Shortchanging Rural Community Development

The more things change, the more they stay the same in philanthropy, it seems. A few years ago, foundations were hot to trot in response to Montana Senator Max Baucus’s call for the foundation community to double its measly grantmaking to rural America in a five year period. So what happened when the incoming chair of the Senate Finance Committee conveyed his concerns about the philanthropic pittance reaching rural states and communities?

Rural communities are getting no more money from foundations today than they were at the time Senator Baucus made his plea at the Council on Foundations annual conference in 2009.

As one Nonprofit Quarterly wit put it, foundations responded with “the appearance of intense activity.” There have been two rural conferences, one in Missoula, Montana in 2007, to make a show in the Senator’s backyard, the next in 2009 in Little Rock, Arkansas, perhaps based on the assumption that then presidential candidate Hillary Clinton was all but a shoe-in to become the 44th president.

In addition to the conferences saluting foundations’ best practices, the Council on Foundations issued a glossy publication on rural philanthropy, selling for $35 a pop, offering different short takes on how best to promote rural grantmaking. There was a big emphasis in the conferences and in the book on rural philanthropic bootstrapping—rural communities looking for the latent local assets that in the intergenerational transfer of wealth might yield a little bit for new donor-advised funds in community foundations.

We hope no one is particularly shocked to discover that rural communities are getting no more money from foundations today than they were at the time Senator Baucus made his plea at the Council on Foundations annual conference in 2009.

A good barometer of the foundation sector’s response to the Baucus challenge is their grantmaking to the better networked, higher profile nonprofits engaged in community economic development, the rural CDCs that work with national intermediaries such as the Local Initiatives Support Corporation (LISC) and the NeighborWorks Network. These tend to be the stars in the community economic development field. Past surveys have revealed foundations reluctant to make or increase grants in rural America because of a belief that rural nonprofits are capacity-deficient. The nonprofits linked to LISC and NeighborWorks include some of the most capable, professional, productive CDCs in the nation, rural or urban, and would likely be among the top beneficiaries if foundations were responding positively to the Baucus challenge.

It would be nice to ascribe foundations’ grantmaking to the rural CDCs from 2005 through 2008 to a Baucus bump, but the opposite is true.

Stellar is no understatement in describing these organizations. Among the LISC rural partner organizations are the Mountain Association for Community Economic Development (MACED) in Berea, Kentucky, Mississippi Action for Community Education in Greenville, Mississippi, Self-Help Enterprises in Visalia, California, Coastal Enterprises based in Wiscasset, Maine, and Chicanos por la Causa based in Phoenix, Arizona. Among the NeighborWorks rural groups are the Champlain Housing Trust in Burlington, Vermont, the Colorado Rural Housing Development Corporation in Westminster, Colorado, Tierra del Sol Housing Corporation based in Las Cruces, New Mexico, and the Federation of Appalachian Housing Enterprises in Berea, Kentucky. On both lists are top flight rural CDCs including South County Housing Corporation in Gilroy, California, Quitman County Development Organization in Marks, Mississippi, Centro Campesino Farmworkers Center in Florida City, Florida, and the Umpqua Community Development Corporation in Roseburg, Oregon.

For both the LISC-affiliated and NW-affiliated rural CDCs, foundation grant dollars increased appreciably between 2003 and 2005, from $3.0 million to $5.7 million for the LISC group, from $2.9 million to $3.8 million for the NeighborWorks CDCs. It would have been nice to ascribe that increase to the Senator, but he made his pitch to the Council on Foundations in 2006. Foundations’ grantmaking to the rural CDCs from 2005 through 2008, a period in which two of the years would have been expected to show a Baucus bump, reveals the opposite, as demonstrated in the table below:

Year	LISC Rural Partners	% change from previous year	NeighborWorks Rural Initiative members	% change from previous year	All foundation grantmaking % change from previous year
2005	$5.7m		$3.8m
2006	$5.0m	-12%	$3.3m	-13%	7%
2007	$5.1m	2%	$3.6m	9%	10% Sign up for our free newsletters Subscribe to NPQ's newsletters to have our top stories delivered directly to your inbox. By signing up, you agree to our privacy policy and terms of use, and to receive messages from NPQ and our partners.
2008	$4.9m	-4%	$3.5m	-3%	3%

 

Grantmaking to the LISC rural CDCs dropped 12 percent and to the NeighborWorks Rural Initiative groups 13 percent between 2005 and 2006 when all foundation grantmaking in the U.S. grew seven percent. For the LISC groups, foundation grantmaking grew only two percent between 2006 and 2007 when all foundation grantmaking grew 10 percent. Between 2007 and 2008, grantmaking to the LISC CDCs dropped four percent and to the NeighborWorks groups three percent while all foundation grantmaking role, albeit modestly by only three percent.

Although the average grant size for the NeighborWorks groups was $74,000, the median grant size was $12,000 and the mode (the most common) grant size was only $10,000. For the LISC partner organizations, the mean grant was lower at $59,000, but the median was $20,000. Be assured, it probably takes just about the same amount of work to apply for and report on these small grants than the very few large ones.

The statistics portray a situation that is actually better than the conditions on the ground. Among the Rural LISC and Rural NeighborWorks groups, there were a dozen or so among each showing no foundation grants whatsoever.

The philanthropic picture for these rural CDCs is further undermined by their dependence on banks.

Moreover, the Foundation Center does not include grants from the Fannie Mae Foundation. Had Fannie grantmaking been included, the totals would have shown much more precipitous declines in 2007 and 2008 than the table indicates. Fannie was among the nation’s top foundation grantmakers in housing and shelter and in community improvement and development from 2003 to 2006. By 2007, the Fannie Mae Foundation was no longer in existence, having been a casualty of Fannie’s early financial, accounting, and managerial implosion. Whatever Fannie might have given these groups by 2006 was in all likelihood truncated or gone thereafter.

The philanthropic picture for these rural CDCs is further undermined by their dependence on banks. For grants from 2003 through 2009, though the 2009 numbers are incomplete, 20 percent came from banks and financial institutions. The Bank of America Foundation was the fifth largest funder, the combination of Wells Fargo and Wachovia (having merged after the onset of the Great Recession) add up to sixth place, and the foundation arm of the recently penny-stock valued Citicorp was twelfth. Given that there is a major regulatory overhaul coming for the unapologetic banking sector, having been sustained and guided into mammoth profitability due to taxpayer-funded bailout subsidies, CDCs cannot count on the same levels of bank philanthropy for the indefinite future.

By not moving on grants to these stellar groups, foundations have not only flunked the Baucus challenge, they’ve shown philanthropic stasis—a condition of philanthropic entropy that undermines the progress and potential of rural community economic development.

Part of this story is the changing composition of rural funders.

What explains this sorry state of affairs? Partially, it is the foundation sector lip service to rural philanthropy, particularly as foundations waft rhapsodic over partnerships with the Obama Administration around programs such as the Social Innovation Fund and Promise Neighborhoods that are all but prescribed for large urban nonprofits.

But part of the story is the changing composition of rural funders. The W.K. Kellogg Foundation has long been the largest grantmaker to rural community development, the Ford Foundation second, but among the funders to the NeighborWorks groups, first place is neither of these philanthropic behemoths, but the F.B. Heron Foundation. The historically big rural funders, according to some rural CDCs, are sharply cutting back rather than doubling their grant outflows. Increasingly, they are more dependent on smaller, local foundations. None of them complain about those relationships, just that the big dollars to make things happen aren’t to be found in tiny family foundations and small community foundation grant dollars.

The stock market implosion that began in the fourth quarter of 2008 has sliced perhaps a quarter or maybe one-third of many foundations’ endowments. Asking them to ante up for rural community economic development will get the “constrained-by-the-recession” answer.

But nonprofits cannot escape some responsibility.

Recession or no recession, the default foundation lip service answer to Senator Baucus should have been expected. It wouldn’t have worked, or at least worked so easily, if two things had happened:

If Senator Baucus had kept up the heat on the foundations, used his bully pulpit to demand more than dog-and-pony conference shows, or called on foundations to report on specific plans toward doubling their rural grantmaking and then held them to account, the pressure would have been on foundations to respond to the challenge. No offense to the chair of the Senate Finance Committee, but the senator did not do what he could have to monitor, publicize, and, as needed, expose how foundations were failing in response to his challenge.

And nonprofits cannot escape some responsibility as well. If they had made the Baucus challenge into a campaign, or put pressure on the national funders along with Baucus to press for increased rural grantmaking—to counter the misinformation and misjudgments that foundations use to explain away their failure to support rural nonprofits—we may have seen some progress.

But neither the Senator (and his Senate Finance Committee colleagues) nor the rural nonprofit sector kept the pressure on the foundations. The pathetic philanthropic response—measured in real dollars—to the Baucus challenge is an important lesson for the nonprofit sector. The foundation sector (through its trade association) is quite adept at promotion and public relations adopting whatever language is needed at the moment—social justice, racial equity, rural philanthropy. But that’s language, not substance. If nonprofits want to see real change, with foundations putting dollars behind the carefully crafted messaging, nonprofits have to mobilize and advocate with the foundation community.

Like any sector, foundations do whatever they can to avoid change. When they do change, it’s because there is effective external pressure—from Congress and from the nonprofit sector.