|
|
Foundations touch state with millions
JEFF PORTER
ARKANSAS DEMOCRAT-GAZETTE
New York oil tycoon John D. Rockefeller wanted his money
to work even after he died. So he created the Rockefeller Foundation, endowing
it with $250 million and charging it with ending human suffering.
More than 80 years later, human suffering remains, and
Rockefeller's legacy is still at work. His foundation gave away $99 million
in 1997 and is funding research on new drugs to treat malaria.
Rockefeller's was one of the first private foundations,
a method of giving that began in the late 1800s and proliferated after
the 16th Amendment to the Constitution created the modern income tax in
1913.
Today the United States has about 58,000 private foundations.
Through them, men like W.K. Kellogg, Henry Ford and Bill Gates are teaching
community involvement, fixing crumbling inner cities and giving public
libraries Internet access.
Arkansas has 273 private foundations, which, according
to the latest numbers available, control about $1.5 billion in assets.
That's twice as much as J.B. Hunt in Springdale, the nation's largest publicly
traded trucking company, is worth.
Without those foundations, the impoverished Mississippi
River Delta would be even more desperate. Fewer students could afford college
tuition. The arts would have a much smaller canvas. To match one 1998 grant
from the Walton Family Foundation in Bentonville, the Girl Scouts would
have to sell 110,000 boxes of cookies.
Directly or indirectly, the life of every Arkansan is
touched.
In 1997, Arkansas' foundations gave away at least $116
million. That's enough money to build Alltel Arena -- and fix the raker
beams afterward. It's enough to reconstruct Interstate 30 from Little Rock
to Malvern, enough to write every man, woman and child in Arkansas a $46
check.
But by some standards, it's still a paltry sum. All by
itself, the Lilly Endowment in Indiana gave away $425 million last year.
In all, the nation's private foundations give away $17.5
billion a year, according to the most recent information available from
the National Center for Charitable Statistics in New York.
Unlike public charities -- such as the University of Arkansas
Foundation -- private foundations typically get their start with money
from a single source. Most are initially endowed with family or corporate
money.
"Some people want to live forever through their foundations,"
said Tom Riley, director of research for The Philanthropy Roundtable in
Washington.
The money those foundations control is "the wealth that's
been accumulated, largely by what we called the World War II generation,"
according to Pat Lile, president of the Arkansas Community Foundation,
a public charity that receives money from various sources, including private
foundations. As the World War II generation passes on, she said, "that
wealth will be transferred."
It will also go a long way toward setting society's goals
and determining the country's priorities.
To date, foundations' purposes seem largely benign. They
have fed and clothed the poor, modernized hundreds of hospitals and sent
millions to college. But they also influence public policy, at least indirectly,
by giving to the American Civil Liberties Union or the Southern Poverty
Law Center or to organizations that promote school vouchers or abortion
rights or medicinal marijuana.
Meanwhile, the foundations are allowed to rake in profits
on their investments, year in and year out, while paying only 2 percent
in excise tax on those profits. Federal law requires them to give away
an average of 5 percent of their assets each year.
That leaves room for them to grow and grow.
The value of the assets private foundations control --
stocks, bonds, limited partnerships, land -- has more than quadrupled in
the past 20 years, even adjusting for inflation. In 1997, the latest year
for which a figure is available, they were worth $336 billion.
Keeping track of what foundations do with that money is
a big enterprise itself.
Nonprofit organizations such as the Foundation Center
in New York, the Council of Foundations in Washington and the Southeast
Council of Foundations in Atlanta all keep an eye on foundations. The center
is a research gold mine for organizations seeking grants from the foundations.
The councils provide the foundations with research, legal services and
conferences and workshops.
An examination of Arkansas' foundations begins with Form
990-PF, the tax return each of them files annually with the Internal Revenue
Service. It lists investments, income, expenses, gifts and the trustees
who decide on gifts.
Form 990-PF is a public record, and a foundation generally
produces it on demand. It's available from the IRS -- after a wait. Many
are on file at the state attorney general's office or are available on
microfiche at the Central Arkansas Library.
The 990-PFs filed by a dozen of the state's largest foundations
open a window into a little-explored area of Arkansas wealth. They are
the starting point for an overview of these ever more influential institutions.
THE FRUEAUFF FOUNDATION
The Charles A. Frueauff Foundation began life in 1950
with $4 million from the successful New York lawyer's will. Now it's worth
$116 million and based in Little Rock, run by the daughter-in-law of Frueauff's
nephew.
Under the direction of Sue Frueauff, who retired a few
years ago as an elementary-school principal in Russellville, the foundation
spread $4.8 million across the country in 1998, with assistance for college
students, at-risk children, the sick, the poor and the handicapped, from
New York to California.
It gave the National Catholic AIDS Network in San Francisco
$35,000. It gave the Arkansas Sheriffs' Boys and Girls Ranches in Batesville
$40,000. It gave $100,000 to endow scholarships at Sweet Briar College
in Virginia.
Even so, the foundation's profits on its stock and bond
investments outstripped its spending by $11.5 million. Both Frueauff and
the Arkansas Community Foundation's Lile said that's a good thing -- the
more money in the bank, the more lives the foundation can touch.
THE ROCKEFELLER FOUNDATIONS
Like the Frueauff Foundation, two Rockefeller foundations
-- the Winthrop Rockefeller Foundation and the Winthrop Rockefeller Trust,
separate organizations, both based in Little Rock -- are riding the crest
in the stock market.
The foundation, with assets of $123 million, made $21
million more than it spent in 1998. The trust, with assets of $76.8 million,
reported making $7.6 million during the fiscal year that ended June 30,
1998.
Both foundations trace their roots back to 1956, when
future Gov. Winthrop Rockefeller created what he called the Rockwin Fund.
It was small, mainly paying for scholarships, and he kept it afloat himself.
Rockefeller died in 1973. His estate founded the trust,
which in turn increased the assets of the Rockwin Fund, which became the
Winthrop Rockefeller Foundation in 1974. Rockefeller's son, Lt. Gov. Winthrop
Paul Rockefeller, is on the boards of both.
The foundation gave $3.2 million in gifts in 1998. The
largest was $1 million for the Enterprise Corporation of the Delta in Jackson,
Miss., with its mission "to improve the quality of life for low- and moderate-income
residents." It invested $1.2 million in Southern Development Bancorporation
in Arkadelphia, a nonprofit that provides low-interest loans to fledging
entrepreneurs.
The foundation's president, Sybil Hampton, listed three
priorities: education, economic development and citizen participation.
A prime example is its Jump-Start Technology Initiative to help rural nonprofits
go high-tech, Hampton said. "They need to be allowed to dream."
In large measure, the trust supports other nonprofits
bearing the Rockefeller name. During the fiscal year that ended on June
30, 1998, the trust approved $4.2 million for the Winrock International
Institution for Agricultural Development and $12.2 million for the Rockefeller
Foundation itself.
Winrock International, which tries to increase "agricultural
productivity and rural employment while protecting the environment," is
housed in Rockefeller's old farmhouse in Morrilton. It does much of its
work in developing countries, according to Marion Burton, a full-time trustee.
Sometimes, making money and doing good seem to run at
cross-purposes.
The trust approved $300,000 for the Arkansas Center for
Health Improvement in Little Rock. The center calls tobacco "a major factor"
in Arkansas behavior-related deaths and says "public education and statewide
health promotion campaigns are effective in reducing tobacco use."
But, according to its tax return, the trust itself owned
3,750 shares of Imperial Tobacco Group, a British company that sells cigarettes
and pipe tobacco, and 2,500 shares of RJR Nabisco Holdings Corp., then
the parent company of R.J. Reynolds Tobacco, the second-largest cigarette
company in the United States.
Other Arkansas foundations, too, have potential conflicts
between investments and grants.
"There are two schools of thought," said Jeff Muir, philanthropy
specialist with advertising and public-relations firm Knoll and Company
of Portland, Ore. One line of thought says investments should align with
a private foundation's social agenda. The other is to divide duties, with
investing and grant-making as separate functions.
Trustee Burton said the Rockefeller Trust falls into the
second category. He said the trust, like many foundations, pays outside
investment managers to handle the money, while the trustees make the grants.
He said that as foundations increase in size, "social investment" rules
are more difficult to live with.
THE JONES FOUNDATIONS
Harvey and Bernice Jones, who wanted their money to make
a difference across Northwest Arkansas and beyond, started their foundation
philanthropy in 1956.
Recently their dream has had a rough ride.
In February, H.G. "Jack" Frost Jr. -- who received $170,000
in consulting fees from the Harvey and Bernice Jones Charitable Trust in
1997 -- was indicted, accused of stealing $1.85 million. His case is pending.
Even before the charges, the trust had told Hendrix College
and Arkansas Children's Hospital that it couldn't honor all of its contribution
commitments, but it eventually gave Hendrix $400,000.
Now the Jones legacy is rebuilding.
"We've weathered the storm," said Joel Carver, the cardiologist
who runs the Harvey and Bernice Jones Center for Families in Springdale.
Harvey Jones, who founded a business that became a major
trucking company, died in 1989. Bernice Jones, 94, is in good health and
enjoys visiting the center, Carver said.
In 1998, the center -- with $67.6 million in assets --
spent $5.6 million on recreation and education in Springdale. Jones money
is responsible for most of that, but some neighbors are helping. The Walton
Family Foundation, for example, gave the center $2 million in 1998.
The center and Har-Ber Village Foundation, with assets
of $10 million in 1998, are the only major foundations remaining of the
several the Joneses began. A small trust started by Harvey Jones, funding
scholarships for nursing students, also remains.
The reorganizing, to "consolidate for efficiency's sake,"
Carver said, includes some extra safeguards, financial checks and balances.
For years, the Jones foundations have given gifts across
the state and beyond. Bernice Jones "has been around the state and now
wants to come back home," Carver said. She wants to see the effects of
her work, focusing on her own communities.
The center's 38-acre campus might be playing host to a
birthday party and a wedding at the same time it is offering a class in
parenting skills, even as families are splashing in its swimming pool.
The Har-Ber Village Foundation supports a museum in Grove,
Okla., open for free. The museum, which includes a set of buildings the
Joneses constructed, depicts pioneer life in Oklahoma.
THE ROSS FOUNDATION
Arkadelphia's Ross Foundation has a unique way of making
money. The foundation, which has assets of $44 million, owns timberland
and sells its crop, both pine and hardwood. Its last tax return says it
made $1.6 million that way.
Timber magnates Esther Ross and her daughter, Jane Ross,
started the foundation in 1966. Jane Ross died in July and, after her estate
is settled, the foundation will own about 52,000 acres. It also buys land,
most recently paying $53,000 for 80 acres in its home county, Clark.
The foundation is serious about stewardship of its land,
grants manager Joe Nix said. The companies that cut down the trees must
follow rules set down by the foundation. "We're watching the loggers,"
Nix said.
It also is watching out for timber's future. An $18,169
grant paid for a study at the University of Arkansas at Monticello on hardwood
tree regeneration.
The Ross Foundation keeps most of its money close to home,
giving to conservation groups, public schools, and county and municipal
governments in Clark County. One of its most costly ventures was funding
a fiber-optic line between Ouachita Baptist and Henderson State Universities,
across a street from each other in Arkadelphia. One of its least costly
was fixing a church's floor after it collapsed.
THE WALTON FOUNDATIONS
During the past 20 years, the world's largest retailer
and the family that started the business have ensured that Arkansas philanthropy
will never be the same.
Wal-Mart Stores Inc. established the Wal-Mart Foundation
in 1979, with $200,000. Company executives sit on the foundation's board,
setting a budget each year.
Director Betsy Reithemeyer says the foundation, with assets
of $11 million, tries to make a difference where Wal-Mart stores are located.
Working with local organizations, it supports such causes as scholarships
and the United Way. It's also a large contributor to the Children's Miracle
Network, funneling money to children's hospitals. Its latest gift: $2.6
million.
The foundation often matches money raised at specific
stores. That meant the Children's Miracle Network got not just the $2.6
million, but also the money raised locally. It ended up with $27 million.
The foundation has another project this year -- raising
money toward a $100 million monument to honor World War II veterans. It
plans to match the first $1,000 raised at each store, which could produce
up to $6 million toward the monument. So far, the foundation is up to $4.1
million, Reithemeyer said.
Wal-Mart founder Sam Walton and his brother Bud -- both
deceased -- were World War II veterans. So are 1,900 Wal-Mart employees,
said Emerson Goodwin of the foundation.
In 1987, Sam and Helen Walton set up the Walton Family
Foundation in Bentonville, now the state's largest private foundation.
For 1998, the foundation listed assets of $548 million and gifts of $50
million.
And it's clear that the family has continued to fund the
foundation. From 1997 to 1998, its assets doubled. In 1997, family members
and their limited partnership, Walton Enterprises, gave $21.5 million to
the foundation. Their 1998 gifts dwarfed that: $77.8 million.
The foundation keeps its money in the family, investing
in Wal-Mart stock and in Walton Enterprises, run by Jim Walton, a son of
the foundation founders.
Stewart Springfield, executive director of the Walton
Family Foundation, said he did not have time to answer questions. But the
foundation's tax return shows such 1998 gifts as:
$4 million to the Children's Scholarship Fund, which pays
for scholarships for private-school students.
$3.6 million to the Foundation for the MidSouth in Jackson,
Miss., a nonprofit with a mission to "create a better quality of life for
all" in Arkansas, Mississippi and Louisiana.
$2.6 million for the Enterprise Corporation of the Delta,
also in Jackson.
The foundation also reported a $3 million investment in
Southern Development Bancorporation, a nonprofit, low-interest lender for
economically depressed regions.
This year the foundation is beginning to fund a 10-year,
$19 million project called the Partners Program, run by the Arkansas Community
Foundation. The goal is to create 16 Community Foundation affiliates across
the state. Each affiliate can gear its programs to its community's needs.
While the Walton Family Foundation hands millions to colleges
and universities, hospitals and the Boy Scouts, it also funds more contentious
efforts.
CEO America -- the short name for the Children's Educational
Opportunity Foundation America -- was founded in 1994 with a $2 million
grant from the Walton Foundation. Those grants have continued, with $3.7
million reported for 1998.
CEO America promotes "parental choice in education through
private tuition grants and tax funded options," arguing that vouchers would
benefit children with more school choices.
Most public-school superintendents contacted in Northwest
Arkansas don't like the idea of vouchers that could take tax dollars away
from public schools, even though their districts receive Walton Family
Foundation grants. Fayetteville Superintendent Bobby New, whose district
received a $21,000 grant in 1998, said public education "would suffer"
if taxpayer money went to private-school vouchers.
The Walton Family Foundation describes its main focus
as "systemic reform in education," according to the Foundation Center.
Some foundations intentionally encourage different approaches,
"trying to improve education in general," said philanthropy specialist
Muir.
Philanthropy Roundtable's Tom Riley concurs. "They're
all trying different things. Some are working; some aren't. They're really
the laboratories of education reform."
THE WINDGATE FOUNDATION
Wal-Mart's success also helped along one of the
state's youngest and largest private foundations. Dorothea W. Hutcheson
of Fort Smith started Windgate Charitable Foundation in Siloam Springs
in 1993 with a donation of Wal-Mart stock. She died in 1996, and her estate
continued giving stock and cash. For 1998, the foundation reported $91.5
million in assets.
The foundation focuses on two key issues: marriages and
families, and arts and crafts. Windgate director John E. Brown III of Siloam
Springs -- former president of John Brown University and now a state senator
-- said the hope is that the foundation can help "strengthen families and
can solve a myriad of problems," Brown said.
But he said the Hutcheson family isn't trying to make
a splash and even asks grant recipients not to publicize the gift.
Last year, the foundation approved grants for 25 college
"Marriage and Family Week" conferences and a $200,000 grant for John Brown
University's Center for Marriage and Family Studies. The foundation also
contributes to such arts and crafts endeavors as the Arrowmont School of
Arts and Crafts in Gatlinburg, Tenn., which was approved for $475,000 in
grants.
THE FUTURE
The recent growth in Arkansas' private foundations
could be just the beginning. Assets -- and the gifts that follow -- could
skyrocket over the next few years.
Arkansas foundation leaders talk about entrepreneurship
spirit, how much of the founders' money is now being returned to their
communities and beyond, how a wave of philanthropy is solidly in place,
how that will encourage wave after wave to follow.
Marion Burton, a trustee of the Winthrop Rockefeller Trust
and a friend of the former governor, likes the notion that Rockefeller,
a grandson of John D. Rockefeller, is smiling down from somewhere.
"He initiated the new growth of Arkansas philanthropy,"
Burton said. "I think he'd be very pleased."
Research for this article was assisted by Dauphne Trenholm
of the Arkansas Democrat-Gazette.
This article was published on Sunday, Nov. 28, 1999