By Paul Daugherty
West Virginia is on the cusp of a historic transfer of wealth that could revolutionize communities through thoughtful stewardship and organized philanthropy to drive economic development, entrepreneurship, education, arts and culture and strengthen quality of life for all.
Imagine what it would be like if West Virginia and its communities had the financial resources available to build up stronger and more robust communities. What if our future was greater than those nostalgic days of the past when many of our towns, cities and counties were full of growing populations, booming economies and energizing innovations?
Most West Virginians are unaware that right now we are at the apex of a historic moment in our state’s growth. We are currently on the cusp of a once-in-a-century opportunity, and if we don’t act quickly, it will pass us by, leaving us with immense regret and frustration.
Defining the Terms
West Virginia is currently experiencing a historic transfer of personal wealth. Not millions or hundreds of millions; rather, billions of dollars in personal wealth are transferring from older generations, such as baby boomers, to Generation X, millennials and Generation Z.
As referenced in the 2019 Forbes article, “The Greatest Wealth Transfer in History: What’s Happening and What are the Implications,” “over the next two decades, the U.S. will experience an unprecedented shift of demographics and finances that will likely be felt by every American.” Older generations are expected to transfer at least $30 trillion in wealth to younger generations during this time.
In the Mountain State, the transfer of wealth is projected to be massive based upon assessments coordinated over the past five years by Philanthropy West Virginia and financial underwriting by some of West Virginia’s community foundations and the Appalachian Regional Commission’s former Flex-E-Grant Program. The Center for Rural Entrepreneurship, now part of LOCUS Impact Investing, has completed an assessment of 37 of West Virginia’s 55 counties, and, over the next 10 years, the transfer of wealth in these counties is projected to be least $30 billion. Over the next 50 years, those same 37 counties are anticipating a $263 billion transfer of wealth. With 18 counties remaining to be assessed, the transfer of wealth is even greater for the entire Mountain State.
The transfer of wealth assessment is conducted in inflation-adjusted dollars and looks at criteria such as the relationships of drivers of wealth and household net worth. It is based upon reviewing public data, including:
- Income levels
- Public versus private lands
- Tax reports
- Corporate ownership and stock ownership
- Economic development projects and types of economic sources
- Natural resource predictions conservatively based on sections of the area assessed
- Long-term population predictions
- Estimated current net worth of each county
- Demographic data such as household income, age cohort, family structure, occupations, housing status, etc.
Raising the Stakes
The increased population loss of the past six years is resulting in West Virginia’s transfer of wealth moving a lot faster, with younger generations leaving and/or older populations passing away. On more occasions than not, this wealth leaves the town, city, county or state where it was created forever when it is transferred on to children and grandchildren who then leave their hometowns for other parts of the country. This wealth includes long-time West Virginia family businesses being sold off or relocated to out-of-state locations; family property such as farms, main street buildings and homes being sold off or unmaintained; and personal wealth that completely leaves the state’s borders versus staying local and investing to drive hometown economies.
A lack of action and leadership will result in over a century’s worth of wealth building leaving the Mountain State forever. This concept is so compelling it merits repeating: West Virginia will lose out on the historic opportunity to retain and grow $30 billion over the next 10 years and $263 billion in the next 50 years—and these are just the funds we know of. If we engage this wealth through permanent resources, West Virginia can advance and strengthen its long-term economy, business community, nonprofit sector and community growth.
Leading the Charge
As the transfer of wealth is moving much faster than originally anticipated for West Virginia due to population loss, action is needed immediately from the general public, businesses, foundations, nonprofits, policymakers and state and local governments. This requires one significant and leading partner to ensure this transfer of wealth can stay in local communities.
That partner is organized philanthropy, such as the grantmaking foundations—community, private, family and public—which are set up with permanent endowments to be around forever. These foundations annually grant out a percentage of their endowment for the needs of the communities and/or causes identified by the donors/founders.
According to the nationally recognized resource BoardSource, a grantmaking foundation is defined as a charitable, tax-exempt organization whose primary function is to distribute funds for charitable purposes. Private foundations are typically formed by individuals, families or corporations. Other grantmaking foundations include community foundations and other public funders that are created through individual donors establishing permanent funds for a variety of community needs.
As many neighbors and community leaders know, West Virginia does not lack the great ideas to innovate, advance great work or turn around communities. Rather, the state lacks a significant amount of the philanthropic, public and private investments to be successful in this work.
By working with organized philanthropy, West Virginia can encourage the transfer of wealth from individuals, families and businesses stay local by creating charitable funds with local community foundations. The money could also be used to form new private, family or corporate grantmaking foundations. This would provide every county and community with the potential for long-term benefits that would create a new staying power.
Engaging the Experts
A 2018 Chronicle of Philanthropy article titled “$9 Trillion will Transfer from Americans’ Estates” by Heather Joslyn reported that more than half of American household wealth—56% to be exact—is in the hands of baby boomers. The oldest are in their mid-70s now. According to Don Macke, co-founder of the Center for Rural Entrepreneurship, which has historically run transfer of wealth assessments, “We’re saying, here’s the opportunity. Now it’s up to you to go out and capture some of that.”
If every West Virginian, business owner and/or family planned to gift at least 5% of the wealth in their estate or business succession plans for a West Virginia community foundation fund or new grantmaking foundation in the next 10 years, it would result in a new collection of philanthropic funds valued at $1.5 billion at least, which could be reinvested in communities to help the state face challenges every year.
If the average spend for grantmaking is 5% of the value of a foundation endowment or community foundation fund, based upon the $1.5 billion figure, this would result in an additional $75 million per year in grants for West Virginia’s communities and critical organizations. These endowments managed by local foundations benefit numerous opportunities for local community economic development, entrepreneurship, health and human services, education, arts, culture, substance use disorder response and recovery, charities, natural disasters and causes that strengthen the state for its citizens’ quality of life.
Organized philanthropy is the best partner in this work for several reasons.
- Foundations and endowments are created and led by local community members who understand the needs of these communities, as they work every day with nonprofit partners and neighbors tackling some of the state’s greatest opportunities and challenges.
- They are, by their mission, created for the long-term by managing endowments to be around and grow for centuries in order to ensure annual grantmaking that strengthens and supports citizens, communities, causes and organizations in West Virginia’s most rural and urban places.
- Organized philanthropy leaders are experts in efficient grantmaking and accountability. This is why they exist—to steward the intentions of the foundation or funds’ purposes, complete due diligence, streamline application/award processes and be accountable to the IRS and West Virginia Secretary of State’s Office on how funds are used and managed.
- These groups are innovative and effective, not just in dealing with the needs and challenges of today but also
in looking at long-term solutions with a bigger vision and focus so West Virginia thrives years from now.
The engagement of the transfer of wealth is ever so critical to the state’s livelihood and future. It has garnered the support of leaders and funders supporting the work. The initial investors who stepped up to complete the research for their respective county or regions of service are community foundations, including: Community Foundation for the Ohio Valley, Eastern West Virginia Community Foundation, Foundation for the Tri-State, The Greater Kanawha Valley Foundation and the Parkersburg Area Community Foundation.
Closing the Gap
To accentuate the importance of this moment and the need to act now, we must recognize that West Virginia has historically not received its portion of rightful allotment of philanthropy in comparison to neighboring states.
Historically, West Virginia and its communities have seen a significantly lesser amount of foundations and grants created here in comparison to the wealth created. “The Philanthropic Divide—Assets & Per Capita Granting Update” by the Big Sky Institute documents how the disparities for in-state assets and per capita grantmaking have significantly increased. For our beloved West Virginia, the 2007 report placed the Mountain State in the bottom 10 states with the fewest foundation assets alongside Alaska, Idaho, Mississippi, Montana, New Hampshire, New Mexico, North Dakota, South Dakota and Vermont.
While this report is from 2007, it is relevant to note the long-time gap exists and continues between the more philanthropically wealthy or states having more philanthropy per capita than West Virginia. This creates more hurdles and disadvantages to catch up to having the resources our communities and state deserve and desire when compared to our neighbors.
Nearly 15 years later, we know what our potential and baseline can be with the transfer of wealth assessments. Engaging this money with new foundations and funds will keep the wealth local. If the collective $1.5 billion in new endowments is engaged, the estimated 5%, or $75 million, per year for grantmaking will go toward numerous charities, community development and community projects that will strengthen opportunities for West Virginians and the state itself. Statistically, the $75 million will more than double the current annual collective grantmaking of West Virginia’s existing foundation community. The overall impact per decade would be nearly $1 billion in new investments.
In other words, the state is at the tipping point of a new golden age in philanthropy if its people will work together. That is why now is our state’s defining moment, which positions us for a compelling future with a stronger philanthropic sector and stronger communities, workforce and economy. As a citizenry, we need to ensure locally created wealth can stay local and grow. We need to know our communities have the philanthropic capital that provides for launching new opportunities, recovering fully from natural and health disasters—as we have learned over the past year and a half—and fueling a future that local citizens envision.
Aiming High in Hope
There are actions that can help ensure this opportunity is not missed, including:
- Professional advisors, such as lawyers, certified public accountants, investment managers, bankers and estate planners, working with clients and stressing the tremendous importance of partnering with and including their local community foundation and favorite charities and/or creating their own foundation in their will.
- Realizing that every West Virginian can be a philanthropist, no matter the size of their giving, from the retired teacher, small business owner and minister to the coal miner, doctor, entrepreneur or grocery store worker.
- Enacting state policies that increase incentives for charitable giving by expanding the West Virginia Neighborhood Investment Program from $3 million to at least $5 million annually so our neighbors can increase their charitable giving to benefit their communities, reducing the burden on government.
- Engaging younger generations on the value of honoring their parents and grandparents by investing in their hometown when the transfer of wealth happens.
- Creating challenge funds with national foundation, federal government and local partners, which are used to raise matching dollars to build community foundation funds for community grantmaking.
- Promoting the value of philanthropy as critical economic and community development that invest in local towns and build up rural communities to have staying power for the next century.
Now is the time for all West Virginians to replicate the generous examples of past generations of philanthropists from all backgrounds and sizes, such as Mike and Sarah Benedum in creating the Claude Worthington Benedum Foundation and William Maier Jr. in creating the Sarah and Pauline Maier Scholarship Foundation, now known as the Maier Foundation.
Borrowing the words of American architect Daniel Burnham, “Make no little plans. They have no magic to stir men’s blood. Make big plans. Aim high in hope and work.” It is time for West Virginians to make big plans, aim high in hope and work together so a new generation of philanthropy can create an even stronger Mountain State.
