THE ROLE OF TAX-EXEMPT FOUNDATIONS

Every year American taxpayers sacrifice their right to the benefit of $600 million in tax revenues that would otherwise go to the federal government if not for the special exemptions granted to private foundations and other similar tax exempt institutions. In so doing, these organizations are able to give away annual grants totaling nearly $3 billion.

Run for the most part by exclusive groups of executives and academics, these foundations see themselves as social trend-setters and reformers, stimulating "worthwhile" change by giving to various causes. The question of the political role vis-a-vis the public accountability of tax-exempt foundations is an important one, especially given the drain their exemptions make on the public treasury.

Perhaps the largest and most influential of the more activist foundations is the Ford Foundation. With grants being made from the dividends that Ford's tax-exempt money is earning from investments in such big businesses as IBM, ATT, Dow Chemical, CBS, Lockheed, American Express, Litton Industries, Boeing, various oil companies and, of course, the Ford Motor Company, it should not be surprising to teacher unionists that Henry Ford's historical anti-unionism is still reflected in the Ford Foundation's current policies--many of which are now aimed at teachers themselves.

It was a Ford-funded "experiment" in decentralization of New York City schools which, by violating teachers' due process rights, set off the heated teachers' strike of 1968. Ford supported supposedly independent scholars and studies which promoted its position. It also funded the pet projects of a number of members of the New York City Board of Education who voted for its proposals.

More recently the Foundation has given money (nearly $900,000 so far) to the National Committee for Citizens in Education, headed by Carl Marburger, former New Jersey Commissioner of Education, who even in that position advocated unilateral changes in teachers' contracts. Marburger now uses the NCCE to argue that teachers have taken over the schools and that parents must reassert their authority by, among other things, opposing a national collective bargaining bill. (Since the NCCE has only 1,300 members, the subsidy amounts to about $672 a member!)

Another of Ford's recipients is the Education Law Center, which received $450,000 from the Foundation early in 1974 and is headed by Paul Trachtenberg, a critic of teacher licensing tests. ELC represents a Philadelphia "parent union," which is now supporting a lawsuit challenging the idea that changing a teacher's contract requires renegotiation. If the suit is successful all contracts will become virtually worthless.

Foundation support for groups like these, which are clearly engaged in political activity, raises questions about the degree to which foundations really deserve tax exemption.

Foundations like the Ford Foundation came under close government scrutiny in the late sixties when the Tax Reform Act of 1969 was passed: Under provisions of that law foundations are supposedly forbidden "to influence legislation through an attempt to affect the opinion of the general public or any segment thereof." They cannot communicate with any government employee other than to report the results of non-partisan study, and they cannot make grants "to influence the outcome of any specific public election." It would seem that a number of Ford Foundation grants are borderline cases under all these provisos.

Given the anti-union role of foundations like the Ford Foundation and the dubious influence it has on a whole range of decisions in the labor, education, and ultimately the political worlds, the American Federation of Teachers urges that the Congressional committees now considering foundation tax exemption give serious thought to the undemocratic and unaccountable nature of the power of foundations and enact measures to insure that foundations will no longer be allowed privileged authority over the public decision-making process.