State’s Charity Foundations in a Growth Spurt

California’s charitable foundation assets--which were relatively modest as recently as two decades ago--are now growing at a rate faster than those in the rest of the country, according to a study by the new USC Center on Philanthropy and Public Policy.

In 1978, California held 8% of national foundation assets; in 1998 it accounted for 14%, the study said. During the same period, the state’s share of foundation grants grew from 7% to 11% of total giving nationwide, it said.

“California is catching up and jumping forward,” said Marcia K. Sharp, a research fellow at the USC Center on Philanthropy and Public Policy, and a co-author of the study.

“California lagged behind the country early on, but in the last 20 years it has grown faster,” she said. “Philanthropic assets are increasing all across the country--but they’re increasing faster in California.”

In 1978, California’s 1,643 foundations had combined assets of $2.8 billion and awarded $184 million in grants, the study found. By 1998, the number of foundations had increased to 4,000, with $52 billion in assets and $2 billion in grants awarded, it said.

Nationwide, there were 22,484 foundations with $37.2 billion in assets in 1978, the study said. By 1998, there were 47,000 U.S. foundations with more than $385 billion in assets and $19 billion in grants given, the study said.

The USC study stressed that some of the state’s biggest new foundations, such as the California Wellness Foundation, were started with the proceeds of the conversion of nonprofit health care entities into profitable enterprises, translating into more grants for health care.

California “is growing faster than the nation, both in terms of number of foundations, assets and their grant-making,” said study co-author James Ferris, director of the 3-year-old USC Center on Philanthropy.

Still, the NewTithing Group, a San Francisco-based philanthropic research entity, calls California one of America’s “philanthropic laggards,” and said the state’s pool of charitable donations would be $17 billion greater if people had engaged in more appropriate levels of “affordable giving,” based on the earnings listed on last year’s tax returns.

“My sense is, overall, that California has not caught up yet, given its share of the country’s wealth,” said Stacey Palmer, editor of the Chronicle of Philanthropy in Washington. “There is still room to grow. The big question for me, in California, is whether the downturn in the new economy will cause problems for some of the high-technology donors who have just started to give their fortunes away.”

Health care accounts for 20% of foundation giving in California, in contrast to 16.5% nationally, the study said. Colleges and universities receive a hefty 18% of California foundation grants, arts and culture get 15%, and human services get 16%--reflecting similar priorities to foundation giving nationwide.

But California foundations seem to give a greater proportion of funds to scientific and high-tech innovation and the environment, reflecting West Coast priorities, Ferris said. Environmental concerns receive 9% of California foundation giving, compared to 6% of such grants nationwide, the study said. Nine percent of California foundation grants go to science and technology, compared to 4% in the country as a whole, it said.

“Philanthropy relates to people’s interests and passions,” Ferris said. “Californians and people in the West put a much higher premium on the environment, and that gets expressed through philanthropy.”

Many California foundations are relatively young. Sixty-four percent have been established since 1980--compared with 56% nationwide--and more than 37% were created during the 1990s, the study said.

The study said 32% of the California foundations with more than $100 million in assets have emerged since 1980, in contrast to 22% of such foundations nationally. About 60% of California foundations have assets of less than $1 million, the study said.

Generally, though, foundation assets in California are highly concentrated in the largest foundations. Half of foundation assets in California are managed by foundations with more than $1 billion in holdings--compared to 35% across the country--and several of California’s largest are the new health care foundations, the study said.

“Because a large number of philanthropic assets are targeted toward health care, California spends a larger share of its grant-making on health,” Ferris said, including funding to help provide greater access to health care and better health care delivery.

California also stands out in grants for such environmental causes as buying and preserving wetlands and cleaning up rivers, Ferris said.

In the next 50 years, between $41 trillion and $135 trillion is expected to change hands through inheritances, Sharp said, with some of that going to philanthropy.

“Personal wealth is increasing in the country, and the interest in giving back is also increasing,” Sharp said. “We have some individuals--Eli Broad and Bill Gates--who are highly visible and have moved to create foundations. This is setting an example for other people.”