Rural Grantmaking for What?

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Inequities in foundation grantmaking are sometimes geographic, with communities, regions, or even entire states sometimes receiving significantly less than they merit. Rural philanthropy is that kind of issue. The shortcomings in institutional philanthropy’s approach to rural needs should motivate nonprofit leaders in rural and urban communities to take action. This August, an important venue for action will take place in Missoula, Montana, thanks to the intercession of Montana’s senior senator, Max Baucus, who has taken on the cause of American foundations’ inadequate grantmaking to rural nonprofits.

A Call to Action from an Unlikely Source
At the annual conference of the Council on Foundations (CoF) in May 2006, Senator Baucus gave a speech calling on the assembled foundations to examine their grantmaking to rural areas and to double grantmaking to rural areas within five years.

In addition, he suggested that foundations recruit “at least one person from a rural area on their grantmaking staff” as well as “a rural leader for their board.” He asked foundations to address entire rural communities rather than engaging in what he termed “silo funding” or “parachute drop” grantmaking. And he also called for greater foundation support of nonprofit capacity building in rural areas, suggesting that grantmakers work together to build nonprofit infrastructure or coordinate their grants to work “in concert with other efforts.” In his speech, Baucus set a target of Labor Day, by which time he wanted letters of commitment from foundations indicating their plans to increase grantmaking to rural areas.

The notion of a political leader pushing foundations to adopt a specific grantmaking focus is relatively unprecedented. It wasn’t just a senator asking for more money for his constituents, a behind-the-scenes negotiation between legislators and funders that probably occurs more often than we might guess. Baucus actually called for general operating support, for foundation investments in the nonprofit infrastructure, and for capacity-building grants—in other words, the kind of thoughtful foundation grantmaking that advocacy groups have long recommended.

When Baucus made this challenge, he was the ranking minority member on the Senate Finance Committee, home to many charitable accountability hearings, so he galvanized foundation attention (Baucus now chairs the committee). A key figure in the audience was former Republican Congressman Steve Gunderson, who now heads the Council on Foundations (and who once represented a largely rural district in Wisconsin).

But by Labor Day, not much had happened in response to Baucus’s speech. COF and the senator’s office put together a conference on rural philanthropy scheduled for August 2007 in Missoula. As with many COF events, nonprofits are not invited to attend this potentially important strategic session other than as panelists. If nonprofits were permitted to participate, they might raise critical issues for foundations to address. Let’s discuss some of them in turn.

Making the systemic underfunding of rural nonprofits a high-profile issue in U.S. philanthropy. Montana’s Big Sky Institute (BSI) has long promoted the concept of a “philanthropic divide”: that is, a gap between the 10 or so states that rank significantly below the rest of the country in terms of in-state foundation assets and per-capita foundation grants received. Montana is always near the bottom of the pile, thus Senator Baucus’s motivation for snapping the Council on Foundations to attention. According to BSI, out of the 50 states and the District of Columbia, Montana ranked 48th in assets and 46th in per-capita foundation grantmaking in 2005; in terms of foundation assets, the philanthropic-divide states are the following, in rank order from the bottom: North Dakota, Alaska, South Dakota, Montana, Vermont, West Virginia, Mississippi, Wyoming, Maine, and New Hampshire, all largely rural in character.[1]

Critics of the BSI numbers have suggested that talking about foundation assets and grantmaking “deficits” is not the best way to pitch rural needs to potential funders. For rural nonprofits, the challenge is to create and pitch funding opportunities, thus presenting a positive context for foundation investments. BSI counters that it isn’t pitching a deficit strategy but is highlighting systemic barriers that have to be overcome for the foundation community to do more than cherry-pick a few rural nonprofits for temporary investment.

Do big-city foundations “get” rural nonprofit needs? Do they understand what’s really going on among rural nonprofits? Within the rural nonprofit community, there are widespread perceptions of neglect that cannot be dismissed as gripes, such as charges of short attention spans among urban foundations, inadequate or nonexistent general operating support grantmaking, the rigamarole of the fundraising process, and so forth. Rather, they represent genuine concerns about urban foundations’ misunderstandings of rural nonprofit operations and rural conditions. Many smaller rural nonprofits would say that the problem stems not from absences of opportunity but from structural barriers that have to be addressed and overcome.

Guiding philanthropy to address critical needs and opportunities in rural America. A recent Christian Science Monitor article about new successes in rural philanthropy led with a woman establishing a donor-advised fund of $500,000 for cemetery upkeep,[2] a large sum of money socked away for a less-than high-priority anti-poverty issue, but it was what the woman wanted. Given the tough economic and social problems for rural communities, it was an odd beginning for a rural philanthropy pitch. Moreover, consider these figures:

  • Although 80 percent of the rural U.S. population is white, rural America increasingly comprises people of color. Half of the U.S. Native American population, 8 percent of the nation’s Latinos, and more than 10 percent of African Americans live in rural America.[3]
  • According to the June 2006 “Poverty in Rural America” report, 14.2 percent of rural America lives below the federal poverty level, compared with 12.5 percent of the U.S. population as a whole.[4]
  • Immigration now accounts for a disproportionate share of rural American population growth, accounting for a 62 percent gain in rural migration versus a 31 percent increase in the overall population in rural areas.[5]
  • 88 percent of persistently poor counties are non-metro; 18 percent of non-metro counties are persistently poor, compared with 4 percent of metro counties.[6]
  • Poor housing conditions continue to plague rural America; in 300 non-metro counties, nearly one-third of households live in substandard conditions, such as housing without complete kitchens or bathrooms.[7]

Add to these generic issues the conditions of specific rural areas, the extraordinarily high poverty and declining job picture of the rural South, the deepening problems of the swath of rural America devastated by Hurricane Katrina, the cross-border dynamics of the Southwest, the depopulation of the rural Midwest, and the sum is a complex panoply of socioeconomic problems that cannot be hidden behind an idyllic view of self-reliant small-town America that doesn’t need a big-time commitment from the foundation sector.

Some members in rural philanthropy get this. The CEO of the National Rural Funders Collaborative (NRFC) has said that the real question is “Philanthropy for what?” To its credit, NRFC is practicing what it preaches. According to the organization’s Web site, “NRFC’s distinctive grantmaking strategy is aimed at supporting those community-based initiatives that are working to alleviate poverty, create wealth, and achieve equity through asset-based economic strategies that build upon cultural diversity and work to overcome historic barriers of race, class and power.”[8]

Getting nonlocal philanthropic grantmaking to rural America. Not one of the 50 largest foundations in the United States is located in one of the “philanthropic divide” states. Not surprisingly, the big foundations’ grantmaking tracks the general response of institutional philanthropy to these rural states. If you pull out the non-grantmaking operating foundations and community foundations from the top 50, the remaining 31 private and corporate foundations gave $69 million in 2004 to nonprofits in the 10 “philanthropic divide” states, $84.3 million to the next five lowest states, and $5.7 billion to the remaining states and the District of Columbia.[9] The largest grantmaker to the divide states was the Robert Wood Johnson Foundation, followed by the Freeman Foundation (most of whose money targeted Vermont), the Ford Foundation, the W.K. Kellogg Foundation, and the Knight Foundation. The only foundation in the top 50 to give to each of the philanthropic-divide states is the Annie E. Casey Foundation.

Which foundations are the typical big funders of rural development nonprofits? It’s not hard to guess: Kellogg is way in the lead, followed by Ford, the big California health conversion foundations, Northwest Area Foundation in its eight-state region, the F.B. Heron Foundation, and some stand-out single-state funders like the Blandin Foundation. But after a dozen grantmakers, there are few rural funders that have taken on community economic development and other social issues.[10]

Shouldn’t the Baucus program be asking not only how much more Kellogg can do—since it already does twice as much rural domestic grantmaking as the next foundation in the list—but also how to get the nonplayers to ante up some real money for rural nonprofits?

Exploring legitimate and dubious public-policy options for rural philanthropy.Not surprisingly, some foundations’ response to the Baucus challenge was to shift the attention from what philanthropy does for rural communities to what the public sector contributes. Soon after a working group of foundation leaders met in November to plot a response to Baucus, the Council began looking for foundation leaders with public-policy ideas about rural development that foundations could push; the notion was that if foundations added their weight to rural policy issues, it would turn the tide, as though the Missoula program would focus not on foundation giving but on the reauthorization of the farm bill.[11]

Reportedly, there is now discussion of policy options for government to help promote rural philanthropy. This seems to be more along the lines of COF’s current national policy initiatives under the guise of the “2007 Agenda for Philanthropic Partnership,”[12] a package of legislative proposals for enhanced incentives for giving to donor-advised funds and foundations. In October 2006, Gunderson actually floated the notion of giving the Department of Commerce some responsibility for promoting philanthropic giving.[13] and the rumor mill has a similar proposal under discussion regarding rural endowment building, in which the Department of Agriculture would receive funding to promote rural endowment building (perhaps through transfer-of-wealth studies for rural communities à la models generated by the Nebraska Community Foundation[14] and other community foundations raising endowments for “affiliated funds”) through the Extension Service.

There is a history of cooperative programming between foundations such as Northwest Area Foundation and Kellogg and Extension Service offices. But the Extension Service’s previous efforts to establish rural community foundations were organic outgrowths of community-based visioning and planning exercises, not a one-size-fits-all philanthropic product promoted and disseminated by national think tanks.

Many local community foundations are doing a more-than-adequate job of exploring strategies for local endowment building, tapping into the lurking intergenerational transfer of wealth. If that is one viable option for rural America, though hardly a panacea, why shift that function to the feds? Maybe even more important, why have government create bodies of private philanthropic capital that, regardless of the good they do and the hype of their promoters, are insulated from legal and effective d democratic control?

Isn’t this an odd dynamic? Foundations will do nearly anything to avoid public-sector scrutiny of their operations, yet they are pitching proposals to give government the task of promoting new philanthropic institutions. This is one instance where nonprofits might inject a healthy dose of reality into the discussion of public policy—and certainly one that doesn’t use public policy as a means of deflecting attention from the subject at hand, what foundations are and should be doing to help rural America.

Examining the political economics of rural philanthropic “prescriptions.” Community foundations and other kinds of locally based philanthropic endowments are great. Who would say otherwise? There are some rural philanthropy advocates who have settled on local endowment building for community foundations and their “affiliate funds” as the end-all, be-all response to rural philanthropic needs. Perhaps unintentionally, some purveyors of rural endowment building have become so enamored with their concept that they end up promoting “rural bootstrapping,” telling rural areas to rely on their own resources rather than ask for a transfer of capital from areas with disproportionately greater resources. Only in the United States would a message to poor communities to rely on bootstrapping be accepted without a whiff of protest. And what’s wrong with bootstrapping, anyway? Well, let’s consider the following:

  • The comparatively wealthier rural counties will of course have an easier time generating new philanthropic endowments compared with persistently poor counties, as demonstrated by survey responses from community foundations serving very poor and less poor rural counties.[15] The community foundations engaged in endowment building for new affiliated funds are doing fabulous work, but for poor communities, self-reliance on minimal latent philanthropic wealth is not sufficient to meet their needs.
  • There’s no guarantee that these new endowments will actually address issues of rural need. As Stanford’s Rob Reich shows, the tax code rewards donors for charitable and philanthropic donations regardless of the social-justice elements involved.[16] A bunch of donor-advised funds don’t necessarily mean that rich people are turning over their capital to the advancement of poor people—unless you’re willfully self-delusional about who benefits from U.S. philanthropy.
  • Who says that endowments are necessarily the way to go in all circumstances? The lockstep endowment-building strategy may work for the woman who devotes her money to cemetery maintenance, possibly in communities where there aren’t as many in need of immediate assistance, but it’s probably not suited to addressing the immediate needs of the poor and dispossessed in rural communities.
  • Finally, you have to do some easy ballpark math to realize how large an endowment you need to generate even a small amount of grantmaking. If an impoverished rural county were to generate a foundation endowment of three-quarters of a million dollars, assuming an all-grants payout of 5 percent, that yields a total of $37,500 in grant dollars. That’s not taking into consideration the fundraising, management, investment, and legal costs associated with the endowment. That $750,000 endowment takes time to build, costs money to raise, and might even come in donor-advised and donor-restricted pieces that don’t necessarily add up to flexible money for rural development organizations.

As these observations show, local endowment building is perfectly fine, but social justice for rural America requires much greater access to resources that lie outside rural communities.

Learning from Montana and other stand-out nonprofits across the nation. There are opportunities for the Missoula conference to be tough, smart and more than a trivialized showcase of nonprofiteers offering philanthropic bromides. Montana has produced some of the more thoughtful leaders in rural nonprofit and philanthropic issues whose voices and vision shouldn’t succumb to what could devolve into a philanthropic light touch on a serious issue.

Montana has a phenomenally active state nonprofit association, regularly generating large turnouts at its annual conferences and maintaining an active role in state policies affecting not only the nonprofit sector but also small towns and rural America at large. The state’s nonprofit sector is also quite active, drawing leadership from the Montana Nonprofit Association, the Montana Community Foundation, and others—regardless of the governing party—on building philanthropy. There is no question that this nonprofit infrastructure captured Senator Baucus’s ear and prompted his unusual challenge to the Council on Foundations. The state has also spawned courageous and innovative nonprofits, including Montana Shares, a social-justice network engaged in workplace (payroll deduction) fundraising, and the Montana Human Rights Network, whose 1,400 members include racism, anti-Semitism, anti-Indian, and anti-environmentalism among the issues they combat. The organization won a Ford Foundation “Leadership for a Changing World” award in 2003.

These causes can’t be addressed by nickel-and-dime grants and the hope of tapping into a locally generated donor-advised fund sometime in the future. Maybe the most persuasive Montana example to which Senator Baucus should refer is Cobell v. Kempthorne,, more widely known as Cobell v. Norton, a class-action suit that was first brought against the government during the Clinton administration on behalf of 280,000 Native Americans alleging—correctly, according to the courts—that the federal government had failed to maintain records of the compensation that Indians were entitled to under the 1887 Dawes Act.[17]

A courageous nonprofit leader like Eloise Cobell doesn’t persist through two administrations defying repeated federal court contempt orders on the cheap. Philanthropy has to own up to the cost of supporting poverty-fighting efforts in rural America and supporting social-justice causes like Cobell’s or that raised in Pigford v. Johanns (originally Pigford v. Glickman), a suit alleging that the U.S. Department of Agriculture had consistently discriminated against black farmers in their requests for USDA subsidies.[18] Let’s not reduce rural nonprofits and rural philanthropy to some idealized vision of Lewis Mumford’s small-town America. Cobell,Pigford, and so many other initiatives demonstrate why rural philanthropy shouldn’t be relegated to bootstrapping local mini-endowments and requires local resources and national foundation support:

  • It was a Ford Foundation grant to the Environmental Working Group that paid for a report detailing how the USDA “deliberately undermined” the Pigford settlement, spending nearly 56,000 staff hours to turn away 81,000 of 94,000 eligible black farmers who sought restitution.[19] You won’t find many other foundations, with the Kellogg Foundation being the major exception, that even have a reference to black farmers on their Web sites. The Federation of Southern Cooperatives Land Assistance Fund (FSC/LAF) has played a key leadership role—sparked by the indefatigable Shirley Sherrod—in helping black farmers redress subsidy inequities.[20] According to Foundation Center data, between 2002 and 2005, FSC/LAF received $325,000 from the Marguerite Casey Foundation, $757,000 from the Ford Foundation, $160,000 from the small Jessie Smith Noyes Foundation, $200,000 from the Nationwide Foundation, $85,000 from the John Merck Fund, and more than $2.2 million from the W.K. Kellogg Foundation.
  • The Ford Foundation has long been the lead funder behind the Rural Community College Initiative (RCCI).[21] As is the case in urban areas, some people in rural communities have rediscovered the important role of community colleges in providing critical education and training services tailored to the needs of the local economy. For several years, Ford provided demonstration grants to 24 community and tribal colleges and, in 2002, began funneling grants to the Southern Rural Development Center at Mississippi State University and the North Central Regional Center for Rural Development at Iowa State University to provide continuing support to RCCI-participating institutions.[22] According to Foundation Center data, between 2002 and 2004, Ford gave $830,000 to Mississippi State and $800,000 to Iowa State, plus $200,000 to a North Carolina-based nonprofit consulting firm, MDC, to help institutionalize the effort and $220,000 to the American Association of Community Colleges to assess RCCI.

It takes more than good intentions to tackle issues of economic development, grassroots mobilization, and social justice—just because the venues are rural doesn’t mean that funders should tell rural groups to rely on volunteers and pull themselves up by their bootstraps. The August conference in Missoula shouldn’t just be about rural philanthropy. It should be about rural philanthropy for what. And that would make for an important conversation about the political and economic functions of philanthropy in the cause of social justice in the United States.


  1. Philanthropic Divide Concept Paper [PDF]
  2. Richard Mertens, “In Rural America, Community Philanthropy Thrives ,” the Christian Science Monitor, May 24, 2007.
  3. Stand Up for Rural America, Community Developer: Making Rural America Work.
  4. The Housing Assistance Council, Poverty in Rural America, June 2006 [PDF].
  5. Kenneth Johnson, Demographic Trends in Rural and Small Town America, Carsey Institute, 2006 [PDF].
  6. Rural Poverty Research Center February 23, 2007 ().
  7. Rural America at a Glance, 2005 [PDF].
  8. National Funders Rural Collaborative “Growing Wealth/Civic Participation” Web page.
  9. This data was gathered by the author using the Foundation Center’s online database.
  10. Rick Cohen with John Barkhamer, Beyond City Limits: The Philanthropic Needs of Rural America National Committee for Responsive Philanthropy, May 2004 [PDF].
  11. See Center for Rural Affairs for a summary of the farm bill reauthorization provisions.
  12. See Council on Foundations
  13. Steve Gunderson, “A Delicate Balance: The Growth of Philanthropy and Its Regulation,” A Speech to the National Association of State Charity Officials, October 16, 2006
  14. Jerry Guenther, “Community Foundation Blazes Trail for Other States to Follow.” the Norfolk DailyNews, November 11, 2005 [PDF].
  15. “2001 Rural Development Philanthropy Baseline Survey,” updated June 18, 2002 [PDF].
  16. Rob Reich, “A Failure of Philanthropy: American Charity Shortchanges the Poor, and Public Policy Is Partly to Blame,” Stanford Social InnovationReview, Winter 2005.
  17. For more information on Cobell v. Kempthorne, see Indian Trust.
  18. Multiple controversies have ensued in the wake of the Pigford case, including problems with how the consent decree treated potential claimants and issues within one of the organizations claiming to advocate for black farmers. Information about the case and the consent order is available at the Office of the Monitor and Federation of southern Cooperatives Land Assistance Fund.
  19. Hearing Before the Subcommittee on the Constitution of the Community on the Judiciary, U.S. House of Representatives, November 18, 2004 [PDF].
  20. At a 2004 forum of the National Neighborhood Coalition, Sherrod described her work [Doc].
  21. The Rural Community College Initiative
  22. The Rural Community College Initiative