Rural Development Grantmaking–Problems and Prospects

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Despite lip service, rural America is the forgotten landscape of the U.S. political arena and certainly in American philanthropy.  Foundation grantmaking and federal government support to rural communities should be a continuing, serious priority in this nation and within the nonprofit sector.

But unfortunately, for the moment, it appears that rural philanthropic grantmaking is tanking, not just because of the economy, but because of its low ranking in the priority lists of foundation grantmakers and some public decision-makers.  This is contrary to what common sense should tell us:  investing foundation dollars in rural communities is a sensible, constructive part of a philanthropic agenda for social progress, social justice, and economic recovery.

In this brief commentary, we touch on the following issues:

1.  What happened in response to Senator Max Baucus’s challenge to foundations to double foundation grantmaking in 5 years?  What did the foundation sector actually do?

2.  Despite the problematic data on reported foundation grantmaking priorities, what do the trends in domestic U.S. rural development grantmaking look like?

3.  How are rural development organizations experiencing and responding to the continuing diminution of foundation grant support to rural areas?

4.  In what ways does foundation grantmaking relate to federal government policy and budget decisions?

5.  What might be some public policy priorities that rural nonprofits and foundations might think about with clear and specific implications and parallels for the content of foundation grantmaking?The takeaway: big new foundation money for rural development is missing

A brief history lesson:  It was an unusual speech at an annual meeting of the Council on Foundations.  Montana’s Democratic senior senator, Max Baucus, gave a plenary talk, partially about pending legislation on Capitol Hill.  He then followed it up with a detailed talk about the challenges facing rural America and called on foundations to double their grantmaking in 5 years and report on their plans for doubling in only a few months.

In the wake of Senator Baucus’s challenge to the Council, there was what one wag called “the appearance of intense action”.  Foundation leaders pronounced rural philanthropy a top concern of the sector, as it was certainly a top concern of the incoming chair of the Senate Finance Committee.  This sparked a conference on rural philanthropy in Montana, a book on the good things that foundations are doing for rural America, a bootstrapping pitch that rural areas looking to capture philanthropic giving should focus on indigenous wealth for rural endowments, and plans for a new conference on rural philanthropy this year, to be held in Little Rock.

But major efforts for promoting more foundation grantmaking to rural?  What happened in the ensuring years has not ben promising.

A search for rural development grants on the Foundation Center’s Foundation Directory Online, which contains information on 1,637,227 ”recent” grants from 98,170 foundation and corporate grantmakers, with only explicitly non-U.S. grant recipients deleted, indicates the following meager pattern of growth in foundation grantmaking in this field:

Domestic Rural Development Grantmaking by U.S. Foundations

  • 2005:  $95,677,130
  • 2006:  $99,699,160
  • 2007:  $110,220,576

Between 2005 and 2006, these rural development grants increased 4.2 percent compared with a 7.14 percent increase in all foundation grants.  Between 2006 and 2007, rural development grants grew 10.5 percent compared to 10 percent for all grants.  One might surmise that these totals for domestic rural development are exceptionally generous, as they include grants to universities which could easily be focused on international rather than domestic issues.  Nonetheless, taken on face value, rural development grantmaking has lagged behind overall foundation grantmaking during this time period:  15.2 percent compared to 17.9 percent, and certainly hardly on a path toward doubling in the five years since Senator Baucus’s unique philanthropic challenge.

These numbers of relatively slow growth in rural development precede the current economic recession, which has seen widespread cutbacks in foundations’ 2009 grantmaking compared to 2007 and 2008 levels (see Rick Cohen, “Philanthropy During the Downturn”, The Economic Crisis and Community Development Finance: An Industry Assessment, May 2009, also “Foundation Grantmaking during Economic Collapse: Pollyanna or Cassandra at the Helm,” Cohen Report, March 19, 2009).

Foundation grantmaking to Rural LISC partners

The recession does not make this time propitious for significant increases in foundation support.  But a more indicative view of the challenge might be seen in the grant support provided by foundations between 2005 and 2007 to a sample of 36 partner organizations of Rural LISC (Local Initiatives Support Corporation), all among the top rural community economic development organizations in the nation (Southern Mutual Housing Association was excluded from the list, because of the special grantmaking it benefited from that was specifically related to SMHA’s stellar Katrina relief and recovery efforts).

Of the 36 Rural LISC partners examined, 11 received no foundation grants between 2005 and 2007, at least as reported on the Foundation Center’s online database.  The remaining 25 took in the following grant totals, including grants from the Fannie Mae Foundation (which appear to be missing in the Foundation Center tabulations):

  • 2005:  $7,102,978
  • 2006:  $5,035,119
  • 2007:  $7,178,379

The 2007 grant total is only slightly more than the amount received two years earlier. If grantmaking to these groups had kept up with the pace of increased overall financial grantmaking, the 2007 number would have reached $8,374,411.

An examination of the largest grantmakers to the Rural LISC partner organizations for this three year period underscores the challenges that nonprofit rural developers are going to face in 2009, 2010, and beyond:

  • W.K. Kellogg Foundation:  $3,114,866
  • F.B. Heron Foundation:  $2,605,000
  • Annie E. Casey Foundation:  $2,505,000
  • Marguerite Casey Foundation:  $1,367,500
  • Ford Foundation:  $1,125,000
  • Mary Reynolds Babcock Foundation:  $1,110,000
  • S.H. Cowell Foundation:  $1,000,000
  • Bank of America Foundation:  $983,250
  • Meyer Memorial Trust:  $350,000
  • Wells Fargo:  $324,000
  • Nina Mason Pulliam Charitable Trust:  $300,000
  • Ventura County Community Foundation:  $296,262
  • Sandy River Charitable Foundation:  $285,000
  • Citi Foundation: $275,000
  • Fannie Mae Foundation:  $260,000
  • William Randolph Hearst Foundation:  $200,000
  • Surdna Foundation:  $154,000
  • Richard King Mellon Foundation:  $150,000
  • Blue Moon Fund:  $140,000
  • Foundation for the Mid-South:  $110,000

The commitment of some of these foundations is noteworthy, particularly the creative mix of general operating support, program related investments, and loans from the F.B. Heron Foundation.  For example, one of the $500,000 expenditures to Coastal Enterprises (in Maine) was in the form of a PRI, a $500,000 disbursement to Self-Help Enterprises was a loan.  In addition, Heron makes both general operating and multi-year commitments, a rarity among foundation grantmakers, particularly during this recession.

The W.K. Kellogg has historically been the largest rural development grantmaker, but all but one of its grants in this list were focused on rural CDCs in Mississippi.  Now, with its recent program focus on vulnerable youth issues in three states–Mississippi, New Mexico, and Michigan–that sort of geographic concentration might be deepened, and the successful grant recipients might have to be pitching programs addressing the needs of children aged 0 to 8.  One good example of Kellogg’s continuing commitment to rural development may be the 2009 grant of $2.35 million to Northern Initiatives.  But rural groups outside of the three state area might find access to Kellogg grant dollars difficult.

The Ford Foundation has historically been the second ranking funder of rural community development, as we wrote in the May 2004 report, Beyond City Limits, and together Ford and Kellogg accounted for 40 percent of the grantmaking to rural community economic development when we last examined these numbers.  Ford is in the midst of completely changing its grantmaking programs under the rubric described by its new CEO, Luis Ubinas, as “A New Generation of Social Change.”  The asset-building and community development program which contained Ford’s rural community development grants has been eliminated.  It is entirely possible that rural community developers might be able to secure Ford Foundation grant support through one of the new emerging program areas, “economic fairness and opportunity,” among whose focus areas is “economic opportunities for the rural poor,” though informal feedback suggests that Ford’s geographic focus for these rural grants might be limited to parts of Appalachia and the U.S./Mexican border area, the latter aimed at the challenge of “colonias”.  Unfortunately, the description doesn’t sound particularly geared to rural community developers per se, and the description of the “community development and land use innovation” focus area is heavily geared to subprime-devastated neighborhoods.

The remainder of the list of major funders is also troubling.  The Fannie Mae Foundation no longer exists as a result of the excessive subprime financial exuberance of the corporation’s leaders.  Fannie Mae’s published tabulations of its 2008 and first quarter 2009 grantmaking show nothing reaching the Rural LISC partner organizations in this analysis.  The Washington Post recently reported that the combined charitable grantmaking of Fannie Mae and its sister GSE, Freddie Mac, will be down 40 percent in 2008 compared to 2006.  Their persistent and mounting financial losses suggest that, despite Fannie’s characteristic corporate bravado, future grantmaking might not be very robust.  Remember that for quite a long period, the Fannie Mae Foundation was routinely the number 1 or number 2 foundation grantmaker in the field of housing-not just among corporate givers, but among all foundations, corporate, family, and independent foundations.  Fannie’s disappearance as a significant grantmakers in housing and community development hurts rural and urban.

No one would be surprised by the presence of bank grantmakers in any list of supporters of community development corporations.  Not untypically, the Bank of America tops the list among bank grantmakers for the Rural LISC partners, and all indications are that BofA intends to maintain its charitable support of nonprofit community developers.   But relying on Citi’s continuing grantmaking is questionable, as it was recently trading on the New York Stock Exchange like a penny stock.  The major bank funders of LISC partners have all suffered major losses in market value and are all major recipients of Troubled Assets Relief Program (TARP) and other taxpayer-funded Treasury Department support, not counting additional federal guarantees of assets against losses: BofA $52.5 billion, Citi $50 billion, JP Morgan Chase $25 billion, Wells Fargo $25 billion, U.S. Bancorp $6.6 billion.  No one has yet really explored exactly how the U.S. public and perhaps Congressional lawmakers are going to interpret charitable giving from banks receiving billions in taxpayer subsidies.

Entrepreneurial adaptation by rural development groups

Rural nonprofits have had to be exceptionally entrepreneurial in order to survive these difficult foundation fundraising times.

A good example of programmatic dexterity is the Colorado Rural Housing Development Corporation.  Foundations that CRHDC had been able to lure to supporting their rural programs such as financial literacy training have now, with the recession, gone back to urban programming and may be lost for 2010.  In pitches to national funders focused on the subprime foreclosure issue, they have encountered the national perspective that foreclosures are not a rural problem due to the lack of “numbers” and density, not seeing or understanding how 10 foreclosed homes in a small town can be as devastating as higher numbers in large urban center.  To get foundation funding, the organization has had to wrap its rural mortgage counseling programs into a larger urban foreclosure counseling and intervention program.  According to the organization’s deputy director, “if we didn’t have the urban areas, we would be hard-pressed to support rural; they don’t have as many people, they don’t have as big a voice.”

But there is little confidence that in this economy, the organization will have much success in philanthropy.  According to the CRHDC deputy director once more, “The foundations, they have cut back, and when we apply to them, we have to do it their way, we have to tell their story; it’s a little misleading to think that way, but right now, we have to be so tuned into the foundations and what they can or cannot do.  For 2010, that means, expect very little, so we’re trying to gear up for 2010 and retooling our operations.” And that summarizes the problem.

The widespread foundation grantmaking cutbacks exacerbate the challenges of limited foundation support for rural.  The likelihood that foundations will make much progress toward the Baucus rural benchmark.  Nearly every report on foundation grantmaking during this prolonged recessions concludes that foundation grantmaking is declining in 2009 compared to 2008 and will drop again in 2010.

Connecting foundations’ rural grantmaking to MetroNations

The otherwise impressive and progressive FY2010 budget proposal from President Obama contains a pretty heavy urban feel.  The model program touted in both the Department of Education (Promise Neighborhoods) and HUD (Choice Neighborhoods) is based in part on the successful experience of Harlem Children’s Zone, an intensive neighborhood-focused comprehensive services integration and community revitalization strategy.  Budgeted at the relatively minuscule $25 million level, the Rural Innovation Fund is ensconced in HUD rather than Ag.  The models cited by both the White House and the First Lady as exemplary entrepreneurial models for the Social Innovation Fund, whether large nonprofits or somewhat smaller organizations, are pretty urban in their orientation.

Besides the tepid rural content in the FY2010 budget proposals, activists know how difficult it was and how much lobbying it took to push rural development in the economic stimulus bill.  Even with getting some rural development programs into the ARRA, subsequent reports on stimulus implication do not make it appear that rural is a major priority for the administration, such as this report on apparently slow implementation of rural components.

Perhaps implicit in the Administration’s rural stance–and in philanthropy’s perhaps as well–is a theory akin to the “MetroNations” concept originated by former Clinton Administration HUD official, Bruce Katz at the Metropolitan Policy Program at the Brookings Institution in Washington DC.  In a nutshell, the concept that Katz presented to the incoming Obama transition team and to many gatherings of high level foundation decision-makers, is this:  metropolitan areas “contain and aggregate key ‘drivers’ of local and national prosperity,” the 100 largest metro areas account for two-thirds of U.S. jobs and three fourths of the economic output of the U.S. despite containing only 12 percent of the nation’s population,  so an economic stimulus strategy would do well to concentrate federal investment in these “key drivers” of national and local prosperity.  If this is a strong motivation behind the Obama Administration’s budgetary allocations, why should philanthropy be all that different?

The debate is not one of taking away from foundations’ urban grantmaking to fund rural or to continue to starve rural in order to follow a MetroNations public and private investment strategy.  The challenge should be at the nexus of public policy and philanthropic practice to push for policies that get a half trillion in foundation assets more directed not just at rural development, but at the needs of people who are most adversely affected in the economic downturn.

Key for philanthropy–and for nonprofit community developers–is to recognize a major change in federal relations with the philanthropic sector emanating from the Obama White House and the implications of that for rural.  Elements of President Obama’s strategy reflect a policy model that connects philanthropy and public policy in a way that has not been seen for quite some time.  As evident by the Obama Administration’s adoption of the Harlem Children’s Zone and other heavily foundation-funded programs as models for federal policy adoption and replication, President Obama has returned to something like the traditional Ford/Rockefeller/Carnegie approach:  philanthropy supports and tests a model, then government picks it up, adopts, adapts, replicates, funds, and expands it.  Anyone that remembers the War on Poverty remembers how the community action model emerged from the Ford Foundation’s Gray Areas project, as one explicitly community development-oriented reflection of this model.

With the power of the MetroNations concept, philanthropy and government are seeing and funding models that are intensely urban.  Until and unless philanthropy puts big money into compelling rural models that the nation could emulate and expand as readily as the Harlem Children’s Zone, attention to rural development in foundation grantmaking and government programs will lag and be subject to trickle down benefits, whatever reaches rural as a result of the multiplier from urban investments as opposed to a revival and expansion of major direct investment in rural America.

For rural community foundations and rural community development corporations, there are roles to pursue, for example, the philanthropic bootstrapping strategy of seeking and leveraging indigenous resources and wealth in rural areas that can be transformed into charitable assets and philanthropic endowments to be deployed for social change and social justice in rural communities.  But CDCs and their community foundation partners can also organize within philanthropy to promote the resuscitation of the national foundation attention that Senator Max Baucus called for so that the rural advances to economic revitalization and social justice get the investment and replication they clearly warrant.