No Surprises, Rural Philanthropy Still Lags Behind

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The failure of foundations to put much grant money into rural nonprofits is historic and persistent.  Despite frequent promises to the contrary, foundations haven’t done much to narrow the disproportional gap between urban and rural groups’ access to foundation dollars.  The toll is increasingly evident in the rural nonprofits across the country that struggle to stay afloat every day.

In Monroe County, Georgia a community health center serving rural communities is closing.  As the director of the clinic noted, all too typical of rural areas that lose a crucial service, “Unfortunately, there is not another rural health center or clinic in the county. Most will find that they will have to seek out this type of health care outside of their own county.”  The money to stay open simply isn’t there.

In Mississippi, the state is contemplating closing mental health facilities that serve rural areas due to a lack of funding.  A patient who had received help for her bipolar disorder echoed the Monroe County sentiment:  “closing facilities would leave a lot of people with no place to go.”

In Nelson County, Virginia, the tiny Rural Nelson has been struggling to continue its service of providing community education and information about governmental services.  Individual donations have been the key to keeping this civic service alive, but they’re hard to come by.

How are foundations responding to the challenges that rural nonprofits face in dealing with these and other rural issues?


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Foundations have long talked about how much they care about rural America and examples of model rural grants. There are plenty of  heartfelt statements about how much foundations care about rural areas, but something is missing year after year—dollars.  There are real heroes and heroines in U.S. philanthropy for whom rural America is undoubtedly grateful.  They are the champions for the cause within the halls of this overwhelmingly urban sector.  Their challenge remains as immense as ever.

Part of that challenge is the difficulty in assessing foundation’s rural grant making. It is difficult to tell with precision how foundations are doing because the definitions of rural are vague, and the classification of foundation grantmaking no clearer.  A foundation grant that might be classified as “rural” could well be serving urban areas as well.  Nonetheless, there are some indications to suggest that rural philanthropy has hardly shown evidence of making the kinds of major leaps that rural communities need.

In an analysis of grants categorized as “rural development” (domestic, not international) in the Foundation Center’s online database (containing reportedly the grants of more than 100,000 grantmakers with more than 2.2 million grants) for the years 2004 through 2008, rural development has not fared well in foundation grant portfolios.  Between 2004 and 2008, annual foundation grants for rural development declined from $92.7 million in 2004 to $89.5 million in 2008.  That is a 3.45 percent decrease in rural development grantmaking during a time total annual foundation grantmaking increased 43.4 percent. (see graphic #1)

Graphic #1

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If there are still some grantmakers that have not fully reported their 2008 grants, that 3.45 percent decline may be erased, but not to the point where it will be anywhere in the neighborhood of the level of growth of total foundation grantmaking.  Moreover, as noted, it is likely that the grants marked “rural development” are hardly likely to be all rural, making the $89.5 million more than likely a gross overestimation rather than undercount.

The list of the top grantmakers to domestic rural development is not surprising.  Even without counting their extensive portfolios of international grants, the Ford Foundation and the W.K. Kellogg Foundation stand out as the largest rural development grantmakers for that five-year period.  As graphic #2 shows, there are other noteworthy smaller funders in the list.  The Northwest Areas Foundation is a large grantmaker due to some large grants made as part of a now-terminated strategic development strategy that are unlikely to be replicated, at least at their seven- and sometimes eight-figure size, by the current leadership of the foundation.

Graphic #2

FOUNDATION

Rural Dev. Grants 04-08

Ford Foundation

$79,989,178

WK Kellogg Foundation

$69,630,100

Northwest Area Foundation

$35,374,899

McKnight Foundation

$27,860,500

CS Mott Foundation

$13,397,000

FB Heron Foundation

$12,537,000

California Endowment

$11,324,558

Annie E. Casey Foundation

$10,693,588

Libra Foundation

$10,639,215

Bill & Melinda Gates Foundation

$10,595,490

Walton Family Foundation

$10,457,045

John D. & Catherine T. MacArthur Foundation

$7,805,000

Gordon & Betty Moore Foundation

$7,312,375

Marguerite Casey Foundation

$7,176,833

Mary Reynolds Babcock

$6,896,732

Bush Foundation

$6,246,651

Duke Endowment

$5,717,068

Otto Bremer Foundation

$4,705,100

Packard Foundation

$4,240,913

Jessie Smith Noyes Foundation

$3,693,049

William and Flora Hewlett Foundation

$3,631,000

Surdna Foundation

$3,477,500

Z. Smith Reynolds

$3,425,400

Paul G. Allen Foundation

$3,360,000

Several of the others focus on specific geographic regions such as the Mary Reynolds Babcock Foundation (southeastern U.S.), McKnight (largely Minnesota), and the California Endowment (California).  Others have more topical interests, such as the business capital grants of the Libra Foundation and the environmental or conservation grants of the Gordon & Betty Moore Foundation.  Nonetheless, there are smaller foundations with creative and aggressive rural development grantmaking portfolios such the F.B. Heron Foundation headquartered in New York City, the Jessie Smith Noyes Foundation, also in New York City, the Walton Family Foundation from Arkansas, and Marguerite Casey in Seattle.

Graphic #3

 

FOUNDATION

Rural Dev. Grants 04-08

Benedum Foundation

$3,328,200

Annenberg Foundation

$3,250,000

John S. and James L. Knight Foundation

$3,053,000

Lannan

$2,925,250

Meyer Memorial

$2,638,220

Mellon Foundation

$2,575,000

Bank of America Foundation

$2,526,500

Rockefeller Philanthropic  Advisors

$2,523,000

Robert Wood Johnson Foundation

$2,481,678

Richard and Rhoda Goldman Foundation

$2,442,500

John Merck Foundation

$2,171,000

Energy Foundation

$2,155,500

Kresge Foundation

$2,070,000

Meadows Foundation

$1,784,000

Joyce Foundation

$1,750,000

Citi

$1,610,000

Mississippi Common Fund

$1,600,000

Blandin Foundation

$1,593,850

Education Foundation of America

$1,550,000

Seattle Foundation

$1,460,649

NY Community Trust

$1,441,100

Minneapolis Foundation

$1,385,500

Public Welfare Foundation

$1,377,850

Iowa WEST

$1,355,952

 

 

The next 25 largest rural development grantmakers have an even more geographically targeted strategy – Benedum largely in West Virginia, Meyer Memorial in Ohio, Iowa WEST in Iowa, Rasmuson in Alaska – or a strategy limited to specific topical focuses, particularly environmental (Goldman and Wyss, for example).

Graphic #1 doesn’t just portray the gap between rural development grant increases and total foundation grantmaking increases, but the gap between rural development grantmaking and overall foundation grantmaking for housing/shelter and for community development.  Within the housing/shelter and community development categories are a number of very experienced and respected rural community development corporations, some affiliated with the NeighborWorks America network and others with the rural program of the Local Initiatives Support Corporation (Rural LISC).  Tracking grants to these organizations (49 for the rural affiliates of NeighborWorks, minus those that had significant urban programs, and 24 affiliated with Rural LISC) for these years provides an unusual targeted analysis of rural development grants.

Graphic #4

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Graphic #4 shows the annual grantmaking to the NeighborWorks and LISC groups for each of the years in this analysis. In each case the Rural LISC groups are seen doing somewhat better (there is a small overlap between the two lists, and in both, Southern Mutual Help Association in New Iberia, Louisiana was not counted due to its disproportionately large grant totals designated for Hurricane Katrina and Hurricane Wilma relief in 2005 and 2006).

Graphic #5 shows the annual change in grants to the NeighborWorks and LISC groups.

Graphic #5

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Overall in this period, comparing 2004 and 2008, annual grants to the NeighborWorks groups increased 11.25 percent and to the Rural LISC groups 42.78 percent, compared to a 48 percent increase in housing/shelter grantmaking – and of course a 3.45 percent decrease in rural development grants.  The fact that they outperformed rural development and overall community improvement grant totals for that period may be a testament to the importance of the networks from which these rural CDCs benefit because of their affiliations with NeighborWorks and LISC.  Realize however that the 24 Rural LISC groups were those that received foundation grants; an additional 12 are not reflected in these totals because they received no foundation grant dollars.

There are some standout foundation grantmakers supporting the rural NeighborWorks and Rural LISC groups, as demonstrated in Graphic #6:

Graphic #6

Largest Non-Bank Grantmakers to Rural NeighborWorks Groups (grants and PRIs combined)

 

FOUNDATION Grants 2004-2008
FB Heron $2,980,000
Meyer Memorial $1,235,000
Cowell $1,217,000
Northwest Areas $1,190,000
Ford $1,150,000
Weinberg $1,033,332
WK Kellogg $914,688
MacArthur $750,000
Marguerite Casey $675,000
Benedum $600,000
Dyson $510,000
Hearst $425,000
Mary Babcock Reynolds $405,000
Quantum $360,000
Amy Tarrant $350,000

 

F.B. Heron tops the list, though more than half of its output was in the form of Program Related Investments, that is, loans or loan guarantees typically, not grants.  Beyond Heron, most of the others are geographically quite limited in their grantmaking – Amy Tarrant, Benedum, Northwest Areas, Cowell, and Meyer Memorial.  Interesting, however, is that rural development support of the NeighborWorks groups gets significant support from banks, as shown in Graphic #7.

Graphic #7

Larges Bank Foundation Grantmakers to Rural NeighborWorks Groups 2004-2008

 

BANK FOUNDATION

Grants 2004-2008

Bank of America

$988,000

JP Morgan Chase

$513,000

Citi

$485,000

Wells Fargo

$440,500

TD Bank

$229,000

Citizens

$209,500

Wachovia/Wells Fargo

$192,000

M&T

$152,036

US Bancorp

$138,225

PNC

$62,500

 

However, the volatility of bank philanthropy due to mergers and acquisitions – and impending losses from burgeoning foreclosures in 2010 and 2011 – suggests that this source of grantmaking might not be counted on as a reliable grant source in the future.  Graphic #8 shows the major providers of grants and PRIs to the Rural LISC groups, which largely matches the NeighborWorks list, with Heron at the top, but many of the others are regionally or state focused (Babock, Meyer Memorial, Cowell, Arthur M. Blank, Sandy River, Nina Pulliam Mason, Rasmuson, and Benedum).

Graphic #8

Largest Foundation Grantmakers to Rural LISC Groups 2004-2008

 

FOUNDATION Grants to Rural LISC Groups
FB Heron

$3,905,000

W.K. Kellogg

$3,364,866

Annie E. Casey

$2,870,000

Ford Foundation

$2,745,000

Marguerite Casey

$1,665,000

Bank of America Foundation

$1,431,500

Mary Reynolds Babcock

$1,355,000

Meyer Memorial

$1,035,000

Cowell

$1,017,000

Arthur M. Blank

$699,000

Wells Fargo

$588,500

Citi

$525,000

JP Morgan Chase

$416,000

Sandy River

$410,000

W.R. Hearst

$350,000

Surdna

$304,000

Nina Pulliam Mason

$300,000

Knight Foundation

$280,000

Rasmuson

$264,490

Benedum

$232,000

Bingham

$190,000

NY Community Trust

$185,000

Piper

$180,000

California Endowment

$160,393

Rochester Area Foundation

$157,000

San Francisco Foundation

$150,000

Wachovia

$130,000

Wachovia/Wells Fargo

$105,000

MacArthur

$100,000

 

In short, after all the philanthropic breast-beating in recent years about how much philanthropy was going to do for rural America, the evidence of follow through still isn’t there.  Foundations have yet to show that they are ginning up increased support for rural America.

Don’t blame it on the economy.  We specifically chose the years prior to the recession that began largely in the last quarter of 2008; if foundations live up to their cost of determining their payout based on a multi-year rolling average, 2008 grantmaking numbers should not have tanked as precipitously as the economy if at all, given the robustness of the market even in the third quarter of 2008.

What is really happening with philanthropic support – or the insufficient levels of it – for rural America?  Elements of several plausible theories probably come into play:

·    Where’s Max?  Remember when Senator Max Baucus challenged foundations to double their rural grantmaking in a five year period?  Led by the Council on Foundations, philanthropy responded with a booklet of self-congratulatory essays about good ideas in rural philanthropy. There are some great things happening in rural philanthropy, some real philanthropic leaders as shown in this list, but glossy publications aren’t the same as real money.  Like Waldo, Max has been hard to find on the follow-up with foundations.  As the chair of the Senate Finance Committee, he might have learned from his predecessor, Republican Charles Grassley, that foundations don’t respond to one-off Congressional initiatives.  It takes a bit more persistence than that.

·    Pull yourself up by your bootstraps:  The major foundations – and philanthropy as a whole – spliced in an argument for bootstrapping in rural areas.  Rather than turning to the foundations that control well above $.5 trillion in tax exempt endowments to put a dollop more toward rural, the Council on Foundations chose to encourage rural areas to look to their local wealth to develop new sources of philanthropy, typically funds as community foundations.  This strategy is not only incredibly slow, but there are two other problems:  One is that not all rural areas are equally well endowed with wealth to be tapped for philanthropy – the development of new rural philanthropic resources is demonstrably easier and more lucrative in richer rural areas than poorer rural areas.  The other is that the “transfer of wealth” between generations that has been touted by some theorists, with trillions upon trillions of dollars leading to some major infusion into philanthropy, has been more than illusory, especially since so much transferable wealth simply evaporated during the recession.

·    Metronation strategy:  Not surprisingly, most of philanthropy is located in cities – even if the wealth of foundations came from rural areas and rural industries (mineral extraction, agriculture, etc.).  Most of the staff of foundations are from urban America and live in cities or suburbs, not ex-urbs or rural areas (except for their second homes).  The inexorable urban bias of philanthropy (“where you stand is where you sit”) is underscored by the “metronations” concept of focusing public investment in a number of metropolitan areas that have the highest potential of leverage and growth and assuming that rural areas will benefit somehow by being dragged along.  Foundations are hardly immune from this thinking and are as comfortable with this investment focus as the public policy makers in Washington have been.


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Perhaps the issue is rural advocacy. Foundations have often complained – shortsightedly, to say the least – about a lack of capacity among rural nonprofits.  That has always been an incredibly unpersuasive ex post facto justification of inadequate rural grantmaking.  Just take a look at the truly impressive array of rural nonprofits in the NeighborWorks and Rural LISC lists to see groups that can match up well against the most sophisticated of their urban counterparts, groups like Coastal Enterprises (Maine), Southern Mutual Help Association (Louisiana), Enterprise Corporation of the Delta (Mississippi), Cabrillo Economic Development (California), Centro Campesino (Florida), Quitman County Development Organization (Mississippi), Chicanos por la Causa (Arizona), and so many more.

But perhaps these stellar rural groups and others aren’t taking on the issue of advocating for more philanthropic grantmaking.  Maybe they are saying thank-you to foundations for their grants and not saying to philanthropy as a whole that the foundations should do more, a lot more, for rural America.  We wouldn’t be surprised.  Advocating to get foundations to do the right thing is something that just about no one does any more.  Rural philanthropy is unlikely to make the leaps it should unless rural nonprofits –perhaps aided by the likes of Heron, Noyes, Rasmuson, Babcock, and a few others – say to their peers that glossy publications about nice examples in rural philanthropy don’t do the trick.

  • Nikki Zeuner

    Thanks, Rick for the data and the analysis. Will repost this on our Southwest NM Nonprofit Daily News. In our area, the absence of foundations (not only their funds, but also any sign of strategic leadership) has been a reality for so long that nonprofit organizations have pretty much given up on philanthropy. As a result, rural nonprofit revenue depends largely on public funds, which tend to buy services without building capacity. The lack of capacity is a direct result of the absence of unrestricted funds.

    You are also right on about the issue of advocacy. But even advocacy requires funds and capacity… a vicious cycle?

  • Kyle Erickson

    Thank you, Rick, for your excellent article calling attention to an acute area of concern. As a one-man development shop for a rural non-profit (Leech Lake Tribal College), I can tell you that my institution – and many others like it – are squarely behind the 8-ball many times when it comes to funding.

    I can’t tell you how many foundations I have researched and found a great mission match, only to discover that they either fund only in the 7-county Twin Cities metro area, that they fund only in Minneapolis or St. Paul (or a specific suburb), or that they do not accept unsolicited proposals.

    LLTC is having an incredible impact on the communities and students it serves, but its ability to grow is severely hamstrung by lack of viable funding options.

  • rick cohen

    Kyle: All so true, but you’ve raised another phenomenon that NPQ readers are experiencing but we haven’t written about–the increase in the number and proportion of foundations that no longer accept unsolicited proposals. This is a serious and troubling trend. I’d love to hear whether additional NPQ readers, from rural and urban nonprofits, are finding that there’s no transom at the foundations over which they can toss their proposals.

  • rick cohen

    Nikki: The absence of foundations in rural areas is also a problem. We’ve written about that in the past, using some of the “philanthropic divide” information that Mike Schechtman at the Big Sky Institute originated some years ago. The lack of indigenous philanthropic institutions (and philanthropic assets) in rural states or, more particularly, rural areas, is a significant issue. That’s a justification in favor of the notion that the Council on Foundations has been promoting about generating new endowments for rural areas at community foundations, etc., but the problem is, that’s an awfully slow process, usually works best in the wealthier rural areas, and doesn’t deal with the huge structural between rural and urban philanthropic assets and philanthropic grantmaking.

  • rick cohen

    Nikki: re advocacy, the issue is more than resources and capacity: nonprofits have to make philanthropy, philanthropic assets, and foundation grantmaking an advocacy issue. We’re talking about a national grantmaking budget well into the billions that nonprofits don’t advocate about, compared to how much they advocate about government revenues and expenditures. As a percentage of the nation’s GDP, philanthropy is worth nonprofit advocacy energies.

  • Denise L Harlow

    We are stressing the struggle for rural investments in our calls to preserve the Community Services Block Grant formula structure. The current structure ensures that all parts of New York State receive funding to help low-income families. From counties with 5,000 people to Manhattan, every county receives an allocation which local boards allocate to local needs. Without this gaurentee we are very concerned that many rural communities will lose out in a competitive environment. Thanks for your efforts to highlight rural needs!

  • Susan McGuire

    This is a subject near and dear to my work. In Wyoming, only one community meets the US Census Bureau definition of urban (pop.>50,000). Corporations that make a great deal of money from natural resource extraction in the state have their headquarters elsewhere, and that’s where the corporate foundations give their grants–not here. When I approach national foundations, they tell me we can’t show enough impact of our work. But that’s because they rely so much on numbers served as opposed to success in achieving our goals. Local community foundations are very small so they aren’t much of an option. Yes, it’s true that we have less capacity than an equivalent urban nonprofit, but that’s because no one will fund us. It’s a Catch-22.

  • rick cohen

    Dear Susan: You’re exactly right. I wrote some of that in my rural philanthropy pieces for NCRP some years ago, particularly the fact that corporations that made their money on natural resource extraction were headquartered in cities and like most corporations giving the bulk of their philanthropy in the HQ city area. That report was the first big challenge to foundations on rural and I’m pretty proud of what we wrote (http://www.ncrp.org/files/Beyond_City_Limits.pdf), though foundations are still using the catch-22 arguments to sidestep rural needs.

  • paula smith arrigoni

    Rick, this is such a spot on analysis. Before starting my own free-lance consulting a few weeks ago, I was an analyst for the CDFI Fund and a lender and consultant for Nonprofit Finance Fund (NFF), where I focused in California. I’ve been struck at how limited the foundation resources are in places such as Northern California (north of Marin County), the Central Valley, and the Central Coast. Thankfully we have some statewide funders that are making a big impact in their sectors, like California Endowment (noted in your article), California Wellness Foundation, Blue Shield of California Foundation, but the response could be a lot broader. Cases like the one that you cited, where the only community health center or domestic violence shelter closes due to lack of funding (particularly now with steep government cuts), are extremely dire. When these agencies close, it’s hard to pick up the pieces. Better funded or managemed agencies from a couple of counties away are usually not positioned to step in to acquire abandoned servies, and moreover, is unlikely to garner locally-based support.

    On the issue of capacity, I have seen evidence that greater investement from foundations to support the development of more effective and durable nonprofits, can also extend to local community foundations and other institutions, like United Ways and local banks. A good example of this is the Community Leadership Project (CLP), a collaborative initiative funded by the Hewlett, Irvine and Packard Foundations. In my obsevation, the CLP is a vehicle for intermediary capacity-building organizations (like NFF or NetZero) to engage with small rural nonprofits in the Fresno area, or Monterey/Salinas area, as well as to partner and train their community foundations. The process takes times (and will probably end of up costing more than initially anticipated), but the potential for increased capacity and access to funding seems very positive.