. P

SERVING THOSE WHO SERVED

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SERVING THOSE WHO SERVED A Wise Giver’s Guide to Assisting Veterans and Military Families Thomas Meyer

A Wise Giver’s Guide to Helping Veterans & Military Families Philanthropy for current and former servicemembers is mushrooming. Yet there is little reliable information about how to do it right. Until now.

Available without charge to Philanthropy magazine readers. To order a FREE printed copy of Serving Those Who Served: A Wise Giver’s Guide to Assisting Veterans and Military Families email tmeyer@PhilanthropyRoundtable.org or call (202) 822-8333 To download an e-book or PDF, please visit PhilanthropyRoundtable.org/guidebook

This book was created as a how-to manual for donors who want to make a di˜ erence with individuals who have served our nation, particularly during the period since the 9/11 attacks. It is packed with proÿ les of the most promising people, groups, and strategies, plus essential data. This is a timely new tool for philanthropists who want truly to help a worthy population and blaze a trail of excellence in this under-provisioned new ÿ eld.

books A Man Out of Time

Ted Turner now leads a quieter life, but his philanthropic quirks remain fascinating BY TOM RILEY

There was a time, and it wasn’t very long ago, when Ted Turner was America’s most famous living philanthropist. One gets the sense from this new “authorized biography” that, at age 75, he has mixed feelings about the current state of his public profile. Turner’s reputation for flair in promotion (and self-promotion) is well deserved, but his record of achievement and innovation really is quite remarkable. Turner’s father shot himself in 1963, leaving 24-year-old Ted in charge of the family’s billboard business. Demonstrating an innate gift for marketing, Turner expanded the business throughout the Southeast, buying up radio stations and eventually a sleepy, low-rated UHF station in Atlanta. He brilliantly seized an opportunity to make his channel available to nascent cable systems via satellite. Then he doubled down with the insight that in the emerging world of unlimited channels, content would be king. He bought the Atlanta Braves and Hawks sports teams, World Championship Wrestling, and the MGM library of old movies, TV shows, and cartoons, and cross-marketed them all on his various channels. He founded CNN, TNT, the Cartoon Network, and Turner Classic Movies, which debuted by broadcasting his favorite film, Gone with the Wind (Turner’s signature mustache is allegedly an homage to Clark Gable). During this period he also found time to become a world-class sailor, successfully defending the America’s Cup in 1977 and winning the notorious Fastnet race of 1979, in which 15 sailors died. Turner did all this while raising five children (an oddity given that one of his deepest policy passions is population control), dabbling in international diplomacy, starting the Goodwill Games, wooing Jane Fonda, and amassing the then-largest personal real estate empire in America. Whew. There’s a mountain of interesting material here—and there have been a number of books written about it, including a pretty good one just a few years ago by Turner himself. But that is not what this book is about; not directly, anyway. This book is focused on Turner’s philanthropic vision and what he is trying to do to “save a troubled planet.” 52

Last Stand: Ted Turner’s Quest to Save a Troubled Planet By Todd Wilkinson

PHILANTHROPY

From Randian to rancher Last Stand was written by Todd Wilkinson, a journalist and conservation author who, according to the book’s promotional materials, “has covered Ted Turner’s life since 1992.” Turner gave Wilkinson unprecedented personal access and was disarmingly candid with him about aspects of his childhood, private life, and recent soul-searching. The portrait of Ted Turner that emerges feels authentic, and the reader gets a better sense for Turner’s motivations and psychology from this book than from anything that has come before. And what is his philosophy? Turner can start off by telling you what it isn’t: “Long ago, when I was a young man reeling from my father’s suicide, I embraced the ‘me-first’ ideology of Ayn Rand…. [But] Rand was wrong, dead wrong, and it is precisely that kind of twisted logic that has sown division in our world.” Throughout the book, “Ayn Rand” serves as shorthand for what Turner views as unfettered greed and capitalist rapine. “I’ve come to realize capitalism isn’t the problem,” he says, but “how we practice capitalism.” “Some have described me as a lefty,” he says, but he is “also” pro-business, citing as evidence that he has lectured at business schools, regularly attends the World Economic Forum in Davos, Switzerland, and is a member of the trade organizations to which his various business interests belong. Turner invokes “freedom and liberty and private property rights,” and he demonstrably believes in the power of “private enterprise. I think it’s more effective, more efficient, and makes things happen faster than government bureaucracies can.” A prime example comes at one of the intersections of Turner’s philanthropy, personal interests, and business: bison. One out of every nine bison on earth today (never call them “buffalo” in front of Ted), ranges on his land. Starting with a childhood fascination, bison have become, along with wolves, “Turner’s totem creatures,” Wilkinson says. When Turner first started buying up land in Montana and replacing cattle with bison, locals had a number of dire and derisive predictions: Turner was just a dilettante and would be gone soon, his bison business would go bust, he would wind up either crassly developing his properties or turning them into boutique “ranchettes” for his family’s fancy friends. But Turner has proven the critics wrong. More than a mere romantic evocation of the Old West, it turns out that bison have some important advantages over cattle, both nutritionally and environmentally.

They are hardier animals, needing far less supervision and human intervention. Their meat is leaner in fat and cholesterol and higher in protein. Ever the savvy marketer, Turner invited Martha Stewart and Oprah Winfrey out to his ranch to host episodes of their shows, which touted the virtues of his product. As a result, Turner has been a market-maker for bison meat, which is now sold nationally by Whole Foods and at Ted’s Montana Grill, the popular chain of 44 restaurants Turner founded as an effort to encourage husbandry of the animal. A wonderfully illustrative Turner anecdote is that when he first bought the iconic Flying D ranch in Montana, he sought to “re-wild” the land and help the bison by tearing down all the fences on its 170 square miles. An even better Turner anecdote is that a few years later when he realized things weren’t working as planned, he had some of those same fences put back up. As he describes his own phenomenally successful career, “In large part I just winged the course that brought me here and adapted as more information became available.” But the most salient philanthropic aspect of Turner’s bison and re-wilding adventure is this: He is doing it on his own. It’s his land. That leaves him free to experiment and tinker and follow his own vision. As he said in defending the rights of a neighboring rival who was developing his land in what Turner considered environmentally unsound ways, “It’s his land. He paid for it fair and square.” Though, being Ted Turner, he added, “but we’ll see who’s still here in a couple years and who proves to be smarter.” We are the world Not that he would admit to it, but the urge to “show up” those he perceives as ignorant probably played into the motivation for Turner’s most famous charitable donation: his stunning pledge to donate $1 billion to the United Nations. The U.N. gift, whose final payment is scheduled to be made in 2014 according to Wilkinson, epitomizes Turner: a

bold, quixotic, seat-of-his-pants decision; yielding a PR coup; riddled with early errors that then got corrected; execution entrusted to a liberal establishment figure (Tim Wirth); with a massive contradiction at the heart of the gesture (maverick entrepreneur hands over much of his life’s work to wasteful international bureaucracy). Here was one of those moments where Turner, so often genuinely ahead of his time, was anachronistically behind it. The U.N., to him, was not the morass of inefficiency, dysfunction, and torpor that it seemed to many in 1998, but still a symbol of progress and internationalist hope. “If civilization is going to remain intact another one hundred or one thousand years, Turner steadfastly believes, there is nothing that can replace the vital, galvanizing role of the U.N.,” writes Wilkinson. The book relentlessly champions this gift, and catalogues many of the good things that have come from it. Turner is vituperative to critics, reducing them all to straw men who are for “pulling out of the U.N. …and going alone in the world.” A central component of Turner’s United Nations Foundation is to mount vigorous media and public defenses of the institution itself. Turner is still fighting this fight, snapping at anti-U.N. “idiots” and “Neanderthals”—“When I hear people like Sarah Palin and Michele Bachmann holding forth on international policy, you have to laugh.” But the occasional rant or outburst aside, the Ted Turner of this book, though still frenetically peripatetic and driven, seems mellowed, perhaps even chastened. Turner talks of being haunted by the notion of dying rich, miserable, misunderstood, and alone, like Charles Foster Kane, the protagonist of another of his favorite movies, Citizen Kane (the rights to which Turner also acquired in the MGM deal). And he has softened on religion; he now allows, for the first time in his adult life, that he might not be an atheist anymore.

is the main character in a television cartoon that he himself created: “Captain Planet and the Planeteers.” This was a real show that ran on TBS in the 1990s. Captain Planet is a powerful superhero (his only vulnerability is pollution), who flies around the world leading his ecoteam (they fly in a solar-powered vehicle, of course) to combat evil polluters on behalf of the earth spirit Gaia (voiced by Whoopi Goldberg). The villains, bearing names like Hoggish Greedly, are voiced by Meg Ryan, Jeff Goldblum, Sting, James Coburn, Martin Sheen, and Ed Asner. Who but Ted Turner could have concocted such a program, had the means to broadcast it around the world, and rounded up A-list talent to star in it? At the turn of the 21st century, Turner appeared a colossus. As the largest shareholder of Time Warner Turner, the AOL deal and tech-stock bubble inflated Turner’s wealth into the stratosphere. He was worth more than $10 billion at the market peak. According to Wilkinson, “there was talk that Nelson Mandela had him in mind for a special assignment to try and bring reconciliation of the two Koreas” (a task demanding a superhero for sure). But 2001 was truly annus horribilis for Turner. As Wilkinson describes, when the bubble burst, Turner lost more money than almost any man in history. The implosion of AOL Time Warner cost him about $8 billion, and he rode the stock all the way down, lest he send a public signal of no confidence in his own baby. But it was his own confidence that was being tested as never before, and not just by the market. His marriage to Jane Fonda was dissolving (among other things, she wanted to live in two homes, not 28). The book’s treatment of this episode is intimate but not tabloidy, and ties together with some of the emotional scars from Turner’s upbringing. That summer a granddaughter died, followed closely by the World Trade Center attack. Turner’s great escape had always Nabob’s nadir been work—but at Time Warner he had Though he waxes sentimental about Rose- become unwelcome even in the institubud, arguably Turner’s cultural touchstone tions he had built, like TBS and especially WINTER 2014

books many philanthropists would look the other way from, considering it “government’s job.” Turner, though, has dedicated serious money (nine figures) plus his own time to getting people to take seriously the danger of terrorists detonating a bomb in a place like New York City. Unsurprisingly, alternative fuels are a hobbyhorse, as is biodiversity. One of the themes that emerges from this book is the notion that, frustrated with the wider world, Turner has increasingly focused on his own world, the sprawling archipelago of ranches and open spaces that he is returning to nature. After bison, his current animal passion is prairie dogs. Long considered a nuisance by neighboring farmers and ranchers, Turner sees prairie dogs as another essential creature to re-wilding the West and is enthusiastic about the massive breeding project on his lands. One of the pleasures of great wealth is the ability to make important people pretend to care about your hobbies, and Turner is a salesman for prairie dogs. “A string of Nobel Prize winners—Mikhail Gorbachev, Al Gore, Kofi Annan or Jimmy Carter…has been regaled with tales about the prairie dog frontier. Turner says he would gladly give any American president…a tour,” Wilkinson writes. He quotes Kofi Annan saying: “Ted can tell you anything you ever wanted to know about the prairie dog.” A pivotal moment in Turner’s life came when he was with his mentor and substitute father figure Jacques Cousteau aboard a ship on the Amazon in 1980. Cousteau lamented that the environmental problems facing the world at the time—“nuclear catastrophe, resource depletion and scarcity linked to consumption, and exploding population growth—might be insurmountable.” Worry over each became embedded deep in Turner’s soul. Happily, in the 33 years since then, all three of those imminent “apocalypses” have retreated, addressed by forces and dynamics not foreseen at the time. None Until the very end The book offers a lengthy and mostly of that new reality, though, has given Ted interesting treatment of Turner’s other Turner the slightest pause in his quest to charitable endeavors. He has done valuable save the planet. and unglamorous work in attempting to prevent the proliferation of nuclear weap- Tom Riley is a contributing editor to ons materials. This is a grave problem that Philanthropy.

CNN. His title was executive vice president, but he had no real responsibilities or power, and felt he had been bamboozled by Gerald Levin and Steve Case. He got paid $1 million a year but quickly realized they wanted him to “do nothing” and shut up— not exactly his strong suit. At one point he contemplated suicide. He felt duped at not having power, and vexed by the ruination of the grandiose visions of philanthropy he had so recently entertained. One of his comeback plans was to fulfill a lifelong ambition and buy one of the three broadcast television networks. Wilkinson records Turner’s thoughts: “Imagine, he mused, if he could bring the following talent pool to one channel: Walter Cronkite, Charlie Rose and Tom Brokaw, Peter Jennings, Ted Koppel, Bill Moyers, Jim Lehrer, Diane Sawyer, Judy Woodruff and Al Hunt, Oprah Winfrey, Catherine Crier, the entire ‘60 Minutes’ news team, and of course former colleagues from CNN.” “It would have been the antithesis of FOX News,” says Turner. “Imagine applying that kind of human capital and the might of television to uniting America in the spirit of cooperation and sacrifice that existed during World War II rather than dividing the country for ratings’ sake or using TV as a propaganda arm of a political party.” Throughout the book, FOX News competes with Ayn Rand for the role of principal bad guy, repeatedly popping up in unexpected places like cartoon villains. Turner has on more than one occasion offered to publicly fight his arch nemesis, Rupert Murdoch. This book, however, contains the surprising revelation that Turner has in fact hosted Murdoch as a guest out at his ranch. Might there be an aspect of professional wrestling, long a staple of Turner’s TBS, to this legendary public feud?

PHILANTHROPY

The Tough Road to Excellence What educators abroad have to teach American reformers B Y DU ST IN P E TZO LD

The media offers constant reminders that American students lag behind their counterparts in many countries in math and reading skills, typically earning middling scores when measured against the rest of the developed world. Although these reports lead many to believe that American students are growing less capable with each passing generation, this is not the case. U.S. achievement has remained steady, but marked improvement overseas has caused Americans to fall behind the pace of international competition. With this in mind, reporter Amanda Ripley argues that the debate on education policy should transcend national boundaries, and that we may want to look to education innovators abroad for ideas and inspiration. Not content to dole out mere facts and figures, Ripley gives readers a firsthand glimpse into three top education systems, following American exchange students in Finland, South Korea, and Poland. With her combination of shrewd research and rich personal narrative, Ripley offers a book that is both informative and engaging. Those with an appetite for education reform will find The Smartest Kids in the World an essential addition to their collection. Ripley begins by introducing Andreas Schleicher, the eccentric Franco-German mastermind behind the Program for International Student Assessment, or PISA. The test, which began in 2000 and has since become the gold standard for worldwide evaluation of students, measures the math, science, and reading competency of 15-yearolds in dozens of participating nations. In 2012, when teens from 65 nations were tested, the United States ranked 26th, 17th, and 21st in math, reading, and science, respectively, falling behind countries like Singapore, Switzerland, and even Vietnam. Ripley acknowledges that no standardized test is a perfect barometer of student performance, but she persuasively demon-

strates the PISA exam’s effectiveness as an indicator of critical-thinking ability. The book includes several sample questions from the test, and there is little doubt that the exam’s hand-graded questions can provide more insight than a multiple-choice answer sheet run through a machine. Philanthropists have taken notice: The Kern Family Foundation recently launched a “PISA Benchmarking Plan,” in which individual schools can administer the exam and compare their achievement against international counterparts. Lacking any trace of partisan slant, Ripley comes across as a writer who is genuinely curious to unearth the secrets to educational success. Even when she touches on the contentious debate surrounding education reform, her own political views are largely undetectable, and she allows readers to draw their own conclusions based on the evidence. The discoveries she makes when analyzing data and speaking with various students, teachers, and administrators cause her to take aim at talking points from many camps with equal vigor: Smaller class sizes do not get results, she observes, and spending increases, centralized curricula, and affirmative-action policies are just as fruitless. What really makes this book stand out is not just its wealth of data or its evenhandedness, but its captivating stories of the three exchange students and its ability to transport readers to distant nations and foreign school buildings. Ripley creates unforgettable characters out of her real-life subjects. One cannot help but become attached to Kim, an underprivileged Oklahoman who bankrolls her $10,000 year in Finland entirely on her own, hosting bake sales and selling beef jerky door-to-door, or Tom, an outsider who travels to Poland in hopes of finding a place where he truly belongs. Ripley’s interviews with key players in their respective countries’ education reform movements also produce pearls of wisdom. Ripley concedes that her anecdotal evidence cannot replace the studies and surveys that she cites, but she is an engrossing writer whose style complements the substance of her work. While the thriving education systems of Finland, South Korea, and Poland offer no panaceas for reform, they offer Americans plenty of time-tested ideas. One word pops up repeatedly in Ripley’s analysis: rigor. Her central claim is that high-school academics in the U.S. are simply not as demanding as they need to be. Finnish and Korean teens perform several grade levels above their U.S. counterparts even when variables like economic status, racial background, and government spending are accounted for. The culture of rigor in Finland and Korea extends

The Smartest Kids in the World: And How They Got that Way By Amanda Ripley

beyond students, and can also be seen in the teaching profession. Finnish teachers in particular must endure demanding graduate programs, and it is not uncommon for these educators to fail their licensing exams multiple times before succeeding. Finnish teachers attain the same prestige as America’s doctors and lawyers, and are paid comparably. Ripley makes a strong case that this treatment of teachers is a key to Finland’s educational excellence. Implementing more robust coursework and raising standards for instructors, Ripley posits, is not enough. American cultural attitudes must become more accepting of, and insistent upon, high standards in education. Some suggestions: elevating the prestige of good teachers, eliminating the “self-esteem culture” that has led to more lenient grading and easier work, and requiring passage of a standardized competency exam as a condition of graduation. Ripley understands that there is more than one path to excellence and she mulls several methods of increasing rigor that will give reform-minded donors plenty of options to consider. Though rigor is at the forefront of Ripley’s call for reform, she is not immoderate. Her profile of South Korea portrays a distressed nation, in which high PISA scores belie a warped education system. She describes South Korea’s “pressure cooker” or “hamster wheel” environment. After school is dismissed, most students transition to private tutors until ten at night, at which point the police enforce a study curfew. Exhausted students often resort to sleeping in class, and an overwhelmed teen who murdered his demanding mother is regarded as a national hero. The lesson? Like everything, rigor has its limits. Parents and teachers must reach a balance between rigor and support, “coaching” and “cheerleading.” America has too many warm cheerleaders and not enough tough coaches, says Ripley. The cheerleaders are too afraid to see children fail, so they foster a culture in which success is attainable through minimal effort. But by attempting to protect children from failure, America’s education system is only postponing that failure to a later stage. It may come in college, or on the first day of work. Ripley hopes to see a day when American students are conditioned to accept failure, learn from it, and ultimately conquer it. This begins on the individual, family, and community levels. It can be boosted through philanthropic supports. Intellectually challenging and emotionally involving, The Smartest Kids in the World strikes its own nice balance between rigor and warmth. Dustin Petzold, a writer in Washington, D.C., is a former intern at Philanthropy.

WINTER 2014

face face TO

Grow What Works in K-12 More than 200 donors gathered in Philadelphia on Sept. 30 and Oct. 1, 2013 for “All of the Above: How Donors Can Expand a City’s Great Charter, District, and Catholic Schools” to examine promising investments that improve and expand the best schools of all types in a city. Attendees visited the country’s only co-ed Catholic vocational school, Mercy Vocational, and the nationally recognized charter school turnaround operator, Mastery. Speakers included Katherine Bradley of CityBridge Foundation and Ed Hanway of Faith in the Future Foundation.

left to right: 1. Helen Cunningham, Samuel S. Fels Fund; Mercy Vocational School student 2. Katherine Bradley,

CityBridge Foundation; Jeremy Nowak, J. Nowak and Associates 3. Gerry Lenfest, Lenfest Foundation; Marsha Perelman, Woodforde Management; Matt Hamilton, Hamilton Family Foundation 4. Jeffrey and Janine Yass, Susquehanna Foundation Philadelphia School Partnership

Photos by Skye Fine Art Photographics

5. Mark Gleason,

PHILANTHROPY

face face TO

Annual Meeting

left to right: 1. Frank Baxter, K & F Baxter Family Foundation;

Eli Broad, Eli and Edythe Broad Foundation

The 2013 Annual Meeting, “A Leading Role for Philanthropy,” was held Oct. 17-18, 2013 at Terranea Resort in Rancho Palos Verdes, California. Keynote speakers included actor Gary Sinise, San Jose mayor Chuck Reed, and Daniel Hannan, member of the European Parliament. Edythe and Eli Broad were awarded the William E. Simon Prize for Philanthropic Leadership during a special luncheon on Oct. 18. The program featured a live-streamed debate, co-hosted with Intelligence Squared U.S., on the motion: “For a better future, live in a red state.” Other Annual Meeting topics included exploring new business models for higher education, providing safety nets for the poor, helping boys thrive in school, and teaching constitutional principles.

2. Alan Marty, Legacy Venture; Darin McKeever, Bill & Melinda Gates Foundation 3. Gary Sinise, Gary Sinise Foundation; Sarah Perot, Sarah and Ross Perot Jr. Foundation 4. John Jackson, Adolph Coors Foundation; Brooke Rollins, Texas Public Policy

Foundation 5. Intelligence Squared

Photographs by Rob Andrew

U.S. debate

WINTER 2014

face face TO

(Annual Meeting continued)

left to right: 6. Annie Vu, Choose to Succeed; Alliance Tech High School student 7. Don Wills, Ginger Murchison Foundation; Chris Hitchcock,

Fred A. Lennon Charitable Trust;

David Odahowski, Edyth Bush Charitable Foundation 8. Vikki Spruill, Council on Foundations; Gene Cochrane, Duke Endowment 9. Denis Calabrese, Laura and John Arnold Foundation 10. Jeri Thompson; Stanley Thompson, Heinz Endowment; Russ Hall, Legacy Venture

11. Sam Corcos, Andaril Technologies;

Marilyn Long, Long Family Foundation; Katie Reed, H. N. and Frances C.

Photographs by Rob Andrew / Amanda Telford

Berger Foundation

PHILANTHROPY

face face TO

(Annual Meeting continued)

left to right: 12. Sara Fay Snider, William E. Simon Foundation; Bill Simon, William E. Simon Foundation 13. Stanley Goldstein,

Alice and Stanley Goldstein Foundation

14. Heather Reams, Jack Kent Cooke Foundation 15. Roynell Young, Pro-Vision; Olen Kalkus, Princeton Academy; Peg Tyre, Edwin Gould Foundation 16. Steve Moore, Wall Street Journal; John Donvan, ABC News; Gray Davis, former governor

of California 17. Rachel Keller

Brown, Pelopidas; Travis Brown,

Photographs by Rob Andrew

Pelopidas

WINTER 2014

president’s note Philanthropy Does Not Shut Down

This is a time of great national conflict. Our political leaders are making fundamental choices about the future of economic growth and job creation, entitlement programs, and the role of government in health care. The American people are deeply divided on many of these issues, and our federal government can sometimes seem dysfunctional, even paralyzed. But I am happy to report: Philanthropy does not shut down. The amazing generosity of the American people is not paralyzed. Every week Americans voluntarily give away $6 billion to help other people. And when Americans give away our money, we don’t have to seek approval from Harry Reid or Ted Cruz or any other political leader. We can make our charitable decisions ourselves. Consider three recent donations. The Walton Family Foundation gave a $5 million challenge grant to the Philadelphia School Partnership to support its efforts to create and expand high-performing charter, district, and Catholic schools. The Fisher House Foundation opened its 62nd home enabling the families of wounded servicemembers to live near the military hospitals where their loved ones are being treated. And Bruce and Suzie Kovner gave $60 million to the Juilliard School to provide fellowships for extraordinarily promising classical musicians. These three donations represent philanthropic freedom at its best. An American citizen, or group of citizens, sees a problem, and steps up to find a solution, without waiting for government to act. Not everyone will agree with the decisions they make. Not everyone 60

would give away his own money in the same way. But that is one of the great strengths of philanthropy. In a free, pluralistic society, different individuals will pursue different charitable objectives. Tyrants have always understood the connection between freedom and philanthropy. In a fascinating recent book called Iron Curtain: The Crushing of Eastern Europe 1944-1956, Washington Post columnist Anne Applebaum describes the Soviet strategy for seizing totalitarian control of Poland, Czechoslovakia, Hungary, and other Eastern European countries after World War II. The Soviets had four immediate priorities. They created an extensive secret police that used violence against opponents of the regime. They took control of the mass media, which at that time meant radio. They forcibly uprooted ethnic minorities from their homes. And they suppressed or put under Communist leadership almost every independent institution of civil society, including women’s groups, church organizations, and Boy and Girl Scouts. Other totalitarian regimes, from Nazi Germany to North Korea to the ayatollahs in Iran, have similarly moved swiftly to crush civil society. They see independent private institutions as a threat to their centralized power. By contrast, independent private institutions have been part of the American character throughout our history. To protect this tradition, The Philanthropy Roundtable and our legislative arm, the Alliance for Charitable Reform, are fighting hard to protect the freedom of donors and foundations to decide where to give away their money. Voluntary charitable giving sustains the independence of private institutions. Freedom of religion, freedom of thought, and freedom of speech and association ultimately depend on the PHILANTHROPY

freedom of private charities to raise money from their supporters. This is also one of the main reasons we are fighting to preserve the charitable deduction. Voluntary donations to charities are one of the principal ways Americans express our responsibilities as citizens of a self-governing republic. The charitable deduction protects the independence of both individual citizens and the charities they support. And by excluding contributions from taxation, it reinforces the traditional American understanding that private donations belong to civil society, not the government. The strengthening of civil society is especially important at this time of crisis in the welfare state. Federal and state governments now spend more than $900 billion a year on means-tested programs for the poor—such as food stamps, refundable tax credits, housing vouchers, and Medicaid. This safety net has dramatically reduced hunger, homelessness, and other forms of material poverty. Unfortunately, it has also coincided with the collapse of families, the breakdown of the social fabric, and a slowdown in upward mobility. Millions of Americans now feel trapped at the bottom of the economic ladder. There is not much the government can do to repair social fabric, put families back together, or restore a sense of optimism that the American dream is still open for those who work hard. Philanthropy has the opportunity to lead the way in strengthening families and communities.

Adam Meyerson President

The Philanthropy Roundtable

Celebrating American History â&#x20AC;&#x2122;s Greatest Donors The Philanthropy Hall of Fame The Philanthropy Hall of Fame celebrates great men and women of the past who changed the nation and the world through their charitable giving. View historical images and read brisk biographical profiles that capture the essence of each man and woman, the sources of their fortunes, and the tactics and results of their philanthropy.

To browse the Hall of Fame, please visit GreatPhilanthropists.org

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