A Moral Failure: Foundations and Rural America

Web banner from the Council on Foundations 2011 Annual Meeting

Yesterday on our Arts and Culture Feed we linked to the breakdown of President Obama’s NEA budget proposal by Americans For The Arts. While discussions on this budget circulated yesterday, Charles Fluharty, President of the Rural Policy Research Institute, testified before the Agricultural Committee of the Senate to discuss how federal and private-sector forces can better serve rural communities and rural development. His full testimony can be found at The Daily Yonder, and video of the testimony begins at the 162 minute mark here.

As we’ve seen previously in creative economies and creative placemaking, artists and arts organizations both offer immense contributions to local economies and benefit from inclusion within the framework of rural development. 

For that reason alone, folks will be very interested to read Fluharty’s analysis of the level of investment in rural communities by our national foundations. Generally speaking, rural America is 80% of the country and 20% of its population, yet these communities receive less than 3% from the major national foundations. (Many estimates put this number as low as 1%.) 

This “institutional and moral failure” is complicated by these foundations’ tax status; in exchange for working towards the public good, these entities receive deductions and exemptions. Below, Fluharty’s testimony suggests that not only is this an example of a gross inequality, but it’s also a breach of public trust:
Beyond these public sector challenges, a concomitant rural disadvantage in philanthropic funding also remains significant. A 2004 report by the National Committee for Responsive Philanthropy, “Beyond City Limits: The Philanthropic Needs of Rural America,” found that out of 65,000 grant-making foundations, only 184 made grants characterized as “rural development.”

Rural America remains challenged by this long-standing, differential disadvantage in philanthropic investment in its people, organizations, and institutions. And this is now more critical than ever, as federal, state and local government resources continue to decline. Because of the generous tax subsidies granted foundations and their donors, their presidents and trustees enter into a covenant with the American people, in which our government and these institutions jointly assume an obligation to steward this awesome public trust so as to optimize the public good achieved, in exchange for the lost public sector revenues and resources, as a result of tax deductions and exemptions. An awesome challenge, indeed…….As with all subsidies, deductions, and exemptions, federal budgetary pressures are again calling these dynamics into question, as both more research and more transparency are sought.

While redlining has been decried by national foundations for years on the part of government, a current de facto foundation redlining of rural America simply must be addressed. Federal funding for community capacity continues to decrease, and rural safety net resources are in dire need. Yet, American philanthropy continues to distribute less than 3% of its annual payout to the people and places of rural America, which comprise 20% of our population and 80% of our natural resource base. In fact, foundations have withdrawn further from rural commitments in the past five years, as need has increased exponentially.  These foundations, and the generous tax subsidies provided to donors, create a public partnership in pursuit of the public good.  This geographic inequity must be named.  It is an institutional and moral failure; and one so long-standing that serious inquiry regarding whether this is an abuse of a solemn public trust should be considered.

[Editor’s Note: In the spirit of full disclosure, Charles Fluharty is the father of Matthew Fluharty, Art of the Rural Editor.]