How Much Should the Wealthy and Foundations Give in Their Home Regions?

When great wealth piles up in a specific region or city, and rising philanthropy follows, there's often tension around how much of that giving stays local as opposed to tackling national or global problems. Big foundations have long fielded complaints that they don't do enough to help their neighbors; MacArthur is the latest funder to draw fire for supposedly not investing enough in its own community. Top donors can feel the same kind of heat. It seems ungenerous when regional opportunities allow someone to get rich who then bestows their largesse elsewhere.

As a matter of practice, though, many major philanthropists of our time do give heavily in their home regions and quite a few focus exclusively on local giving. Think of the Hostetters in Boston with the Barr Foundation or the Kinders in Houston or George Kaiser in Oklahoma. The list goes on. And what we've observed is that even many big donors with national or global ambitions also set aside substantial local funding. The Gates Foundation has long given heavily in the Pacific Northwest, as has Paul Allen, even as he's also given huge sums for brain research. While the Walton Family is best known for its national K-12 funding, it has an active grantmaking program in its home region of Arkansas.

All told, about half of all charitable dollars in the United States are given by local donors to local nonprofits. Is this the right balance? Who's to say? But the proper focus for generosity remains a sensitive issue, and nowhere is this more true than in the Bay Area—where there's an explosive mix of vast new wealth, growing local inequities, and emerging philanthropists who often seem unmoored from community concerns in their grand plans for giving.

Recently, we dug into two new reports that shed more light on Bay Area giving. One was exclusively focused on the Bay Area and titled "The Giving Code: Silicon Valley Nonprofits and Philanthropy." The other more nationally focused one, "The 2016 U.S. Trust Study of High Net Worth Philanthropy," looks at some broader trends through a local lens as well. Let’s dive in.

Although Bay Area philanthropy is increasing overall, the data shows, a small proportion of these funds are being invested locally. This is disheartening news for grassroots groups who have watched money flow right past them. An estimated 80 percent of local nonprofits are reporting increased demand for their services, and with sky-high rent prices, many of them are struggling just to get by, let alone hiring quality talent and achieving financial stability. They could use some extra help from their wealthy neighbors.

Instead, Bay Area funders are increasingly looking beyond their own communities and supporting large national institutions. For example, they'll give to charter school networks like KIPP that operate largely outside the region as opposed to schools close to home.

So who are these funders we’re talking about? Unsurprisingly, a lot of them come from the tech industry. According to the report, Silicon Valley tech companies generated $833 billion in sales last year, and the region is home to more than 76,000 millionaires and billionaires. But in the Bay Area, the rich are getting richer and the poor are getting poorer. The middle class here continues to shrink, and nearly 30 percent of residents rely on public or private assistance to make ends meet.

The "Giving Code" study was paid for by the David and Lucille Packard Foundation, a leader in local funding in San Mateo, Santa Clara, Santa Cruz, San Benito, and Monterey counties. However, local grantmaking is just one component of Packard’s current giving strategy, with most grants going toward its signature programs around the environment, reproductive health, and children. All told, the bulk of Packard grant dollars end up outside the Bay Area, and that's also true of two other giant Silicon Valley foundations, Hewlett and Moore, that were created with tech wealth. Each of these foundations also has a local grantmaking program while deploying most of their funds elsewhere.

Will insights gained from this study lead these and other area foundations to prioritize more at home? That seems unlikely, given that some of the priorities of these funders—such as slowing climate change or saving the Amazon—have only become more urgent in recent years.

But it's worth emphasizing that some of the newer tech funders do have a keen eye on local concerns. After initially investing in education in Newark, Mark Zuckerberg and Priscilla Chan shifted the focus of their K-12 giving to the Bay Area, making an education gift here that was even greater than the $100 million Newark commitment. Chan has also opened up a primary school in East Palo Alto, and the couple gave $75 million to the San Francisco General Hospital, a vital public center of care for the city's low-income residents. Meanwhile, Marc and Lynne Benioff have focused their giving almost exclusively in the Bay Area, with big hospital gifts and a notable push by Salesforce to help local schools, as we've reported. Benioff has also exerted vital pressure on the tech community to giving more locally. Google.org is among the tech funders that has raised its giving in the Bay Area, as we've reported.

Meanwhile, let's not forget that there are some important funders in this area from outside the tech community. Perhaps most notable among them is the Sobrato Family Foundation, which is tapping a multi-billion-dollar real estate fortune to ramp up its local giving. This foundation has deep ties to local nonprofits and has been closely involved in hashing out some of the bigger issues with speaker series events alongside nonprofit community leaders.

Finally, it's worth taking a moment to specifically look at grantmaking by the Silicon Valley Community Foundation. As we've reported, SVCF's giving has lately soared to over $800 million in 2015. So how much of that money went to address local needs as opposed to flowing elsewhere? Answering that question is tricky. The foundation's grants list for 2015 shows that of the nearly $480 million in grantmaking listed, over half of that money—$260 million—went to grantees in the Bay Area. That number sounds encouraging, but quite a few of the grantees listed work outside the Bay Area.

A last point to keep in mind: Yes, lots of local philanthropic wealth flows out of this region, but a fair amount comes in, too. For example, the University of California at San Francisco has been a huge recipient of gifts lately, with two of the biggest coming from well-known national donors Chuck Feeney and Sandy Weill. Not long ago, Phil Knight gave Stanford University a $400 million gift.

We also want to touch briefly here on the national study of giving mentioned above. That report finds that support for basic needs is on the rise, with 63 percent of donors surveyed giving to these types of causes last year. After basic needs, the top giving category has been religion (50 percent), followed by education (45 percent), the environment (42 percent), and health (40 percent).

Another interesting trend that we picked up on is that younger philanthropists are giving to fewer causes, but giving more to those causes, than their parents and grandparents. Donors under the age of 50 have been giving to an average of five nonprofits per year, while baby boomers gave to seven and seniors over 70 gave to 11. Bay Area groups may want to target donors in their 30s and 40s for more immediate gains and to secure steady support for years to come.

This national survey was a collaboration between U.S. Trust, a Bank of America corporation, and the Indiana University Lilly Family School of Philanthropy.