For Phila. arts, a shifting donor base

Posted: September 30, 2013

Second of three parts, on successive Sundays.

For more than a dozen years, philanthropy in Philadelphia was led by a powerful quartet. In various combinations, the Pew Charitable Trusts, William Penn Foundation, the Annenbergs, and the Lenfests lined up behind arts and culture.

They built: Without them, Philadelphia might have no National Constitution Center or new, altered Barnes Foundation on the Parkway.

They rescued: Had they not stepped in to cover construction debt, the Kimmel Center would have drowned in red ink.

And they preserved: When The Gross Clinic, Thomas Eakins' important canvas, was on the brink of being sold off to the National Gallery of Art in Washington and an Arkansas museum backed by Wal-Mart heirs, calls were made, checks written, a deal was struck, and the painting's continued residency was assured.

In addition to the cash itself, these partnerships have created great civic momentum where there might have been none. Joint activism on a particular issue would elicit gifts from others, and things got done.

But the quartet is no more. After the deaths of the Annenbergs - first Walter in 2002, then Leonore in 2009 - the Annenberg Foundation moved to Los Angeles. It is being led now by children and grandchildren with little or no connection to Philadelphia.

H.F. "Gerry" Lenfest is planning a different tack. By design, he has given away most of his fortune and has crafted a directive to spend down the remaining assets of the Lenfest Foundation on disadvantaged youth. In a little more than a dozen years, the Lenfests went on a giving spree of rare proportions, leaving behind $1 billion and major changes across the region.

At the Curtis Institute of Music, whose board chairmanship he will give up in May, the school's first dorm building would not have happened without Lenfest money and might. The Lenfests have given more than $70 million to the school, endowing faculty chairs, buying buildings, underwriting tours, and adding to endowment. Even more, at least $93 million, propelled the Philadelphia Museum of Art's years-long expansion plan.

They have provided college scholarships for students from rural Pennsylvania, funded the Lenfest Ocean Program with the Pew Charitable Trusts, underwritten advertising time for local arts groups, led the move of the Barnes Foundation to Center City, and given tens of millions to Mercersburg Academy, where the little Gerry Lenfest developed character.

Their giving stimulated other acts of generosity, earning them a place in the city's philanthropic lineage alongside the Girards, Curtises, and Boks.

Once Philadelphia's largest foundation, the Pew has moved the vast majority of its operation from Philadelphia to Washington, since borrowing $180 million to buy and renovate a building seven blocks from the White House and changing its legal structure from a pure foundation to something less easy to define. Pew once existed to give money to others while doing some of its own research, but has shifted its emphasis to being an operating charity that conducts lobbying, advocacy, and research - and spends more money on its own programs, operations, and consultants than it distributes to others. It has also reduced, over a long stretch of time, the amount of money it spends in the Philadelphia area.

With a cultural community that has grown by leaps and bounds, and groups now running deficits and several high-profile financial crises and bankruptcies, the question of how to fund the ongoing operation of the sector has become urgent.

"What is the solution? New donors. The ones we've relied on aren't there anymore," said Gerry Lenfest, who also is an owner of Interstate General Media, the parent company of The Inquirer.

The era of local philanthropy being dominated by a mighty handful of foundations may have ended, but the change may not be without its silver lining. Some observers say the dominance - until now - of foundations in Philadelphia has resulted in an arts and culture sector that has been somewhat apathetic about cultivating a broader base of individual donors.

"The shifting foundation landscape, combined with the recession since 2008, forced many groups to rely more heavily on individuals, who stepped up to the plate in a way they never had before," says fund-raising and nonprofit consultant Nancy Burd. "Now there is a new world of donors out there for arts managers to steward and engage."

David Haas, board chairman of the William Penn Foundation, recognizes his foundation's new stature but isn't yet sure of its response.

"You can certainly say a certain amount of dollars are no longer here," he said. "For me, first of all, we're going to be very thoughtful about where the grant budget is going to go. I am not saying it is going to grow, but we are going to look at that very carefully. We are not going to respond by simply upping our budget - we're not ruling that out, but we are not doing it as an automatic fix.

"We are . . . assessing our role as an institution that has become more prominent, and we are going to do everything we can beside our grant-making - we will also be engaging other institutions and parties to participate."

Leaving Philadelphia

The Annenberg Foundation was established in 1989, but Annenberg philanthropy began decades earlier in Philadelphia. Over time, publisher Walter Annenberg and the foundation distributed billions to education, health care, environmental causes, the arts, and horticulture - and in one grand stroke, the foundation gave $500 million in 1993 toward the Annenberg Challenge for school reform.

Avid art collectors, the Annenbergs in 1991 made another famously grand gesture: donating their billion-dollar collection of Impressionist and Post-Impressionist masterpieces to the Metropolitan Museum of Art. They were the biggest givers in the history of the Philadelphia Orchestra and Academy of Music, giving more than $100 million to both over several decades.

After Walter Annenberg's death, Leonore Annenberg took over leadership of the foundation and disbursed more money than it was earning on its investments - $1.2 billion over a six-year period, much of it in and around Philadelphia. When she died, leadership fell to a new generation of Annenbergs who live elsewhere.

After a period of reflection, the family decided to keep the Annenberg operating as a perpetual foundation rather than spending down the endowment. But Philadelphia isn't likely to feel much more Annenberg love.

"If you look back over the last quarter of a century, the foundation has given $4.5 billion to over 8,500 grantees in 40 countries, and because of its formative years and connection to Philadelphia, there is a preponderance of former grantees in that region," said executive director Leonard Aube. "Unfortunately, we can't be all things to all people, and the one thing the trustees have done is reshape the geographical area we cover so that there is virtually no grant support beyond the Los Angeles area.

"I was in Frank Gehry's offices looking at the wonderful plans they are developing for the Philadelphia Museum of Art," Aube said, "and obviously we feel very connected to the communities we have served, so there's a little bit of a pang, because we want to be supportive. But we have a billion less than we once had, and that means $50 million fewer in grants per annum, and you have to draw the line somewhere."

Penn Foundation evolves

The William Penn Foundation has not only reasserted its loyalty to Philadelphia, it has also grown its assets. It is now the city's largest reliable source of money to arts and culture: more than $23 million in 2013.

With the sale of Rohm & Haas Co. to Dow Chemical in 2009 for $15 billion, the Haas family shifted $1.25 billion to the William Penn and to a newly created charity, the Wyncote Foundation, which has also given heavily to the arts.

Haas described the difference between Wyncote and William Penn this way: Wyncote exists to fulfill the passions of Haas family members, while William Penn, though overseen by a board that includes Haas family members, has a substantial staff of foundation professionals who help shape policy and vet requests.

Wyncote is "a typical family foundation where it's more driven by particular interests of the trustees. The Penn Foundation has a fairly significant strategy process where also obviously the family is involved, but it's a different approach."

Like other local philanthropies, William Penn is in transition, having parted ways in November with its last president, Jeremy Nowak, after just 18 months. Leaders say it could be several more months before a permanent president is named.

The foundation's arts and culture giving is also evolving. Grants now fall into one of three categories, says arts funding director Olive Mosier. "Basically our funding approach is core support, which tends to be for multiple years. A new area for us, which we did but for which we didn't have a discrete program, is funding newly commissioned work, or work that has never been seen before in Philadelphia - really having arts organizations add to the artistic canon, but also have audiences here see work they have not seen before. And, lastly, business-model transformation. If an organization decides it needs to reinvent its business model, what kind of funding can the foundation give?"

But more broadly, the arts program grants money for general operating support, growing audiences and arts education, plus a category called "Great Public Spaces."

That several of these ideals nestle in a single project explains William Penn's enthusiasm for the move by FringeArts - sponsor of the annual fall Fringe Festival - from intentional itinerancy to a more anchored life in a renovated pumping station on Delaware Avenue. The building, which drew $1.75 million in William Penn funding, is set to open in October. The foundation says it no longer is focusing on funding construction projects, except to the extent that a building is integral to changing a business model.

Said Mosier: "FringeArts and its new building - that had a lot of synergies to it in terms of what happens in creative communities, but it's about the FringeArts' business-model change from a two-week to a year-round presenter, and the building was key to that. But it also had synergies quite frankly with the Race Street Pier and that becoming more of a destination."

The amount of money William Penn allots to arts and culture each year is set by the board, says William Penn chief philanthropy officer Laura Sparks, and that number will be the same this year as last ($23 million). "One of the things we can do as an institutional funder is have staying power," she says.

William Penn, like many other foundations today, is focused on "capacity-building" - foundationspeak for increasing audiences and donor bases. Mosier notes that some arts groups are trying to operate without holding out the traditional tin cup for tax-deductible donations.

"Up-and-coming arts organizations - some are not even getting 501c3 status," says Mosier, using IRS shorthand for a tax-exempt nonprofit. "Traditional philanthropy is just not how they are going to be building their business. It may be about artists coming together for a temporary project and raising money for the project and then moving on to something else.

"Ways of creating art are changing. I think it's only just the beginning as organizations are figuring it out."

Pew move to D.C.

Foundations routinely undertake self-reflective studies, recast their priorities, and, ultimately, fund and defund projects according to shifting philosophies. The changes at Pew, though, are more radical. In 2004, Pew legally ended its days as a traditional foundation that distributes grants, and became a public charity that gives out its own money as well as funds it has raised from others, and acts as a research and advocacy group.

There's been another major change. Pew, headquartered in Philadelphia for decades, now has affixed its gaze elsewhere. It has opened offices in London and Brussels, and shifted most of its workforce to its new building in Washington - even though it continues to claim Philadelphia as its headquarters.

Still, despite the appearance of having left town, "the commitment to Philadelphia remains ever-present and ever-strong," said Rebecca W. Rimel, Pew president and CEO since 1994.

"We are here to stay, and our support for the arts has been unflinching," she said. "The notion of the walk away or a diminishing commitment to Philadelphia is just not borne out by any fact."

Pew's latest tax returns show that, in addition to its giving to arts and culture, Pew still has a philanthropic presence in Philadelphia, awarding about $15 million in grants to local churches, social-service organizations, schools, and other charities. Pew granted an additional $180,000 to Philadelphia-area groups through its employee matching-gift program. The tax return also showed Pew's contribution of $22.8 million to the Barnes.

"The amount authorized by the board of directors for Philadelphia programs is approximately $30 million a year," wrote Pew spokeswoman Melissa Skolfield in an e-mail. "That includes spending on support for the arts and cultural programs; for care of the needy and the elderly; for the Philadelphia research initiative, which prepares nonpartisan, fact-based analyses of city issues, and for compelling civic opportunities."

But gauging whether Pew is as engaged in Philadelphia as it once was is a more complex question.

By any objective measure, Pew has moved to Washington, which it calls its "base of operations." The foundation had a total of 860 employees in the year ending in June 2012, according to that year's tax return. About 575 work in Washington, an additional 60 across the United States, and a few in Europe.

Only about 90 remain in Philadelphia. Pew's 1993 annual report listed a total of 100 employees working for the foundation, all in Center City.

Funding of arts and culture - a traditional focus of some Pew family members - has dwindled. In March, Pew announced a restructuring of its culture program. The Philadelphia Cultural Leadership Program is being phased out by 2015, and, instead, Pew said it would be putting its money into its Center for Arts and Heritage - giving out $10 million in grants instead of the previous amount, $8 million.

But 20 years ago, in 1993 and 1994, Pew was awarding $22.5 million annually through its culture program, according to its annual reports from those years. The vast majority of the money went to Philadelphia groups or to support performances and projects here. For Pew to be making a comparable payout to the operation of arts and culture groups today, adjusted for inflation, it would have to be giving $36 million a year.

"That's a board decision. The board looks at all available resources and they set an overall annual budget," said Rimel.

The move by Pew away from providing pure operating money - funds with no strings attached that help pay to keep the lights on - to project-based giving is a significant development for many arts groups, given the increasing scarcity of this kind of money.

"I think most people in the arts would agree that there have been cutbacks in general operating grants from a number of foundations since 2008, some of whom eliminated funding for the arts altogether," said Philip Maneval, executive director of the Philadelphia Chamber Music Society. "Certainly we are hoping that trend can be reversed. We've made up for that loss by broadening our base of individual support."

Pew says that instead of its operating support - 21 groups currently receive this money - it will add 20 percent to project grants to cover operating costs.

Asked what kind of arts projects Pew is interested in funding, Rimel said:

"High quality and high performing. And organizations that are meeting a market demand. If any organization produces high-quality products that consumers wish to see, then they are going to flourish.

"There are fabulous examples of this in some of the work being done in opera, here [in Philadelphia] and at the Met, in taking opera to locations where people wouldn't have access to the best performances. They are doing a lot of very innovative things to meet audiences where they are. People today are not used to time-bound and place-based experiences. They are used to getting things where they want it and when they want it. Without arts consumers, arts groups are not going to flourish."

A new designation for Pew

The changes in arts and culture are but a small part of the evolution of Pew. With the change to being a public charity, Pew is spending more money on itself than on others. For the year ending June 30, 2012, according to its tax forms, Pew spent $197 million on Pew-operated programs, travel, lobbying, consultants and all the other expenses of running the charity.

For the same year, Pew's tax forms state that it gave out $162.1 million to groups internationally and across the United States. However, Pew figures into that number both money that passes through it from outside philanthropists as well as $19.4 million for the Pew Research Center. Stripping out those numbers reveals that Pew's own grants to other groups comes to a much smaller sum.

By comparison, in 1993 Pew awarded a total of $166 million to education, religion, culture, and other sectors - $43.8 million of it to the Philadelphia area. (Those figures would equal $263.8 million and $69.6 million, respectively, in 2012 dollars).

A member of the Pew board who was there for its change in direction said the effort was led by Rimel.

"One thing I think they have is an extraordinary executive director taking the reins in Rebecca," said Paul F. Miller Jr., a board member for several years starting in 2004. "She has been trying to lead this family, which has its own ideas about things, and she has led them gently but firmly down some different roads. It didn't happen with suddenness, it happened over a period of time. I think there was a feeling, whether by the board or more by Rebecca, I am not sure, that the Pew research operation was gaining stature and was an extremely trusted organization, and that there was much less bang for the buck here in Philadelphia."

Rimel points with pride to the expanded influence of the Pew brand as a source of information: on politics, religion, same-sex marriage, pay-day loans, gun control, marijuana, guns, and tattoos (23 percent of Americans polled in a 2010 survey said they were tattooed). In fact, Pew polls, experts, and studies were cited in the New York Times more than 320 times in 2012. In 2004, before the foundation's transformation to being a charity, the number of Pew citations in the Times was below 70.

The change in mission has brought higher operating costs. In 2003, Pew had 163 employees - less than a quarter of the current number. Today, with $5.3 billion in assets, Pew is spending about $97 million on salaries, other compensation, and employee benefits.

Pew has become a hybrid organization - part foundation, part advocacy nonprofit. To what other organization nationally could it be compared?

"There isn't one," says Aaron Dorfman, executive director of the National Committee for Responsive Philanthropy. "I see this as part of a larger trend in philanthropy for grant-makers to be more and more in the driver's seat in determining the issues that need to be addressed and the strategies and programs to be used to tackle those issues.

"We've seen over the last two decades narrower and narrower goals by many of the nation's grant-makers," Dorfman said. "Pew has simply said: 'We have a vision of what we want the world to look like and we have a pot of money to make that happen. Why should we pay someone to carry out those programs when we can do it better ourselves?' "

To maintain its new legal status, Pew must raise a certain amount of money each year from outside sources. In recent years, that involved raising money for the Barnes Foundation's move to a new building on the Parkway - a $201.7 million campaign. About $16 million from two outside sources to the Barnes shows up on Pew's tax form. A total of about 25 percent of money flowing out of Pew came from outside individuals, public charities, private foundations, corporations, and government entities, according to Pew's tax returns.

Cultivating these sources - their names are not listed - is expensive. Pew spent $4.6 million on fund-raising.

Rimel says she does not accept the idea that Pew's new strategy does not benefit Philadelphia.

"I really think of our national and international work as supporting Philadelphia, whether it's children having access to dental care or safety of the food supply."

In Philadelphia in the past, on top of its more routine arts funding, Pew has often stepped in for bigger, special projects in Philadelphia with other partners. The coalition to pay down the Kimmel's construction debt was an example of that, as was the Barnes move and the recent renovation of the Benjamin Franklin Museum. Will Pew remain open to such ideas in the future?

"Well, I mean, give me some ideas. The answer is yes," said Rimel. "I would like nothing better than to find a project where we could find new donors, find out what their philanthropic interests are, and how an organization like ours might partner with them on some big ideas.

"In my experience . . . donors invest in big ideas. The time has passed when donors invest or make contributions because it's the right thing to do or because it's what everybody is doing. They want to see their investment yield results. They are very eager to make those investments, but have a high quotient for accountability."

The decision for Pew to join a trio or quartet of philanthropies around another grand project - something akin to the coordinated effort to move the Barnes to the Parkway - would ultimately be the decision of the Pew board, she said.

"Again, it is about the idea, the feasibility, the return on investment and the risk," said Rimel. "I can't imagine, if there was a big idea and an ability to have a range of partners, that they wouldn't be very open to hearing about the proposal."


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INSIDE

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