At 1:00 p.m. on February 23, 2009, the Dow Jones Industrial Average fell to an 11-year low, to 7,190.72, the lowest since October 28, 1997. By the end of the month, the market closed at 7,062.93. Compare that with the all-time high on October 9, 2007, of 14,164. In less than 18 months, the Dow, the Dow Jones Wilshire 5000, and the Standard & Poor’s 500 indices have lost more than half their value.
While foundation executives and staff have thought carefully about what to do during a recession, their tried-and-true strategies may not hold up during this economic maelstrom, which is different and deeper than any in the past two decades. What should foundations do when their own assets have plummeted so precipitously? How should these institutions respond when the U.S. automotive sector is in danger of bankruptcy, the banking sector is so weak that former Federal Reserve chairman Alan Greenspan hints at “temporarily” nationalizing key banks, and hundreds of thousands of nonprofits may simply go out of business?
True, foundation grantmaking constitutes only 12.6 percent of total charitable giving, according to , leading some observers to suggest that foundations do not merit the attention they garner. But foundation grants are one of the few sources of discretionary capital that nonprofits might-again, might-be able to use to sustain capacity and subsidize programs to weather financial storms. The role foundations choose to play during these times will speak volumes about their commitment to people in need and to the services and advocacy organizations that serve them.
So how have these important financial institutions responded to the worst recession since the 1930s? How will their strategies for navigating the next months-or years-of national and global economic crises alleviate or exacerbate these turbulent times for America’s nonprofit sector?
Recent Foundation Grantmaking: A Sinking Feeling
While some foundations-such as the John D. and Catherine T. MacArthur Foundation, the Bill & Melinda Gates Foundation, and the James Irvine Foundation -have announced their intentions to exceed their 2008 grantmaking in 2009, most news reports cite grantmaking cutbacks.
Even in these cases of proposed increases, some announcements contain equivocal wording suggesting that foundation overseers might reconsider or curtail their proposed increases. Many foundations, such as the John S. and James L. Knight Foundation, have issued lengthy statements to assure grantees that funders will not renege on existing commitments, which suggests that future grantmaking levels look more than a little bleak. Some foundations announced increases in their percentage payout, which press accounts mistakenly interpreted as 2009 grantmaking increases. Straightforward statements about losses-such as those by the McKnight Foundation in Minnesota (which lost $700 million in assets) and the George Gund Foundation in Ohio, which announced that its higher-than-anticipated payout rates will still translate into lower actual grant payouts in 2009 because of depressed endowments-remain rare.
But in this era of economic downturn, what will the norm be? Countercyclical expansion o