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Wealthy individuals, foundations and donor-advised funds should consider giving a larger amount now to effective nonprofits

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By Joe Selvaggio and Don Samuels

September 1, 2018 — 12:00am

“If you’re not depressed, you’re not paying attention.”

There’s a lot of bad news out there, including the growing gap between the working class and the rich. The Minneapolis Federal Reserve Bank and other studies show the top 10 percent are getting richer every decade and the bottom 50 percent poorer.

The two of us have spent most of our careers in business and nonprofits. The work has included helping people of means invest in opportunities that enable low-income people, including immigrants, obtain the training, employment and housing needed to achieve self-sufficiency.

The need is great, even with unemployment low for the working poor and their kids. It’s tough to make rent, even on $15 an hour.

There is plenty of private capital around to make a difference.

A solution is for wealthy individuals, foundations and donor-advised funds to consider giving a larger amount now to effective nonprofits than their usual 2 percent to 5 percent annually.

U.S. foundations have about $890 billion in assets; donor-advised funds have upward of $85 billion, and the top 2 percent of wealthy families probably trillions in assets slated toward philanthropy.

Despite the urgent needs in our communities, wealthy individuals and the boards of directors of these silos of accumulated capital are, by and large, growing the corpus. This permits problems to fester. Instead, we could heed the adage “a stitch in time saves nine” and reap the benefits.

Wealthy people in their 80s should be in a “distribution mode.” Many are still in an “accumulation mode.” Consequently, needs grow and opportunities disappear.

Here is an example very close to home of how a generous donor can advance a low-come person of potential.

Don Samuels, now 69, was 20 years old when he arrived in this country from Jamaica with no money and a student visa. He was accepted by the Pratt Institute in New York City to study design, but lacked money for tuition and faced deportation. Then, an affluent “angel” loaned him the money for four years at no interest until he graduated.

He paid back the money year by year.

Don worked in business and as an entrepreneur in industrial design for 30 years.

He became a Lutheran pastor, was elected to the Minneapolis City Council for 10 years, served on the Minneapolis school board and raised his family in north Minneapolis. He has worked for three years as executive director of the nonprofit MicroGrants, which makes grants to low-income people of potential to advance their careers.

Don’s philanthropic lender nearly 50 years ago not only helped him, but hundreds of other people touched by his work. To us, this use of cash advanced Don, others and our economy. The rich donor didn’t miss it. He was ever grateful to help.

There are scholarship programs for high school and elementary school students. All could use investments to serve more students and improve our workforce.

When money stays in a foundation as opposed to going to work on problems, it essentially stays in the investment market since foundations are only required to spend 5 percent of the principal, including salaries, fees and overhead. This means double the overhead, once in the foundation, and once in the nonprofit.

To the extent that we do not solve the problems, whether it is poverty, health, the environment, or racism, the government will get involved. Then we not only have more overhead, but we will have an even more troubling reality: more taxes and government inefficiency.

Another example: A businessman named Tom Warth, started a foundation 20 years ago, and then decided it would be more cost-effective to liquidate the foundation of its $2 million in assets by giving it to a nonprofit called Books for Africa. Books for Africa has given over 40 million books to Africa, which has a serious book famine, helping many disadvantaged children to develop a love of reading.

Another wealthy individual, who wants to remain anonymous, has decided to avoid all this inefficiency and give directly to his favorite nonprofits dealing with the problem now, rather than put it in a foundation. He gets the side benefit of not being hounded by hundreds of nonprofits looking for donations.

There are some benefits to long-term thinking and top-down strategizing that foundations often do. We are just making the case for a bigger portion of philanthropic dollars getting into the hands of people dealing with the problems, at a level that makes a statistically significant difference.

If only a few foundations, donor-advised funds or wealthy individuals liquidated or gave 10 percent rather than 5 percent of their assets, many more billions of dollars annually could go into the communities, making the body politic well today, rather than reducing its symptoms into the future.

Let the business people who were smart enough to make the money decide how to help our troubled world and get plenty of “psychic income from the gifts.”

Let them “enjoy the fruits of their giving, while they are living.”


Joe Selvaggio was founder and chief executive of Project for Pride in Living and the One Percent Club for 35 years. Don Samuels is chief executive of MicroGrants, a nonprofit that gives grants to low-income people.