Just one barrier stands in the way of a payout increase: Conservatives’ fear that an increase in foundation giving would largely fund election-adjacent projects and groups promoting progressive causes, instead of just funding programs that provide services to communities in need.
The below article appears in a collection of predictions published this month by The Chronicle of Philanthropy about philanthropy-related policy reform.
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A resolution is unlikely in the continuing debate over raising the minimum foundation payout rate, but I expect Congress to move closer toward that goal in 2026. So far, foundations have been able to forestall a hike by convincing politicians that endowments wouldn’t be able to keep up with inflation if the payout rate increased even modestly from the current 5 percent to 6 percent.
The healthy growth of foundation assets belies this concern. Most well-managed funders easily keep up with inflation.
Just one barrier stands in the way of a payout increase: Conservatives’ fear that an increase in foundation giving would largely fund election-adjacent projects and groups promoting progressive causes, instead of just funding programs that provide services to communities in need. Progressives want more money to go to fundamental programs serving low-income communities and other marginalized groups but oppose any limitations on what foundations can fund.
There may be ways to surmount this obstacle. If an increase in the payout rate was linked to equally strong requirements for donor-advised funds, progressives might be willing to accept limitations on politically related nonprofit activities, recognizing that even a 1 percent rise would provide a huge amount of new money to charities.
Funding could be further increased if foundation program expenses were no longer used to meet the payout. A cap on expenses would produce millions more in charitable dollars.
The philanthropic trade groups hope this vision is a mirage that will disappear in partisan rancor. I think that’s wishful thinking. Voices on the right and left want change. A few smart senators, such as Republican Charles Grassley of Iowa and Democrat Elizabeth Warren of Massachusetts, who have both criticized foundations for not spending enough, could make the difference if they are willing to reach across political lines and work to pass a policy that will benefit the charitable community.
