What the Council on Foundations Should Have Said to Its Members

Dear Colleagues:

National and global economic turmoil make these extraordinarily difficult times for people in need in the communities served by U.S. foundations. Foundations have to think and act differently at this pivotal moment. As the leadership organization representing the foundation sector, the Council on Foundations encourages its members to step up in these circumstances. We need to be expansive, generous, and bold, not fearful and self-protective. We recommend the following:

  1. Increase grantmaking: As some courageous foundations demonstrated in the wake of the post 9/11 recession, downturns in the economy are the time for foundations to increase their grantmaking, not cut back. While foundation funding is only a small part of overall nonprofit revenues, it is a crucial and distinctive component, enabling nonprofit recipients to undertake programs and actions that the turmoil in the economy demand. As so often stated, our funding is the risk capital for social change. This is the time when we have to live up to that credo and put our money on the table to help nonprofits address the recession or depression in all of its forms.
  2. Increase the flexibity of grants: There are many arguments pro and con on flexible core support grantmaking versus program — or project-specific grantmaking. At this moment, however, many organizations do not have the luxury of taking or completing program-specific grants while experiencing losses in individual donations and government grants. We strongly suggest that foundations make many more core operating grants and, further, make every effort to convert program-specific grants to flexible, core operating grants to help grantees survive these economically perilous times.
  3. Increase program-related and mission-related investments: At the crux of the economic downturn were problems in the financial sector, reflected in widespread mortgage foreclosures and related bank failures. Commercial banks have closed down much of their lending and a retrenching Wall Street is tight on investment capital. As mission-driven institutions, foundations should be devoting increasing proportions of their investment capital to mission-related projects and programs sponsored and implemented by our nonprofit partners.
  4. Increase support for advocacy: The pace of change in these times has been unlike anything our society has seen in many years. Government initiatives to rectify problems in the economy such as the bailout legislation are devised and altered by the day. There is an enormous window for advocacy on social spending and tax policy among many other things. . Foundation support for nonprofit public policy advocacy and organizing is essential if nonprofits are to be able to carry out this function.
  5. Increase our commitment to the nonprofit sector: There is hardly a nonprofit in the nation that is not preparing for cutbacks, laying off staff, reducing program services, contemplating deficit budgets, and thinking about creative ways of surviving what could be a prolonged economic slump. This is a time for the foundation sector to remember that we have to invest in strengthening rather than abandoning the nonprofit sector. It is not “myopic,” as one national foundation leader insinuated, for philanthropy to recommit to a primary focus on the nonprofit sector. Rather, at this moment, it is nothing short of essential to the fabric of American democracy.

We know you are all concerned about raising unrealistic expectations given that foundations across the board are being hit with declining endowments and increasing needs from your nonprofit partners. We encourage you to explain to your nonprofit partners what the economy is doing to foundation assets, but also to meet with and listen to your partners on what the financial meltdown is doing to the core nonprofit infrastructure that undergirds not only social programs, but our democratic local and national polity. We are confident that together foundations and nonprofits will be able to craft appropriate solutions that don’t just help all of us get through this economic crisis, but also take advantage of the moment of instability to reassert democratic values into public dialogue. But this must start with our sector’s willingness to own up to and deliver on the value of our grantmaking and investment assets.

At Nonprofit Quarterly, we truly look forward to seeing this open letter replace the disappointing version (see below) that was officially released by the Council on October 10th. There is time for the Council on Foundations—in fact, time for philanthropy writ large—to really step up and deliver for the nonprofit sector and for American democracy.

“An open letter to council members and other leaders of our field”

October 9, 2008
Dear Colleagues,
At the conclusion of the Council’s 57th annual meeting in Pittsburgh, we committed that we would work to ensure that philanthropy will step up and take on “the challenges of our time.” That commitment served as the theme and frame for the 2007 Annual Conference in Seattle, as a point of departure for the 2008 Summit at National Harbor and the upcoming 2009 conference scheduled next May in Atlanta.

Little did any of us know or expect that “the challenges of our time” would include an economic situation of the scope and magnitude now facing our nation and the world. Even so, there is no avoiding the question: what could it mean for philanthropy to step up in these circumstances? How can we play a constructive role without raising unrealistic expectations?

This is a conversation that has started already and will continue for sometime. We look forward to listening carefully, participating when and how we can and providing whatever technical assistance and support would seem appropriate. For starters, we have three broad recommendations:

  1. Let’s reach-out to the nonprofit sector in general, especially those organizations, leaders, and networks we currently support. Our non-profit partners will bear the brunt of shrinking resources and growing need. Within parameters defined by our respective missions, resources and work, we should actively look for creative ways to assist the sector in weathering this storm and serving those most impacted.
  2. Let’s play an active and visible role in helping communities and regions figure out the scope and extent of the challenges they face, and in finding and crafting solutions that make sense. We know that some regional associations and community foundations already are using the convening role of philanthropy to build the “big tent” under which diverse stakeholders can gather to create shared understanding and to search for common sense solutions. The exciting work of the Dade Community Foundation, the Arizona Grantmakers’ Forum and the Clinton Center for Community Philanthropy represent just the tip of the iceberg of what our colleagues and peers are doing already. We’ll share these examples in the toolkit.
  3. Let’s pay special attention to those situations where the loss of philanthropic resources could be the unintended consequence of mergers and consolidations that are the inevitable products of economic restructuring. In the D.C. area, there is considerable concern that the takeover of Fannie Mae and Freddie Mac could result in an annual reduction of up to $47 million in philanthropic support for programs around child welfare, hunger and homelessness. We know that this was not what was intended and we are hopeful that federal officials will work with local philanthropy and the nonprofit community to rectify the situation.

Having offered up these three recommendations, the Council will move expeditiously to provide some backup on each. First, we will work with partner organizations to compile a list of promising ideas and practices employed throughout the field. Second, we will work with the Forum of Regional Associations, the affinity group Philanthropy for Civic Engagement (PACE), and others to assemble a toolkit designed to assist with the stakeholder convenings we will have recommended. Third, we will produce talking points designed to make the case for preserving philanthropic commitments during takeovers and consolidations. We have more to say on each of these within the next ten days. Please stay tuned.

Finally, we know that, even if fully implemented, these three recommendations do not constitute a sufficient response. We expect to hear and learn more and have more to say in the weeks and months to come. What we also know is that these recommendations offer us the opportunity to continue to serve the common good in these uncommon times. From our point of view, this is an important way to step up and take on one of biggest challenges of our time.

We look forward to hearing from you. Thanks for all you do.

Ralph Smith                Steve Gunderson
Chair of the Board            President & CEO