Direct economic impact of Colorado foundations
The economic activity of non-operating foundations is unusual compared to businesses and other nonprofits, since most foundations function to distribute funds to other organizations rather than produce goods or services themselves. Aside from the largest, foundations also tend to employ few staff members. Instead, foundations rely on other nonprofits to carry out their mission-supporting activities. Grants made to external organizations have both direct and indirect economic impacts as the dollars are converted into programming. While anecdotes about specific foundation giving are powerful tools for illustrating impact, trying to understand the overall role of foundations in the economy is worthwhile. A 2008 study attempted to measure the direct and indirect economic returns from foundation activities nationally.[1] As might be expected, a dollar granted to a human services organization has a different estimated return on investment than a dollar granted to a religious organization. We use the purpose-based multipliers established in the existing study to estimate a ballpark figure for the direct economic returns of the largest 100 foundations in Colorado.
Based on IRS filings, Colorado’s largest 100 foundations made $531 million in grants in the year of activity reviewed for this study. This spending resulted in an estimated $4.68 billion in direct benefits to the economy, led by grants and support in the Public Affairs/Society Benefit, Human Services, and Education categories (see table 8 for details). These estimates also omit substantial non-grant spending by the foundations. Based on reported foundation assets, the value of direct benefits for all Colorado foundations is estimated at $5.57 billion assuming the purposes of grants are similar for all foundations.[2]
The benefits of foundation spending primarily accrue to the supported organizations and the people they serve. Yet, broader impacts on the supported communities reflect indirect benefits driven by employment resulting from foundation grants and support. While we do not generate estimates of indirect benefits due to employment generated by foundation giving, it is important to recognize that previous work by Shapiro and Mathur found the additional household income and tax revenues to be substantial. In a national study, additional household income generated by foundation giving totaled nearly 12 times the grant and support amounts, while additional tax revenues generated for local, state, and federal governments equaled 90%, 104%, and 144% of foundation giving, respectively.
[1] The analysis by Shapiro and Mathur included operating private foundations and community foundations, while this report focuses only on non-operating private foundations. The use of existing multipliers is imperfect since the mix of grant activity within each purpose in Colorado may differ markedly from the mix used in the original study to determine the estimated returns on investment by category. Despite this limitation, the exercise allows us to illustrate that the economic impact of foundations extends well beyond the amount of grants made each year. For methodological details, see: Shapiro, Robert J. and Aparna Mathur. “The social and economic value of private and community foundations.” Washington, DC: Sonecon (2008).
[2] The largest 100 foundations represent 84% of non-operating foundation assets in Colorado. Grantmaking is generally tied to foundation assets, so the estimated value of the direct benefits for the largest 100 foundations is divided by 0.84 to find the estimated value for all non-operating foundations in Colorado.