<< back | January 2003

Building Blocks
On Mercy Hospital's first floor, there's a modest coin fountain, a collection of religious statues and a Wall of Fame on which contributors to the hospital are listed. Big donors are honored with plaques, and six of the main honorees are foundations -- the Alcoa Foundation, Mary J. Donnelly Foundation, Eden Hall Foundation, Richard King Mellon Foundation, PPG Industries Foundation and The Pittsburgh Foundation.

For anyone who's seen a child born or a grandparent die within these uptown walls -- and this author has had both experiences -- this is a special place. The plaques on the wall are a reminder that in Pittsburgh, the foundations are a part of life, from cradle to grave.

Let's take a tour. Start at Xplorion, the Southwestern Pennsylvania information center in downtown's Regional Enterprise Tower. Shoot through the Cultural District, and count the arts organizations and their new or refurbished homes. Cruise the North Shore, past the riverfront park, Carnegie Science Center and Pittsburgh Children's Museum. Then head east on Centre Avenue, past the Hill House, Hill Community Development Corp., and other organizations that are helping rebuild a storied neighborhood.

Centre takes you by the new Hillman Cancer Center, and a quick jaunt through Oakland gets you to the Phipps Conservatory and Botanical Gardens and the Carnegie Museums. A short drive northeast, and you're passing the Lawrenceville Boys and Girls Club, then Highland Park's Pittsburgh Zoo and PPG Aquarium.

Wend your way through the suburbs and counties of the region, and you'll pass Hosanna House in Wilkinsburg, St. Vincent College's new conference center, Penn State Fayette's community events building and Touchstone Center for Crafts in Farmington. Everything you've just seen -- and hundreds of other landmarks along every major artery in the region -- exists in part because of the foundations.

"If we carved all of those [foundations] out, if they disappeared tomorrow, think about the wide array of things that wouldn't happen," says Jeffrey R. Gilbert, executive director of the PPG Industries Foundation. "It's special education, it's culture, it's helping build labs, it's developing a workforce, it's human services. If you didn't have the foundations doing those things, we wouldn't have the unique quality of life we enjoy in Pittsburgh."

In 1999, foundations in Southwestern Pennsylvania gave $453 million in grants, according to a statewide study by three philanthropic service organizations, including Grantmakers of Western Pennsylvania. More recent data on overall giving aren't yet available. But judging by the reports of individual foundations, it's likely that the figure rose in 2000, declined in 2001 and 2002, and is currently near 1999 levels.

Why do they give? Because federal tax laws allow well-to-do individuals, corporations, hospitals and community boosters to sequester money in tax-exempt foundations, invest it, and give it away. Once placed in a foundation endowment, the money can't be used for private gain, and it can't just sit there; foundations and trusts must give away 5 percent of the market value of their holdings each year to nonprofit organizations and beneficiaries like schools or face tax penalties.

Many of Southwestern Pennsylvania's 20 wealthiest foundations trace their roots to Pittsburgh's industrial and financial heyday. The biggest local philanthropy, the R.K. Mellon Foundation, has its roots in banking and now gives away some $65 million a year. Bankers also founded the McCune, PNC, Scaife Family, Sarah Scaife and Hillman foundations, which are also in the top 20.

The Heinz food empire spawned the Howard Heinz Endowment, Vira I. Heinz Endowment, Eden Hall Foundation and H.J. Heinz Company Foundation. Heavy industry birthed the Alcoa, US Steel and PPG Industries foundations. Oil and gas fortunes fuel the Eberly and Claude Worthington Benedum foundations.

The Grable Foundation was created by the widow of Rubbermaid Inc. founder Errett M. Grable, and the Buhl Foundation's benefactor rung up that endowment in retail. The United Jewish Federation Foundation is rooted in religion, and the Jewish Healthcare Foundation was created when that community sold Montefiore Hospital to the University of Pittsburgh Medical Center.

The Pittsburgh Foundation sets up mini-endowments -- called funds -- for families, individuals or businesses, and makes grants from those funds to charities specified by either the donor or the foundation's staff.

Smaller foundations have even more diverse origins. The Mary J. Donnelly Foundation was built on money made when Premier Malt Products Co. -- which sold mash to home brewers during Prohibition -- sold out to Pabst Brewing. Henry and Elsie Hillman have given their children their own foundations, creating a brood of philanthropies that each gives out $350,000 to $500,000 a year.

And the Staunton Farm Foundation is rooted in the estate of Matilda S. McCreedy, an oil baron's wife who died childless and wanted her estate to serve the needs of the mentally ill.

In the late 1990s, the stock market boom inflated the endowments of many foundations, and giving away 5 percent became a challenge. "Every year, we would grow and grow, and we wouldn't always meet our 5 percent payout before the very end of the year," says Karen Wolk Feinstein, president of the Jewish Healthcare Foundation.

Times have changed. The market decline that began in 2000 and the swelling of need caused by the Sept. 11 attacks are now squeezing the foundations. The region's biggest philanthropy, the Richard King Mellon Foundation, gave away $91 million in 2000 but has had to trim that to about $65 million in 2002, says its vice president and director, Mike Watson. "It hit hard," Watson says of the market's slide. "We're not looking at as many new grants, and we're getting a backlog." Others report similar declines in giving power.

Faced with declines in their spending power, the foundations could have retrenched. Instead, many redoubled efforts to get the brightest light from each reaction they catalyzed. And occasionally, somebody got burned.

Powerful Reactions
By mid-2002, the usual high jinks on the Pittsburgh Public Schools board had escalated into a full-blown food fight. Board factions and superintendent Dr. John Thompson were battling over school reopenings, budget items and curriculum options. Many public figures bemoaned the infighting, but nobody seemed to have the leverage to force a truce.

Susan Brownlee, executive director of The Grable Foundation, was particularly frustrated. The Grable Foundation is dedicated to education, and its biggest grantee has long been the Pittsburgh Public Schools.

"Because of the governance issues -- particularly between the two factions on the school board and the superintendent -- the system was increasingly dysfunctional."

Brownlee made some calls and found that Trueheart and The Heinz Endowments executive director Maxwell King shared her concerns. So on July 9, Brownlee, Trueheart and King held a joint press conference to announce that they were suspending funding to the district. It was an unprecedented move for the traditionally publicity-shy foundations, and it had immediate repercussions. Besides blowing a $3.5 million hole in the district's budget, the move became a national news story and prompted Mayor Murphy to create a commission to study the school board's governance. Trueheart and Oxford Development Co. president David Matter co-chair the panel, which is now refining its recommendations.

"At some point, foundations need to say, ‘This may be a good program, but fundamentally, you've got to do some things differently,'" says Brownlee.
Then in August, a spat between Murphy and four foundations over the future of a 177-acre Hazelwood development site exploded onto the front page. The Heinz, McCune, R.K. Mellon and Benedum foundations had long planned to buy the former LTV Scoke works site for $9.9 million, then to guide a community planning process and to pass the project on to a responsible developer. The foundations thought they were doing a favor to the cash-strapped city by securing a key property that might otherwise have fallen into the hands of land speculators.

But in June, Murphy sent a letter to the foundation heads chiding them for taking two years to try to buy the site and threatening to intervene -- perhaps by seizing the property using the city's eminent domain powers -- if they didn't seal the deal quickly. The foundations shot back with an epistle of their own, calling the imbroglio "a case of ‘no good deed going unpunished,'" and saying they "are both discouraged and puzzled by the difficulties of working cooperatively with your office."

"The reason it was taking a long time was because we were trying to get environmental clearance from the commonwealth," explains William P. Getty, president of the Claude Worthington Benedum Foundation and the prime architect of the Hazelwood deal. By the end of August, Murphy and the foundation heads made peace, and the joint venture bought the property.

Then in mid-September, an even larger contingent of foundations launched another missive at a proposal by the Sports & Exhibition Authority to finance a new hockey arena, in part with funds from the Allegheny Regional Asset District sales tax. "There was widespread loathing of the idea that now that we have football and baseball, we should build ice, too, and have a hat trick," says Edwards, whose staff at the McCune Foundation wrote most of the letter.

There was also concern that arena funding would come at the expense of the arts groups and cultural institutions that RAD backs -- and that those organizations would have to turn to the foundations to make up the difference. So executives at the McCune, Heinz, Benedum, Hillman, R.K. Mellon and Pittsburgh foundations penned a letter to the RAD board urging that the portion of RAD funds dedicated to sports facilities be capped at the current 22 percent.

Often, such communications never see the light of day. But this time, the letter was excerpted in newspapers even before it reached its addressees, says RAD board chairman Dan Griffin. "When I saw the recommendations they made in the newspaper, that was the first I saw them," Griffin says. "We had no dialogue ahead of time."
Edwards says he's unapologetic about the headlines the letter generated. "‘Behind closed doors' ain't making it," he says. "The foundations are learning to play in the public sphere."

"It's been part of the culture of the foundation community not to be out front. They've been one row back," says King. When he arrived at the Heinz Endowments in 1999, King says, foundation heads were talking about becoming more vocal. But King took things several steps further.

A longtime newspaperman who served as editor of the Philadelphia Inquirer (1990-98), King brought a new view of the news media to the foundation world. "If a reporter calls, I take the call," he says. "I'm comfortable with the idea that one of the tools with which we get things accomplished is the media."

King also sought a unifying theme within the Heinz Endowments' five areas of interest -- the arts, children, economic opportunity, education and the environment. He found it in civic design, by which he means molding a community that works for the benefit of its residents and serves as a model to others worldwide. The endowments, he says, are becoming "one of the institutions that shapes the future development of the community."

The Heinz Endowments are Pittsburgh's second-largest philanthropy, giving upwards of $60 million a year, and their shift into civic design made them an instant star on gridirons long dominated by government and business. As a key funder and leader of the Riverlife Task Force of Pittsburgh, for instance, King has exerted influence on private developers, angered the Mon Fayette Expressway's backers and forced PennDOT to adopt view-friendly barriers for the Fort Pitt Bridge.

"There's a sense that I have that we're now in other people's space," King says. "In many ways, we're welcomed, but there's a little bit of anxiety that we're not staying in our space and just providing resources."

Trueheart took the helm at the Pittsburgh Foundation in January, and he, too, embraced a more public role. His foundation regularly interacts with thousands of donors and grant recipients, giving it a unique capacity to move the public discourse. "Has the Pittsburgh Foundation been involved in deliberate efforts to make or shape public policy?" Trueheart asks. "That's long been a part of our history. … It's been a quiet part of our history."

The Pittsburgh Public Schools' public squabbling, though, called for a louder approach. Trueheart's last gig as national head of Reading Is Fundamental, a national nonprofit dedicated to promoting literacy, taught him that urban education has urgent needs. "The children in the [Pittsburgh] school system could not afford not to have the best education available," he says. "And any time that we wasted reduced their opportunity to get that education."

Suspending grants to the district -- and doing so publicly -- was the only way to get the community to face up to the district's problems, he says.
The roots of the new assertiveness in the foundation community go beyond any few individuals. "Systems change" and "leveraging" are hot buzzwords throughout the philanthropic world -- both in Pittsburgh and elsewhere -- and those two concepts have inevitably led to increased activism.

Systems change means getting at the root of a social malady, rather than just treating the pain it causes. "Are we going to get good at getting much closer to the social and health and environmental problems we were created to address? Or are we going to play at the margins?" asks Feinstein of the Jewish Healthcare Foundation. "If we can get ourselves down to the root causes … then we're going to be much more interesting and important."

Leveraging means using one resource -- typically a grant -- to bring to bear other powerful forces. If a foundation grant can help a nonprofit attract other private money, government funding and helpful partners, it can have an influence beyond its own dollar value. Leveraging often involves working with government, notes Ron Wertz, president of The Hillman Foundation Inc.

"Today, there is a much greater collaboration between public and private money than there has been in the past," he says, "and that almost dictates that you're going to get more involved in public policy."

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