How Palin, Yee, and California State University Are Affecting Philanthropy

Earlier this month Jane Wales of the Aspen Institute wrote a post published in the Huffington Post about a possible populist threat to philanthropy. In her piece, she stated her faith that foundations will continue to do their best to create social benefits, but "the way in which they do it must take into account the public mood, and even distrust." Sadly, the populist threat and backlash against philanthropy may already be on exhibit in California.

Last week California Aware, a nonprofit focused on open government, filed suit to obtain documents related to an upcoming June 25 fundraiser -- the 50th anniversary gala for California State University (CSU) Stanislaus -- at which former Alaska Governor Sarah Palin will speak. The lawsuit is the latest in a series of moves to obtain documents related to her speaking engagement under the California Public Records Act, which requires release of government records to the public upon request. At question is whether the CSU Stanislaus Foundation, a 501(c)3 tax exempt organization and the entity that arranged for the speaking engagement, can be compelled to provide the documents. So far, the university foundation has declined to share information on the contract by claiming that it does not have comply with the California Public Records Act since it’s a public charity and not a government entity. In addition to the lawsuit, the California Attorney General's office has "launched a broad investigation into the California State University Stanislaus Foundation to include an examination of its finances and the alleged dumping of documents into a university dumpster."

University foundations are common. In some sense, a university foundation is a  tool to an end as it primarily receives grants and donations for the university with which it is affiliated. In this specific case, the CSU Stanislaus Foundation was specifically created "for receipt, acknowledgment and oversight of private gifts" to CSU Stanislaus.

The fact that the university and its foundation are separate entities reflects more the requirements of the US Tax Code than reality. The foundation is housed on the university campus, its staff work within the Division of University Advancement at CSU Stanislaus, and the university's president serves as the chair of the foundation's board. As noted by the Huffington Post, "a 2001 state appeals court case ruled university foundations and auxiliary organizations are not subject to the same public disclosure requirements as universities themselves. However, the court also ruled that foundation documents must be made public when they are in the university's possession." The lack a clear line of separation between the university and the foundation only complicates the issue.

The public scrutiny on this issue has continued to grow and will continue to foment anger and distrust as the university and its foundation resist the calls for transparency. New legislation by State Senator Leland Yee (D-San Francisco) could significantly raise the backlash against philanthropy. Senator Lee has authored legislation that would require the 93 public charities and foundations affiliated with California State University campuses, to comply with the California Public Records Act.

Senator Lee sponsored a similar bill last year that Governor Schwarzenegger vetoed. This year’s bill has already passed the State Senate and now awaits a hearing in the State Assembly. It’s easy to imagine that the legislation could also encompass the foundations affiliated with the 10 University of California campuses. Collectively, the CSU and UC foundations manage over $5.3 billion in assets. Already the governor is being urged to in several newspaper editorials.

Philanthropy needs to be ahead of this wave and not stand in the way of transparency and public opinion, which will only encourage more efforts to force transparency on the field.


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