In his forum, Rob Reich claims that, at their best, foundations foster pluralism and encourage discovery. But in my experience foundations can do much more.

This article was a response to What Are Foundations For?, a forum and debate about philanthropic institutions and their role in democracy, in which the author shares his views that “foundations do not simply express the individual liberty of wealthy people; we all pay, in lost tax revenue, for foundations, and, by extension, for giving public expression to the preferences of rich people.”

Deborah Fung’s response below first appeared, along with other responses, in The Boston Review. 

Rob Reich raises questions in his forum (“Philanthropic institutions are plutocratic by nature.–can they be justified in a democracy?”) that keep many of us who work in foundations up at night. He is also right that, at their best, foundations foster pluralism and encourage discovery. (“A democratic society is committed to the equality of citizens, but foundations are the voice of plutocracy.”)

But in my experience foundations can do much more than this. They can catalyze systemic changes that empower the most vulnerable. Reich’s skepticism aside, even modest foundations are capable of creating solutions to some of our most intractable social problems. That’s because solutions don’t always require a lot of money. A new idea can create fundamental change.

In 2004 an average of roughly 1,500 Massachusetts families were living in state-sponsored homeless shelters on any given day, many with no prospects for a more permanent home. That year, the Department of Transitional Assistance found itself with a surplus. Typically, this money would have been used to fund shelter stays for families, which cost about $40,000 per year. However, Sue Beaton, my colleague at the Paul and Phyllis Fireman Charitable Foundation, came up with a radical idea: give families the option to receive a one-time payment of $6,000 in flexible funds instead of ongoing resources to remain in the shelter. Two hundred families opted for the payment. Two years later, 80 percent of these families remained housed outside of the shelter system. The experiment showed that families could use a relatively small amount of money to navigate their way into their own homes when given the chance.

The pilot project eventually transformed homelessness policy in the state, which now offers every family in shelter a one-time cash grant of $4,000. Given rents in most of Massachusetts, many families can’t accept this option. Hopefully the amount will be increased over time, and all homeless families in Massachusetts will have a chance to become independent.

Still, this program points us in the right direction, and creative philanthropy made it possible. Importantly, our ideas, not our money, made the difference. We pay Sue to develop unconventional ideas to generate the resources and supports that allow homeless families to become independent. Governments typically do not pay for this kind of creative work.

Of course, money can create change too. The mission of the Fireman Foundation is to end family homelessness in Massachusetts. We do this in two ways. First, we provide direct aid, including scholarships for moms experiencing homelessness. Second, we try to change the broader social service system for homeless families because many of its policies discourage those families from achieving independence and economic security.

Foundations’ ideas, not just their money, can create fundamental change.

But the latter efforts differ from Reich’s ideal model of discovery, in which government picks up successful philanthropic pilot projects. Instead, we work closely with government, civic, and private-sector partners. We make change by developing ideas and by paying for parts of the solution that those partners cannot.

We also help to bring together disparate parts of the social-service system that can work more effectively in concert.

The homeless system is disconnected from other services that families need, such as education and workforce training. So the Fireman Foundation seeded regional collaboratives with $10,000 grants to bring together government agents, nonprofit providers, the business community, and homeless families. These collaboratives would figure out how to connect families in shelters or on short-term housing subsidies with job training and work opportunities.

In most regions of the state, this was the first time state employees and nonprofit providers who work with homeless families had ever met their counterparts who provide job training for low-income families. Each region created a plan that became the basis of new public-private partnership. The results aren’t in yet—these plans were just launched a month ago—but all regions have forged partnerships with employers and begun placing moms in jobs. One regional project, the Merrimack Valley collaborative, has formed a unique partnership with the vocational high schools and a community action program. Each partner agreed to open up its facilities so that moms completing vocational training would have social supports, such as childcare and transportation.

The Fireman Foundation had only to offer seed money to create the incentive for these different groups to work with one another where they had not before. But in this case, too, start-up money was just a small part of the solution. With the Foundation acting as a neutral and credible third-party convener, small amounts of money encouraged diverse organizations to come together, realigning their programming and activities in ways that will do much more for vulnerable families.

There are many problems that neither government nor philanthropy can solve by themselves. But when foundations work well, catalyzing the power of government and private actors, they can do amazing things.

Deborah Fung is the executive director of the Paul and Phyllis Fireman Charitable Foundation, a family foundation based in Boston. The Fireman Foundation dedicates a major share of its funding resources to ending family homelessness in the Commonwealth and beyond. The Foundation also supports a range of other causes.