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A Slippery Legislative Slope: Diversity in Philanthropy, Part 2

April 11, 2008

(Michael Seltzer, a noted authority on the nonprofit sector and philanthropy worldwide, is a regular contributor to PhilanTopic.)

In the weeks since my post on California Assembly Bill 624, which would mandate public reporting on diversity on the part of large foundations in the state, the bill has passed the assembly and awaits deliberation in the state Senate.

AB 624 would require private foundations with assets of more than $250 million to annually collect and publicly disclose the race, gender, and ethnicity of their board members, staff, and grant recipients. It also requires private foundations in the state to report the amount and percentage of grants to organizations where 50 percent or more of the board and staff belong to an ethnic or racial minority.

Those in favor of a legislative solution mandating diversity reporting argue that voluntary action has not worked and that government action is required to ensure that foundations improve their diversity practices. Some have also asserted that the reporting requirements are not burdensome and such data should be made available to the public.

Those in the opposing camp argue that voluntary initiatives are the most effective course of action, and that foundations are likely to do more without burdensome government regulation. Many also fear that any law would set the stage for unintended and undesirable consequences, such as discouraging donors from establishing new philanthropic entities in the state.

Fortunately, most reasoned voices do not deny the importance and value of diversity in ensuring excellence in their work and want to see meaningful change in this area.

I fall into the second camp. For starters, I don’t have confidence in legislators at any level to do the right thing. In June 2004, I sat in on the Senate Finance Committee’s first hearing on our sector, during which Sen. Charles Grassley (R-IA), the committee’s chair, called for charity oversight and reform. During the hearing, Sen. Max Baucus (D-MT), who subsequently succeeded Grassley as chair, asked a speaker to explain what Form 1023 was. I would venture to say that many other elected officials don't know what Form 1023 is and that even fewer really know how nonprofits operate or are sufficiently informed to design new legislation relating to our sector.

As also demonstrated in Sacramento, the combination of partisan politics and philanthropy rarely yields positive results. Of greatest concern, however, is the very real possibility that AB 624, the proverbial "camel's nose under the tent," could lead to legislation from forty-nine other state legislatures as well as the federal government, creating a patchwork quilt of regulations that would be a nightmare for everyone.

Speaking for myself, I would prefer that government focus on its own house, especially now. In a period of declining tax revenues and shrinking state budgets, we know all too well from past experience that low-income and working people will suffer the most, and that the state and federal programs on which they depend will be the first to suffer serious cutbacks or be axed altogether.

So, to lawmakers in Sacramento and Washington D.C., I say this: Before you start tinkering with the regulatory framework of the nonprofit sector, please make sure you do no additional harm to the well-being of those Americans most likely to be affected by a serious economic downturn.

-- Michael Seltzer

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