Budget 2021 and Philanthropy: Breakthroughs and the Disbursement Quota Consultation
On April 19th, I welcomed many measures in the 2021 federal budget in this written submission in advance of the 2021 budget and this post-budget communiqué. The range and scale of new investments -some historic- are quite astonishing. The emergency pandemic-related measures are badly needed by our civil society partners –from the extension of wage and rental subsidies to the $400M Community Services Recovery Fund. The Government also introduced long-term transformative investments, notably to support early learning and childcare across Canada, to strengthen standards in long-term care, and to meet our climate commitments by greening our economy.
Legitimate policy debate will continue about the budget assumptions and priorities. Does Canada have the necessary fiscal space to sustain these large deficits? If I remember correctly my undergrad macro-economic classes, a return of inflation, and increased interest rates would be indicators that the growth agenda of the government is indeed working. However, rapidly increasing interest rates would quickly undermine the Government budgetary framework. (On the other hand, the cost of additional debt to the Government is near zero, the Government can manage debt payment without crowding out other expenditures and Canada’s stimulus plan is much lower per capita than the one introduced by the Biden administration). The coming months and years will shed much light on this debate. Meanwhile, the era of an activist government with an ambitious economic, social and green agenda has clearly returned. Let us see if Canadians embrace this agenda during the forthcoming federal elections.
I am struck that Budget 2021 also provides a revealing testimony for the long-term sustained approach adopted by several foundations. It can take a generation for an issue long on the margins of the policy process to become part of the Canadian mainstream. We have philanthropic leaders who, for example, have been involved in childcare and early learning since the 1980s. Their engagement was a critical success element for the breakthroughs announced in budget 2021. Foundations cannot – and have never purported to – replace governments. Foundations can, however, play a distinctive and complementary role in providing social risk capital to address unforeseen crises, giving voice to marginalized groups, promoting civil society organizations, and supporting their long-term engagement. Foundations are uniquely positioned to explore “unpopular and uncharted” territory that other entities might find daunting.
This brings me to the announcement for public consultation about the disbursement quota (DQ) and related tools. Under the heading “Boosting Charitable Spending in our Communities,” the government stated its intent to consult “during the coming months on increasing the disbursement quota” adding that “increasing [the DQ] would increase overall levels of expenditures by registered charities on their programs and activities in Canada….” I have no details yet to share about the calendar and the process for this consultation. I have also strongly welcomed the consultations (although I have qualms about the misleading and incorrect data on endowments and granting included in the budget document).
PFC will fully collaborate with the Government and our civil society partners to develop an evidence-based and forward-looking framework for these discussions. As PFC became aware of the increasing government interest in disbursement quota, the PFC Board created a working group in early March to address this important question. This Working Group is chaired by Jean-Marc Chouinard from the Chagnon Foundation. Its other members are Leanne Burton (MakeWay), Justin Wiebe (MasterCard), Rachel Renaud (Roasters Foundation), and Claude Pinard (Saputo). The Working Group is drawing on the available evidence, expertise, and experience to support an informed policy process. What is already clear from our internal discussions is that PFC will continue to take a holistic view of the DQ. The DQ is but one aspect of the fundamental role of private philanthropy in promoting the public good. The issue goes beyond the percentage of assets to be disbursed; it also includes sustainable funding, the role, and impact of endowments in supporting the public good – ranging from immediate needs to structural challenges and future crises. A sound DQ policy will also require accompanying policy adjustments -winning conditions such as addressing the non-qualified donees issue- for the improved impact of philanthropic giving.
The Working Group will report back to the Board with its recommendations as PFC prepares itself for the consultation. The Board will want to make sure that we hear from members on this issue. As the process and timing become clearer, we will invite you to participate through a range of platforms (e.g. town halls, webinars, focus groups, and surveys). I will have more to share soon.
Meanwhile, the budget is challenging us to continue addressing both the short and the long term. The pandemic has called on all of us to pivot, step up, and address how we can improve our collective impact as grantmakers, investors, and partners. Responding to the crises has been transformative for many in the foundations’ sector, exploring and innovating how we can better support community-building and the ties that bind us in ways that are truly inclusive.
This work will continue as our world slowly emerges from COVID. This new reality is going to ask more of us: more transparency, more trust-making, more risk-taking, more innovation, more grounding in local and global realities, and yes, more courage to stay engaged for the long term to support discovery and a more just, sustainable and prosperous world.