Billionaires to the Rescue: What’s the Role of Philanthropy When Government Falls Short?



George B. Kaiser is an Oklahoma businessman with a $7.5 billion fortune. To his credit, he believes that he has a “moral obligation” to use his resources to repair the inequities that let him amass so much while others struggle to get by. In his Giving Pledge letter, Kaiser also writes that “a shared partnership between the public and private sectors to foster the public good” is a “distinctly American principle.” He goes on: “If the democratically directed public sector is shirking, to some degree, its responsibility to level the playing field, more of that role must shift to the private sector.”

That line of thinking has propelled the George Kaiser Family Foundation to a place of vital prominence in Oklahoma, particularly in Kaiser’s hometown of Tulsa. As in other states and localities across the U.S., public sector resources in the Sooner State have suffered from a long, drawn-out decline over the past several decades. That has left local governments without the means to properly fund public education, healthcare, parks and more. This is where Kaiser has stepped in, filling in gaps and taking on a leading role in Oklahoma’s philanthropic ecosystem.

One of the most visible hallmarks of Kaiser’s importance to Tulsa is the Gathering Place, a $465 million public park envisioned and paid for largely by his foundation. The Gathering Place, which held its grand opening last fall, covers 100 acres and is pushing for a million visitors a year. Backstopped by its founder’s vast fortune, the George Kaiser Family Foundation has more than enough resources to maintain the park in virtual perpetuity, and it has created an endowment to do exactly that.

In a range of other issue areas, including education and healthcare, the influence of Kaiser money in Oklahoma is hard to miss. Just look at the $4 billion Tulsa Community Foundation, which was largely Kaiser’s brainchild. Or consider Kaiser’s role in establishing Tulsa as a leader in early childhood education. For the people and nonprofits of Tulsa, this billionaire’s dedication to “reversing the generational cycle of poverty” is more than welcome. Nevertheless, as Kaiser himself points out, his foundation’s local heft isn’t exactly normal, and it’s less than ideal in a society where democratic processes are meant to determine how public services receive their funding.

When Philanthropy Steps In

Kaiser’s outsized presence in Oklahoma isn’t an isolated example. In localities spanning the United States—and particularly in certain small and mid-size metros—a number of factors have aligned to coax private funders into roles once thought of more as the province of government. The most well-known instance is the philanthropic bailout of Detroit following its 2013 bankruptcy, a so-called “Grand Bargain” that involved significant outlays from Ford, Knight and Kresge, to name just a few. 

Michigan, in fact, seems to be a hotspot for this sort of thing. Flint’s water crisis, for instance, prompted funders like C.S. Mott, Carnegie, Ford, Kresge, Robert Wood Johnson and W.K. Kellogg to get involved in ways that included typical forms of relief, but also addressed some of the underlying infrastructure problems. It’s hard to think of a more basic role for the public sector than maintaining water and sanitation systems. This is precisely the kind of area that shouldn’t suck up scarce philanthropic dollars. But with flawed governance leaving thousands of vulnerable people in a state of crisis, funders like Mott felt they had little choice but to step up. At the time, Mott Foundation President Ridgway White stated unequivocally: “Government must be responsible for infrastructure that protects the health and safety of its citizens.” At the same time, he strongly defended Mott’s decision to take action: “We couldn’t sit on the sidelines while the children of Flint were being harmed.”

This kind of dilemma is likely to emerge more frequently in cities across the U.S. as pension and debt costs crowd out other spending, and as infrastructure systems fail after decades of under-investment. Ridgway called the crisis in Flint the “canary in the coal mine.”

Not long after the events in Flint, private funders stepped forward to help Kalamazoo, another troubled city in Michigan. That effort has become a philanthropic partnership called the Kalamazoo Foundation for Excellence (KFE), which aims to bolster the city’s budget and pay for quality-of-life improvements. Two local philanthropists, William Parfet and William Johnston, provided the initial $70 million for KFE, which then set an ambitious fundraising goal of $500 million. In a similar fashion, Hartford-headquartered insurers Aetna, The Hartford, and Travelers committed emergency resources in 2017 to help the Connecticut capital deal with its budgetary woes.

Meanwhile, the nation’s largest city, New York, has long tapped private philanthropy to finance public goods—mainly for education and parks. A new island park that’s largely financed by Barry Diller and Diane von Furstenberg is under construction right now on Manhattan’s West Side—not far from the High Line, another park mostly underwritten by private donors. Inspired by New York’s success in mobilizing philanthropy to improve the city, Los Angeles mayor Eric Garcetti catalyzed a new Mayor’s Fund to support City Hall’s priorities.

While the purpose of these efforts has been more about supplementing government rather than standing in for it, they provide yet another example of private funding’s expanding imprint on public affairs.

Push and Pull

Why is this happening now? The short answer is that there are powerful forces pulling philanthropy to shore up a faltering public sector at the same time that more super-wealthy people like George Kaiser and Barry Diller are pushing into civic life with deep pockets and big ideas.

The “pull” dynamics vary by city and state, but we can point to a couple of general trends. One is generational: As the baby boomers retire, many cities are locked into pension and debt obligations that strain budgets and force cuts elsewhere. Another factor is the rising frequency of local crises, including climate-related catastrophes (hurricanes, floods, etc.) and infrastructural issues (Flint’s water crisis, or New York’s aging subway system).

A third causal factor brings us back to Oklahoma: politics. Circumstance may force some regions into financial austerity, but others actively pursue it. From Reagan onward, Oklahoma’s Republican leaders have pushed the state toward low-tax, low-spend policies that have translated into disinvestment in services and public goods. This same pattern has played out in many other states. Among the leading casualties have been public university systems, which have seen steadily diminishing support from state legislatures over recent decades. Not coincidentally, private donors have come to play an ever larger role in funding and shaping these schools.

With ever greater resources on hand as inequality continues to rise, the wealthy will have ample reason to get involved when government falters—and often, they’ll bring exciting ideas and strong vision to their giving, as Kaiser has with the Gathering Place and early childhood education. Or as Eli Broad has with his investments to create a vibrant arts sector in Los Angeles over several decades. Like earlier generations of philanthropists, today’s billionaire “super-citizens” are eager to improve the places where they live in ways that government can’t or won’t, and they have the means to do it.

This giving is often welcome and lauded in an era when government is stepping back, but it raises unsettling questions about who gets to shape public spaces and institutions.

While the Gathering Place has been a popular project from the start, privately funded parks have sparked controversy elsewhere—for example, critics charge that the High Line in New York City accelerated the gentrification of West Chelsea while providing few benefits to neighborhood residents. And, of course, the growing role of philanthropy in public education has generated a far greater backlash.

Meanwhile, all this largesse doesn’t address the underlying forces behind government’s decline. Even the best-intentioned, most lavishly resourced philanthropists like George Kaiser can’t assume government’s mantle and fill in for everything. And nor should they when their assets might be better deployed to experiment with new ways to solve problems or back structural change.

Speaking of structural change, that’s precisely what is needed to avert a growing tempo of future crises like the one in Flint and to address the larger problem of a strapped public sector. For example, funders should direct more attention to shaping public policy at the state level, where forces antagonistic to government have long had the upper hand in many places. At the national level, funders need to invest more heavily in fiscal policy and budgetary work to influence decisions that have a huge impact on what the federal government can and can’t afford to do—with effects that cascade downward to municipalities.

The blunt truth is that America’s wealthy elites have been deeply complicit in hobbling the public sector over the past generation. They’ve benefitted from historic low tax rates and deregulation. And now, many are basking in the role of benevolent super-citizens as government falters. The good news: Some billionaires like Kaiser understand that these dynamics are not healthy or normal. Even as they build great parks and fund desperately needed services, the philanthropists that understand this should also back efforts—including social movements—to press for changes that put citizens back in the driver’s seat of American life.