BILL ANALYSIS
AB 624
Page 1
Date of Hearing: January 15, 2008
ASSEMBLY COMMITTEE ON JUDICIARY
Dave Jones, Chair
AB 624 (Coto) - As Introduced: February 21, 2007
SUBJECT : PRIVATE FOUNDATIONS: DIVERSITY
KEY ISSUE : IN AN EFFORT TO IMPROVE DIVERSITY IN PRIVATE
GRANT-MAKING, SHOULD CERTAIN LARGE PRIVATE FOUNDATIONS BE
REQUIRED TO PROVIDE RACIAL AND GENDER INFORMATION REGARDING
THEMSELVES AND THEIR GRANTEES?
SYNOPSIS
This bill, sponsored by the Greenlining Institute, requires
specified private foundations to collect specified race and
gender-related data and show this information on their websites
and in their annual reports. According to the author, this bill
is not a solution that will diversify foundations, but, is an
important tool toward this goal. The Greenlining Institute
states this bill is necessary because diversity in the world of
foundations is lacking despite numerous studies that acknowledge
this problem. In response to the introduction of this two-year
bill, and the Greenlining Institute study that preceded it,
foundation representatives have undertaken steps to address the
issue of increased grant-making to communities of color. They
report that these activities are ongoing and productive, and are
preferable to the approach taken in the bill. However,
supporters believe that the bill remains needed to improve
foundation giving. In opposition, the Nonprofit &
Unincorporated Organizations Committee of the State Bar, states
that the bill is both intrusive and burdensome to foundations
and that the harm presented by this bill would outweigh any
benefits derived from it.
SUMMARY : Requires specified private foundations to collect
race and gender-related data and post this information on their
websites. Specifically, this bill :
1)Requires every private foundation with assets over
$250,000,000 to collect, among other things, the following
information:
a) The racial and gender composition of its board of
directors;
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b) The racial and gender composition of the private
foundation's staff;
c) The percentage of business contracts awarded to
businesses owned by specified racial minorities;
d) The number of grants and percentage of grant dollars
awarded to organizations serving specified racial minority
communities; and
e) The number of grants and percentage of grant dollars
awarded to organizations where the grantee's board of
directors and/or staff are ethnic minorities.
2)Requires the collected racial and gender-specific information
to be posted on the each private foundation's Internet website
and included in its annual report.
EXISTING LAW :
1)Under state law, regulates the administration of nonprofit
corporations via the Nonprofit Public Benefit Corporation Law.
(Corporations Code sections 5110 et seq.)
2)Federal law also regulates nonprofit corporations and private
foundations, and defines "private foundation" to mean an
organization which, among other things, is organized and
operated exclusively for religious, charitable, scientific,
literary or educational purposes. (26 U.S.C. section 509)
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
COMMENTS : In support of the bill, the author states, "This
legislation does not require foundations to invest in minority
communities, and it does not create racial quotas for
grant-making and employment. This legislation is a simple
attempt to get foundations to disclose key data related to
diversity on an annual basis." The author further explains:
A.B. 624 is not the solution that will diversify
foundations. But it is an important tool. Minority groups
are expected to comprise fully half of the U.S. population
by 2050. The failure to develop and standardize diversity
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best practices threatens the effectiveness and viability of
foundations to achieve their missions. With a more
systematic and measurable approach to diversity,
foundations can better prepare themselves for the
demographic changes ahead. Most importantly, foundations
that embrace diversity will be able to produce a stronger
impact on societal change. A.B. 624 will standardize how
foundations in California track, gather, and disclose
diversity data.
The positive impact of data collection and disclosure in
corporate America is a good example of the benefits of
greater transparency of diversity data. The Home Mortgage
Disclosure Act (HMDA) of 1975 is a good example. HMDA
requires banks to submit diversity data related to home
mortgage lending. ? Rather than contributing to direct
discrimination, collecting and publicly reporting race and
gender data has led to viable public and private
partnerships to address this important issue.
?
At the state level, the California Public Utilities
Commission (CPUC) requires regulated utilities to disclose
diversity of top employee management, along with data on
supplier diversity. In addition, the CPUC holds an annual
hearing to discuss diversity issues with its regulated
utilities. This annual hearing by itself motivates CPUC
regulated companies to respond with stronger diversity
practices.
Many supporters have submitted letters to the Committee, such as
the letter from the Orange County Community Housing Corporation,
which states:
With a more systematic and measurable approach to
diversity, foundations can better prepare themselves for
the continued demographic changes ahead. Most importantly,
foundations that embrace diversity will become leaders in
the effort to create meaningful social change for
underserved communities.
Orange County Community Housing Corporation has worked for
over thirty years to establish a "minority-led" nonprofit
and is very proud to have achieved that goal. As a
minority-led organization (with former clients as senior
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staff), we have a more complete understanding of our
shareholders and their needs. The result is more effective
service. The "war on poverty" needs to be fought by people
who understand poverty from a personal experience - not by
people who have studied poverty.
This legislation will require a more purposeful recruitment
strategy that will result in the leadership of charitable
organizations looking more like the communities they are
supposed to serve.
2006 Greenlining Institute Report . This bill follows a number
of studies that, the sponsor states, detail the lack of
diversity in foundation grantmaking and governance, including
most recently a 2006 report issued by the Greenlining Institute.
According to this report, the top 50 foundations in the United
States provided only 3% of their grant dollars to minority-led
organizations. This report also noted that only 10% of
foundation executive directors and board of directors are
minorities. ("Investing in a Diverse Democracy: Foundation
Giving to Minority-Led Nonprofits," The Greenlining Institute,
Fall 2006.)
The Greenling study in turn followed an historic joint hearing
of the Latino Legislative Caucus, Legislative Black Caucus, and
Asian Pacific Islander Legislative Caucus on April 24, 2006 to
discuss philanthropic giving to communities of color. The
author reports that legislators listened to over 20 witnesses in
a two-hour period. Several leaders from minority-led nonprofit
organizations discussed their experiences trying to obtain
funding from foundations. The legislative caucuses also invited
over 75 private foundation presidents to testify at the hearing.
Two private foundation presidents, Jim Canales of the Irvine
Foundation, and Dr. Robert Ross of the California Endowment
accepted, as did two other high-ranking private foundation
executives. Corporate funders were also invited by the
legislative caucuses to discuss their experience funding
minority nonprofit organizations.
Response To The Bill By Foundations and Grantmakers
Associations. This two-year bill has sparked many discussions
over the last year between the author and sponsor and the
state's philanthropic community, as well as concrete efforts to
improve diversity in grantmaking. Shortly after the bill was
introduced, the three regional associations of grantmakers in
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California, representing approximately 400 institutional
foundations and giving programs, contacted the author to
express "serious concerns" about the legislation and to open a
dialog about how to strengthen philanthropic support for
communities of color. Two months later, the grantmakers
submitted a letter thanking the author for meeting with them and
for asserting leadership on the important issues raised by the
bill. The grantmakers further promised to undertake a number of
steps to address those issues, including hiring "a recognized
independent research institution ? to assess the current
landscape of nonprofits led by and/or serving people of color in
California." The grantmakers also offered to create an advisory
committee of community leaders to contribute input to the
research initiative and provide feedback and analysis of the
findings and recommendations." The grantmakers argued that this
approach was superior to the proposed bill, which they contended
lacked clarity and could have negative unintended consequences
for investments in communities of color as well as the growth of
philanthropy generally.
Along with the grantmakers, a number of large foundations,
including the California Endowment, the California Wellness
Foundation and the David and Lucille Packard Foundation, as well
as the California Association of Nonprofits, wrote to the
Committee to express concerns about the bill and request that it
not move forward while they worked with the author and sponsor
on alternative solutions.
In a January 3, 2008 letter to the Committee, the grantmakers
wrote again to applaud the author's commitment to diversity and
his concerns about ensuring that philanthropy better reflect the
state's changing demographics and emerging needs. The
grantmakers stated that they have made "significant progress" in
their efforts to address diversity issues and have an "ambitious
work plan" for the coming months that they believe far exceeds
the mandate of the bill. Specifically, the grantmakers state:
Over the past year, the regional associations have worked
with Assemblymember Coto to identify ways in which we can
collectively assess, understand and strengthen the
engagement of the philanthropic community's support of
minority communities. To this end, we made commitments to
the Assemblymember that show that in working together,
legislation is not necessary to achieve our common goals.
These commitments include conducting independent research;
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creating a non-profit advisory body to review the research
and make recommendations to the philanthropic community;
and providing a platform for minority leaders to meet and
discuss approaches with foundation leaders. We believe we
have made much progress on these agreements. We continue to
obtain feedback and recommendations from the Assemblymember
and update him and his staff on developments within the
philanthropic community that demonstrate our commitment to
achieving meaningful diversity goals. Below we provide an
update of our work and a timeline for implementing the
commitments we agreed to with Assemblymember Coto.
In May 2007, the regional associations commissioned the
Foundation Center - a leading research center on
philanthropy based in New York and with a branch office in
San Francisco - to conduct research on the issue of
diversity in philanthropy in California. This work will be
conducted in partnership with the University of Southern
California's Center on Philanthropy and the University of
San Francisco.
The Foundation Center's research project includes an
analysis of grants awarded by the top 50 foundations in
California; surveys of 600 foundations in order to gather
additional data from a broader range of institutions; and
surveys of nonprofit organizations in the state. These
three strategies will enable us to obtain an accurate
overall picture of board and staff diversity of California
foundations; understand the communities served through
grantmaking by the top 50 California foundations; compile
data on the populations served by nonprofit organizations;
determine the percentage of minority-led nonprofits in the
state; and determine what data (if any) foundations and
nonprofits are currently collecting to evaluate progress
towards diversity-related goals.
By the end of January 2008, we should have the report on
the analysis of grants awarded by the top 50 foundations in
California. The other two components of the project will
be completed by mid-2008.
An advisory committee comprising leading academics and
practitioners representing diverse communities from across
the state has been constituted and will be convened in
January to review the data collected by the Foundation
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Center and provide feedback on next steps. The committee
includes noted non-profit and community leaders who work
closely on issues of diversity and minority communities.
An invitation has been extended to the Greenlining
Institute, the sponsor of this bill, to participate on this
advisory committee and they have identified a community
representative to serve.
The framework and scope of this research project, which has
been supported by the regional associations' membership,
far exceeds the scope and mandate of AB 624.
The Committee also received recent letters from the California
Endowment, James Irvine Foundation, and the California Wellness
Foundation expressing commitment to advancing diversity and
inclusion in the field of philanthropy in order to improve
outcomes and effectiveness, in partnership with the author.
They further state that they support the grantmakers plan, which
they view as a more comprehensive alternative that better
fulfills the intent of AB 624, making the bill unnecessary.
Supporters Believe The Actions And Commitments of Private
Foundations Are Insufficient To Address The Problem . Despite
the efforts of the grantmakers to address the concerns of the
author and the sponsor, the Greenlining Institute argues that
this bill remains needed if adequate progress is to be made on
the vital issue of increased foundation support to minority-lead
organizations. The Greenlining Institute states:
The regional association of grantmakers is developing
aggressive research efforts on the topic of diversity in
philanthropy. Prior to AB 624, such efforts were rare or
non-existent. Unfortunately, the research efforts are not
transparent and will never provide us with the data
required under AB 624. In fact, the research by Northern
California Grantmakers and the Foundation Center make a
stronger case for the necessity of AB 624.
For example, recent research developed by the Regional
Associations of Grantmakers (RAGS) and the Foundation
Center demonstrates that 20% of foundation funding from the
state's 50 largest foundations is going to "minority
serving" causes. Apparently, many foundations, and maybe
even the RAGS, are satisfied with this 20% figure.
Unfortunately, this percentage is embarrassingly low in a
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state where 55% of the population is minority, and where
minorities disproportionately represent children, the
"needy" and "economically disadvantaged."
Secondly, NCG is committed to never disclosing what
foundations are doing on an individual basis. Under this
secret research strategy we will never have data for
individual foundations. The current 20% "giving to
minorities" is a smokescreen that allows a few leading
foundations to cover for their non-diverse peers. The 20%
figure also makes the leading institutions, such as the
California Endowment and the California Wellness
Foundation, appear poor in their diversity numbers.
NCG could do one simple thing to avert legislation. They
can simply disclose how the top 50 foundations are doing
individually in their diversity efforts related to board,
staff, and grantmaking.
The current research efforts by the RAGS might lead to 30%
giving to minorities by 2040. By then the state's
population will be 70% people of color.
Opposition of the State Bar Nonprofit & Unincorporated
Organizations Committee and California Family Council. The
State Bar's Nonprofit and Unincorporated Organizations Committee
(Business Law Section) opposes the bill for four reasons:
First, although the bill seeks to ensure more transparency
and accountability from foundations, implementation of its
provisions will not foreseeably improve corporate
governance of foundations and may actually make governance
more difficult.
Second, the bill requires racial, ethnic and gender data
pertaining both to governance and to grant-making. This
requirement is intrusive to the personal affairs of the
board members and staff of foundations. The intrusiveness
extends beyond the foundations to their grant recipients
and to businesses that interact with foundations. Such
intrusiveness is in conflict with constitutional rights of
privacy.
Third, this bill would be burdensome both to the
foundations and to the grant-recipient nonprofits. It
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would impose multiple layers of administration and costs
due to its requirements to secure, maintain, and report
extensive data.
Finally, this bill may affect the ability of nonprofits to
obtain grants from foundations. If implemented,
foundations may seek to maintain ethnic and diversity
ratios that would then deter them from making grants that
would adversely affect such ratios, even if such grants
would be in furtherance of their charitable mandate. Even
if the nonprofit would meet the diversity requirements,
proving this may well be beyond the ability of the
nonprofit seeking the grant.
Also in opposition, the California Family Council argues,
"Government should not dictate how private money is spent.
While AB 624 does not go that far yet, the collection of data is
the first step in moving toward a mandate that will require
diversity among the boards of directors and grant recipients.
This mandate will result in a burden on the non-profit groups
and will detract them from serving the communities that are
benefiting from their services."
The Author May Wish To Consider Clarifying Some Aspects of the
Data Set. As the bill moves forward, the author may wish to
fine-tune the data specified in the bill in order to address
outstanding issues, some of which are among the many thoughtful
questions raised by the Greenlining Institute, such as:
specifying a date by which fluctuating employment data is to be
reported so as to ensure consistency and comparability; the
inclusion of gender data only for the board and staff of
foundations, rather than grantees; the value of including other
diversity characteristics, such as disability, sexual
orientation, and age; the definition of minority-led
organization; whether data regarding the total number of
minority-led organizations should be collected in order to allow
the assessment of disparities in foundation giving; whether a
consistent definition of "minority-serving" organization could
be specified so as to avoid incompatible or inaccurate reports;
the difficulty of determining minority ownership of businesses
that are incorporated; whether a minimum threshold value for
reportable business contracts would be helpful; whether the bill
covers all foundations making grants or otherwise doing business
in California, or only those with a principal place of business
in the state or perhaps those organized as California
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corporations; and the apparent exclusion of all public
foundations and most if not all corporate foundations,
Author's Technical Amendment.
On page 3, line 13, a comma should be added after the word
"foundation".
REGISTERED SUPPORT / OPPOSITION :
Support
Greenlining Institute (sponsor)
AFSCME
Antioch Baptist Church
Black Business Association
Center for Training and Careers
Centro Legal de la Raza
Chicano Federation of San Diego County
Community Resource Project, Inc.
Council of Asian American Business Associations
East Bay Asian Local Development Corporation
Hmong American Political Association
Kearny Street Workshop
Orange County Community Housing Corporation
Southeast Asian Community Center
Opposition
California Family Council
Nonprofit & Unincorporated Organizations Committee of the State
Bar
Analysis Prepared by : Manuel Valencia / JUD. / (916) 319-2334