In the recent congressional debate and accompanying media coverage, arguments were made that cast doubt on the value of perpetual foundations and suggested that their resources would be better used to address current social needs. The case for preserving a long horizon for some part of the universe of 62,000 private U.S. foundations, however, is a strong one: (3)American foundations originated in the early 1900s as an alternative to traditional annual giving. Early foundation donors, like their counterparts today, wanted to improve society, not just dispense charity. They believed that social progress required research into the causes of complex problems, systematic and long-term approaches, careful monitoring of the use of funds, and partnerships involving the active participation of the foundation. In short, early foundation leaders believed — and demonstrated — that their consistent engagement could add value to the work they sponsored. It was from this ethos that the concept of perpetual value-added foundations emerged.
Annual charitable giving fluctuates with the ebb and flow of economic activity. It is wise to have a permanent core of endowment-based giving that is there through thick and thin. History shows that a prolonged booming economic environment generates new foundations, but that the emergence of new foundations is minimal during long economic slumps.
Foundations are the source of a unique form of social capital. Foundations play a role that business and government do not in making long-term investments to improve society. No small part of the sense that "anything is possible" in this country derives from the presence of foundations with long-term horizons and the capacity to underwrite research, innovation, and new talent. John Evans, M.D., has written about the importance of foundations staying the course when tackling social problems: "Foundations have to make a choice between making the wave and riding the wave. To make the wave requires intensive investment over an extended period of time." Perpetual value-added foundations provide this capacity.
Perpetual value-added foundations enrich the work of their grantees and the fields in which they operate. They demand a wholesome degree of accountability from the institutions that receive their grants, however much recipients may chafe under a foundation's productivity — and quality — enhancing procedures. Permanent foundations provide a body of experience on which new foundations draw, thus shortening the period of casting about for direction that foundations commonly experience in their formative years. Foundations with short lives sometimes seem to be closing their doors just as they gain sufficient experience to be truly effective in their fields, or they may build up expectations for continuing support that other institutions are unprepared to assume.
Foundations provide the capital for infrastructure in the nonprofit sector that makes volunteerism, fundraising, and new program initiatives possible. The nonprofit investment banker and venture capitalist is a role to which perpetual value-added foundations are particularly well suited, and the voluntary sector would suffer in the absence of those reliable sources of financing.
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