The California Wellness Foundation has announced several changes to its giving and investing model to help spur change among private foundations. 

In a message on the foundation’s website, executive vice president Richard Tate and public policy officer Stephanie Gomez explained how the economic impact of the COVID-19 pandemic on communities across the country showed the need for a change in “status quo of institutions like ours getting richer while communities are suffering.” The foundation also called attention to sector-driven campaigns, such as the Initiative to Accelerate Charitable Giving (IACG), which Cal Wellness has endorsed, are promoting tax reforms that could increase and accelerate the flow of resources to community-based organizations. For example, IACG has proposed suspending the excise tax on investment earnings for years when private foundation payout exceeds 7 percent. But current efforts are largely focused on donor-advised funds rather than increasing payout minimums for private foundations.

While Cal Wellness increased its giving during the pandemic and simplified its grantmaking processes, the foundation has set an annual payout policy that requires 5 percent as the minimum and allows for distributions above 6 percent when there are unique opportunities for impact or during times of critical need. The foundation also announced that it will begin moving its entire endowment into mission-related investments this year, including up to 5 percent in program-related investments. Currently, to receive tax benefits as a nonprofit organization, private foundations in the United States are required to allocate 5 percent of its investment assets annually to grants, program-related investments, or operating expenses.

“When we prioritize resources for our own perpetuity, we shortchange our most vulnerable communities. And those communities need foundation resources now more than ever before,” wrote Tate and Gomez. “We call upon our private foundation peers to make 5 percent their payout minimum and to adopt investment strategies for their endowments that advance their missions and reflect their values.” 

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