Who Wins in the Megagrants Game

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We know that many of you are in high fundraising mode between September and January. We thought we’d catch you with some relevant background information while the question of how grant and contract-based resources are invested is high on your radar screen. Thus we bring you this special section on trends in philanthropy.

We made Rick Cohen of the National Committee for Responsive Philanthropy entirely responsible for this section, which represents much of the organization’s wish list of what they wanted to communicate to you the practitioners out there who are trying to make sense of spending patterns. Over time, we have found them to be an invaluable source of excellent, timely and sometimes irreverent information. We can always use more of this.

We were particularly alarmed by the article on the downturn in grantmaking to groups representing racial and ethnic minorities. If you read this together with the article on page 44 on barriers in movement building, it paints a compelling reason to pay much more attention to what we, by omission or commission, support in the way of exclusionary practice.
The article on the faith-based initiative is a pure luxury for us. We generally try to keep articles a bit shorter than this, especially when they are so densely packed with information, but this New Yorker-style piece had such a fascinating story behind the story to tell, we thought it would be well worth the space. Don’t miss the call for action here!

Our deepest thanks to Rick Cohen for bringing us this elucidating special section on philanthropy. Let us know what you think!
The stock market may be shaky and foundations have been hinting at lower spending due to potentially declining endowments. Nevertheless, the winners in the Million Dollar Grant club keep climbing like contestants answering Regis Philbin’s quiz show questions. But there is a weakest link in the story—are any of these grants going to social change?

The Indiana University Center on Philanthropy reports that the number of million dollar gifts is up 12.2 percent between the first and second quarters of 2001, the largest single quarter increase in the past 34 years. In all of 2000, there were only three billion dollar gifts; there have already been three in 2001, two of them in the second quarter alone. There have already been 1,273 gifts over $1 million by individuals, corporations, and foundations this year, compared to 1,801 in all of 2000.
Supposedly struggling with maintaining their previous levels of giving against the eroding value of their stock portfolios, foundations are increasingly in the lead in this unprecedented philanthropic behavior. The number of million dollar grants made by foundations in the second quarter of 2001 is up 47 percent from the first quarter and 61.7 percent compared to the same time a year ago. Foundations have already made 80 percent as many million dollar grants in two quarters of this year as they made in all of last year.

The good news is that foundations are resisting the drumbeat of downsizing their grantmaking by increasing their big awards; the bad news is that few of these megagrants winners are social change advocates. For every grant to groups like Community Catalyst, Consumers Union and Rural Community Assistance Corporation, there were scads of million dollar awards to well-endowed colleges and universities (including Regis Philbin’s gift of not $1 but $2.7 million to the University of Notre Dame).

Based on a rough count of the Indiana University data, grants to colleges and universities (excluding multi-million dollar grants to higher education funds such as the United Negro College Fund and the American Indian College Fund) account for almost two-thirds of all the million dollar plus grants in the second quarter of 2001. Only a handful went to Historically Black Colleges and Universities (HBCUs) such as Clark Atlanta, Shaw, and Philander C. Smith. Note that the third largest grant on the entire list, the William and Flora Hewlett Foundation’s $400 million grant to Stanford University, was larger than the entire endowments of every HBCU in the nation except for Howard University in Washington, D.C.

Fortunately for society, some social change-oriented groups did score in the competition, with grants such as:
• $100 million from the Bill and Melinda Gates Foundation for the Global Fund for AIDS and Health
• California Endowment’s $3 million to the Rural Community Assistance Corporation, one of the top advocates for rural Americans in the U.S., an additional $50 million for California’s agricultural workers, and a $1.26 million grant to the Los Angeles Women’s Foundation
• Pfizer’s $50 million dedicated to South African AIDS sufferers (although there are many critics of Pfizer and the other major pharmaceuticals for their stance against the low-cost production and distribution of generic drugs in the Third World)
• The Robert Wood Johnson’s grants to a couple of initiatives on our nation’s tobacco policy
• The Gates Foundation’s grant to the Colorado Small Schools Initiative
• several grants from the Ford Foundation, including $2.5 million to the Global Fund for Women, $1.5 million to the Liberty Hill Foundation, $1.5 million to the National Immigration Forum, $1.5 million to the Southern Partners Fund, $1.5 to the American Civil Liberties Union, and $1 million to the Center on Budget and Policy Priorities, among others, and
• W.K. Kellogg Foundation’s $4 million to Community Catalyst and Consumers Union, the two most prominent organizations advocating for the preservation of the nonprofit assets of health insurers that convert to for-profit status.
Probably the two grants to the right-wing Heritage Foundation, totaling $10.5 million, count as social change philanthropy as well, though the change is in a direction rather different from those listed above.

Worth noting are large grants directed toward environmental causes, such as the $50 million from the David and Lucile Packard Foundation and the Gordon and Betty Moore Foundation to the Peninsula Open Space Trust, the Pew Charitable Trusts’ $3 million to the National Environmental Trust, and 3M’s $5.1 million grant to the Nature Conservancy. Once again, the awards hardly register when compared to grants to higher education on the list. Similarly, there were some huge grants to nonprofit community development intermediaries, with the Local Initiatives Support Corporation raking in two grants of $17 million and $8 million from State Farm Insurance and another $1.5 million from the McKnight Foundation. The Enterprise Foundation got $1.5 million from McKnight and the Lilly Endowment awarded over $5 million to the Indianapolis Neighborhood Housing Partnership. Cleveland’s Neighborhood Progress received $2 million from the George Gund Foundation and the Craig and Susan McCaw Foundation granted $2 million to the Grameen Foundation. It is at least possible that these intermediary mega-grants will reverse the recent tide of declines in foundation funding for community improvement and community development.

Most social change organizations were clearly out of the running for these big grants. The conventional wisdom among fundraisers is that big donors, from wealthy individuals to well-heeled foundations, respond to big ideas. One would think that tackling intractable social problems with a persistence rivaling Job would be enough to warrant proportionately substantial gifts. But million dollar grants depend on other factors, particularly sustained and intimate relationships between the donor and potential grantee, as well as the donor’s interest in putting his or her stamp on the nonprofit’s use of the gift. For a big-time university, the job is easy. The donor (or in the case of the Hewlett gift to Stanford, the donors behind the foundation) might be an alumnus and the university can reciprocate by naming a chair, a program, or an entire school after the benefactor. The opportunities for social change groups are considerably more limited.

Frequently in the million-dollar grants arena, the big donor is searching for the nonprofit grantee, not the other way around; in the social justice arena, it is like two ships passing in the night. Who wants to be a millionaire? For social change groups, the avenues to the big donors are few and far between.

Rick Cohen is president of the National Committee for Responsive Philanthropy (NCRP). NCRP is a quarter-century-old nonprofit philanthropic “watchdog” organization. NCRP’s mission is to make philanthropy more responsive to people and organizations with the least wealth and opportunity, more relevant to critical public needs, and more open and accountable to all, in order to create a more just and democratic society.