Philanthropy and the State

Welfare Reform and the Relationship between Foundation Funding and State-level Policy

Editor’s Note: Jennifer Mosley and Joseph Galaskiewicz continue HistPhil’s forum on philanthropy and the state.

Philanthropic foundations are independent when it comes to revenue. That seemingly neutral fact has led to two assumptions that govern how we tend to think about their interaction with the policy environment. First, foundations are typically seen as having unusual freedom to express policy preferences through their giving choices, resulting in considerable power to bring attention to new ideas or service technologies. Second, as a corollary to that, foundations have traditionally been conceptualized as operating largely independently of environmental influences, instead providing leadership by seeding social innovation and promoting new ideas. In other words, foundation trustees and administrators like to talk a lot about the influence they have on policy, but play down the influence policy has on them.

As organizational scholars, we find this very odd. Almost all current organizational theory would predict that, like all organizations, foundations are strongly affected by the environment in which they operate. Why shouldn’t they be? The policy environment sets the stage for effectiveness, for example by creating incentives for innovative new programs or highlighting unmet needs. In our view, the question should not be whether or not foundations are responsive to the policy environment but rather to which aspects are they responsive and to what degree? It is only through this detail of how foundations respond to their environment that we can understand better their public policy roles. Currently foundations are under-conceptualized as public policy actors and, as a result, we know surprisingly little about the public policy roles they adopt.

In our recent paper, “The Relationship Between Philanthropic Foundation Funding and State-Level Policy in the Era of Welfare Reform” (published in the December 2015 issue of Nonprofit and Voluntary Sector Quarterly), we examined the complex relationship between foundations and the public policy environment by investigating two possible roles that foundations play in response to a major policy change. In the first narrative, foundations are seen as charitable agents, responding to the government’s failure to meet the needs of all citizens. In the second narrative, foundations are seen as engines of social innovation, working with the states to implement public policies. These roles are not incompatible, and foundations likely play both. However, no known research has used a large sample to see which roles foundations systematically assume.

We examined foundations’ sensitivity to the policy environment by looking at how foundations responded to state level policy trends and demographic conditions in the years immediately following the 1996 U.S. welfare reform legislation. During this time, the federal government fundamentally changed how it administered cash assistance for low-income families, resulting in large differences in state-level policy. This provides a rare opportunity to see how foundations responded to changes in state policies. To carry out this work, we obtained longitudinal data (1993-2001) on the annual giving of approximately 1,000 of the largest foundations in the United States in five key areas (child care, family services, workforce development, safety net, and poverty research). We then analyzed the amounts of welfare-related funding foundations gave in each state across the welfare reform era.

Two major findings stand out. The first suggests that, contrary to public discourse (but perhaps in alignment with trends in philanthropic thought), foundations work to promote social innovation more than assistance to those in need. While funding for research and workforce development grew in response to welfare reform, funding for social needs programs stayed essentially flat.

The second major finding is that, despite some rhetoric to the contrary, foundation funding seems to be more of a complement to government initiatives than a substitute. Overall, foundations gave more in states that had experimented more with waivers, had implemented more generous policies, or spent more on welfare related services, such as childcare and job training. We also find that foundations were not particularly concerned about giving where the need was greatest, e.g., where unemployment was greater. Rather, foundations preferred to give in active policy contexts, regardless of need, which indicates their strong inclination to adopt a social innovation role in their relationship to government. Although these findings vary by foundation type, by generally providing more funding and promoting social innovation in states where welfare reform had the greatest chance for success, they demonstrate a sector that, perhaps unintentionally, works more in partnership with government policy goals than as a potential adversary or policy leader.

-Jennifer Mosley and Joseph Galaskiewicz

Jennifer Mosley is an Associate Professor in the School of Social Service Administration at the University of Chicago. She researches the role of nonprofit organizations as political actors, specifically the role human service organizations, community-based nonprofits, and philanthropic foundations play in advocating for underrepresented populations. She is particularly interested in the relationship between advocacy and improved democratic representation and how organizations balance self-interest with larger community goals. 

Joseph Galaskiewicz is a Professor of Sociology at the University of Arizona.  He has published several papers and books on corporate philanthropy and nonprofit organizations.  Galaskiewicz is currently doing research on the spatial patterning of Third Sector organizations as well as businesses and government organizations in the Phoenix urbanized area. 

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