What Can We Learn from That Surprise $100 Million Gift to the San Diego Foundation?/
Full disclosure: As someone who keeps an eye on arts and culture grantmaking here at IP, I have a soft spot for the reclusive donor who shocks the recipient organization with a massive and unexpected gift.
These gifts are fascinating because they fly in the face of Fundraising 101, which stipulates that mega gifts are preceded by a series of smaller gifts from the donor. But these gifts also have a riveting cinematic quality. One imagines a Howard Hughes-like figure picking up the phone and instructing his lawyer to include a huge gift in his estate plan. Afterward, the lawyer rings up a bewildered nonprofit executive director who, after realizing it isn’t a hoax, has to figure out what to do with tens of millions of dollars. Roll the credits!
Given this (admittedly odd) guilty pleasure, I was intrigued when I came across a San Diego Union-Tribune report stating that the San Diego Foundation (SDF) had received an unrestricted $100 million cash gift from a “stranger” named Jay Kahn, who was an entrepreneur, clothing magnate and investor. Kahn passed away in 2022, and if the size of his gift wasn’t enough to turn heads, the bequest was also unrestricted, making it the largest gift ever of its kind given to a San Diego charity, according to the foundation.
I initially thought the Union-Tribune’s use of the word “stranger” may have been a case of editorial overreach. But it turns out Kahn was a “stranger” in the truest philanthropic sense. In an email to Inside Philanthropy, SDF President and CEO Mark Stuart said, “In May of 2021, I heard from Jay’s estate attorney Jay Miller, who let me know that Jay had made recent changes to his estate plan and wanted the very bulk of his estate to benefit charitable organizations in San Diego, and he chose the San Diego Foundation as the place by which he wanted to do that.” SDF had no existing relationship with Kahn prior to that call.
Kahn was born in 1932 in Michigan. He amassed his fortune in the San Diego/Tijuana-area clothing industry and went on to make some incredibly astute investments, such as a purchase of $250,000 of Apple stock that turned into $80 million. SDF’s press release called him “risk taker who chose to be low-profile in the San Diego community” and “a thinker who was progressive, open-minded and compassionate, though reclusive.”
Of course, we occasionally see “reclusive” donors make big gifts in the performing arts, visual arts and higher ed fields. But in most of those cases, there’s some track record of giving to the recipient organizations, however Hughes-like the donor may be. Moreover, these donors typically stipulate how the money should be allocated.
The Kahn bequest is arguably the rarest of all gifts — an unrestricted $100 million sprung upon an organization that didn’t know him from Adam. If there’s a playbook laying out how an organization should respond to such unexpected news, I’ve yet to come across it. This makes SDF’s stated intentions for allocating the windfall worth addressing — it’s like the MacKenzie Scott Effect on steroids.
SDF leaders never spoke to Kahn, but they did know that he was a “classical musician who played clarinet in symphonies.” In recognition of this fact, the foundation signed off on 10 grants of $150,000 to mostly music- and arts-related nonprofits serving children and/or vulnerable populations. The foundation will also direct support to its affordable housing fund for low- and middle-income families and a strategic initiative advancing racial and social justice.
With the balance from the bequest, SDF will establish the Jay Kahn Endowment Fund with more than $86 million “so that Kahn’s legacy and impact continues to grow and transform San Diego County in perpetuity.” Back-of-the-envelope calculations show that if the corpus generates a conservative 6% return, the fund’s balance should swell to $154 million within 10 years.
“This is what you dream about all day long, to say, ‘If I only had…,” Stuart said. “And now we’re in that position to say, ‘We now have the capacity to do more good than we ever could have possibly imagined before.’”
Nonprofit leaders are an idealistic bunch, but I imagine very few of them dream to the tune of $100 million in unrestricted support. But an out-of-the-blue gift of, say, $8 million, certainly isn’t outside of the realm of possibility in this post-Scott era of giving, which explains why a December Center for Effective Philanthropy report encouraged nonprofit leaders to dream big and plan for the unexpected.
CEP studied the impact of Scott’s gifts on recipient organizations and found that even though the median gift in its dataset came to a robust $8 million, 37% of respondents said the money would not “significantly strengthen long-term financial stability.” This was partly because organizations didn’t have a plan to allocate a gift they never expected to receive. Respondents’ biggest piece of advice for their peers is “the importance of having a strategic plan in place should the organization receive this type of funding.”
SDF’s response to the Kahn bequest proves instructive in light of this advice. Faced with the unexpected news, its leaders put together a workable plan addressing short- and long-term needs by disbursing support to organizations aligned with Kahn’s interest in music, pledging funding for affordable housing and advancing racial equity, and putting the bulk of the bequest into an endowment fund. Of course, other nonprofits may emulate SDF’s approach or land on completely different priorities and action items. What matters here isn’t the fine print as much as crafting a plan should the organization net an unexpected and unrestricted gift — from Scott or anyone else.
While its backstory of the Kahn bequest remains cloaked in mystery, we can reasonably assume he didn’t select SDF by arbitrarily thumbing through the phone book. For Stuart, the bequest boiled down to trust. “We learned that when you do good work, it does not go unnoticed,” he said. “Jay Kahn recognized the important work we’re doing to advance our vision for just, equitable and resilient communities. We are so humbled by his trust in us.”
With the gift, Kahn’s estate joins an impressive cadre of San Diego mega donors including Qualcomm cofounder Irwin Jacobs and his wife Joan, self-made billionaire Ernest Rady and the Scripps Family, the Price Family, and local philanthropist Darlene Shiley, who gave UC San Diego $10 million last year for the Shiley Eye Institute. This is the same UC San Diego that in 2019, became the youngest university in the U.S. to raise $2 billion through a capital campaign, Campaign for UC San Diego. The campaign, which wrapped in 2022, went on to raise a total of $3.05 billion.