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 of the likes of MacArthur and Irvine? Higher payout rates but lower grantmaking such as at McKnight and Gund? Efforts to maintain 2008 grant levels through 2009? Or couched amid statements of concerns, reductions of unknown levels in grant budgets?
The complete answer will probably take time to unfold. Still, the Nonprofit Quarterly has compiled early data from surveys of 15 regional associations of grantmakers on foundations’ response to the economic crisis, and the data is discussed below.
The Data Sources
Many foundations belong to regional grantmaker associations (which bear the unfortunate acronym RAGs) and in late 2008 or early 2009, about half these organizations surveyed their members about grantmaking expectations for 2009.
Table 1 features the 15 grantmaker associations whose survey information we have reviewed in this article.
Table 1: Grantmaking Association Survey Respondents
|Grantmaker Association (and Geographic Coverage)||Time Frame in which Surveys Conducted||Number of respondents|
|Donors Forum of Southern Florida (Broward, Miami-Dade, Monroe, and Palm Beach Counties)||November 1-December 1 2008||57|
|Ohio Grantmakers Forum||January 2009||92|
|Council of Michigan Foundations||December 2008||49|
|Council of New Jersey Grantmakers||34|
|Minnesota Council on Foundations||November 2008||107|
|Connecticut Council on Philanthropy||October 2008||38|
|Delaware Valley Grantmakers (Greater Philadelphia region)||October 2008||27|
|Arizona Grant Makers Forum||October 28-December 1 2008||31|
|Indiana Grantmakers Alliance||October 2008||71|
|Grantmakers Forum of New York (upstate New York)||40|
|Washington Regional Association of Grantmakers (metropolitan District of Columbia, including suburban Maryland and Virginia counties)||October 2008||“just over one-third of the membership”|
|Southeastern Council of Foundations (11 Southeastern states: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, and Virginia)||Not specified||Not specified|
|Northern California Grantmakers (largely San Francisco Bay Area)||November 2008||32|
|Donors Forum (Illinois)||October 2008-November 2008||54|
|Donors Forum of Wisconsin||August 2008-December 2008||100-plus|
Because of a variety of factors, there are limits on what we can learn from these grantmaker association reports. First, the RAGs didn’t use a uniform survey design, so comparing information among them can be difficult or impossible. Second, these reports’ level of detail varies. Some provide only gross aggregate information on survey respondents, others disaggregate the information by type of funder or by regions within the state. In some cases, detailed benchmarking of this information may have been available to association members, while the press and public received only summary data.
Further, like most nonprofit surveys, these surveys are not random or stratified random surveys of the foundation sectors in their regions. They are responses from the foundations that choose to respond to surveys. As a result, the responses are more revealing as general foundation reactions to the downturn than they are as evidence for definitive claims.
And the responses themselves are not definitive concerning what funders will do. The surveys, for example, ask respondents about their expectations for their 2009 grantmaking. but responses provided in late 2008-when the markets and the economy were merely plummeting-may differ markedly from those provided in the winter of 2009 when “plummeting” hardly conveys the depth of the economic crisis. Many foundation executives may prefer to maintain or increase their 2008 levels of grantmaking in 2009, but they may also find that the combination of sinking investments and cautious trustees makes these hopes unrealizable.
Interpretation is also limited by the various kinds of foundations. Survey respondents include community foundations; private foundations; health-conversion foundations; and, in some cases, regranting intermediaries, United Way agencies, and even some quasi-public or public entities. They are not always easily comparable. Conversion foundations created as a result of state government intervention or legal consent decrees may be required to do certain kinds or levels of grantmaking. Public foundations, such as community foundations and regranters, may use a different calculus for responding to economic downturns than do private foundations feeling hamstrung by “inviolable” endowments and a fear that too much spending will harm gilded notions of perpetuity.
Despite these limitations, the survey findings reveal important signals about how the foundation community may navigate the recession. This review focuses on two core issues:
1. Compared with 2008, what will funders do with their grantmaking budgets in 2009? Increase, decrease, or hold steady?
2. How will funders change grantmaking strategies? What will they emphasize and deemphasize?
Will Foundations Give More or Less?
As Table 2 indicates, many foundations expect to give less in 2009, and few expect to give more. In all but five of 15 regions, the majority of foundations expect to give less.
Table 2: Respondents’ Predictions for 2009 Grantmaking Budget
|Grantmaker Association||Respondents’ Predictions for 2009 Grantmaking Budget Compared with 2008 Level|
|Will Increase||No Significant Change/|
|Delaware Valley||6%||42%||“over 50%”|
|Upstate New York||8.0%||27.0%||57.0%|
|metro-Washington, D.C., area||17.0%||30.0%||54.0%|