Downturn spurs some foundations to give more
As need for aid deepens, groups cut into principal
At a time when most foundations are cutting back or maintaining last year's spending, a few are doing what hedge fund manager Ken Nickerson of the Eos Foundation calls "counter-cyclical giving." They're increasing their grants.
Nickerson heard a story last October that helped him decide how to steer his family foundation through this severe recession: A gentleman visiting a local food pantry offered $5 for his groceries. Even after a pantry worker assured him they were free, the man insisted on paying. "There are people out there who need this $5 more than me," he said. The worker then laid his own $5 on the counter. Others did the same, and within moments the food pantry had collected $50.
Despite losing 30 percent of what a year ago was a $50 million endowment, Eos will spend an additional $15 million over the next five years to fight poverty in Boston. Nicker son and his wife have also contributed an additional $10 million to Eos to begin to offset its losses.
"At a time when we feel compelled to do more, our resources are vastly less," said Nickerson, 46. "It's something that kept us awake at night. . . . We have more money than we need, and the foundation needs it more than us."
While Nickerson recapitalizes his foundation, others dig deeper into their shrinking endowments than would be required to simply maintain spending. There are growing cries for more to do so.
"If not at this time, why do we have endowments? That's what endowments are for, that you have these additional funds to dip into," said Ron Ancrum, president of Associated Grant Makers, which represents donors in Massachusetts and New Hampshire.
"It's not necessarily something trustees would gravitate toward immediately, because it would take them away from what they're used to doing, which is protecting their endowment. It's difficult for most foundations to consider, but I believe it's the right direction."
The Highland Street Foundation, which along with Eos and two other family foundations donated an additional $1 million for hunger relief and fuel assistance late last year, also expects to increase grantmaking in 2009.
The Women's Fund of Western Massachusetts, a public foundation, announced last month that its grantmaking will jump from $100,000 to $250,000 in both 2009 and 2010. The 20 percent hit that its $2.76 million endowment took is offset in part by an unexpected $300,000 donation, some of which will help finance the increased spending.
"Our board looked at the impact the entire economic situation was having on women and children," said executive director Carla Oleska. "They are absolutely aware of the level of fund-raising we will be doing from here on out."
The United Bank Foundation, based in West Springfield, expects to make at least $250,000 in new grants this year, up from $207,000 in 2008. "We've got groups getting reduced state funding and reduced federal funding," said foundation president Dena M. Hall. "We will try to be the new source of funds for the right groups."
Nationally, the Bill & Melinda Gates Foundation plans to give more than the $2.8 billion it distributed in grants last year, though less than it had once projected. The New York-based Foundation Center expects aggregate grantmaking to decline in 2009, but not as much as the stock market has dropped.
Associated Grant Makers expects half its members to reduce their giving and most of the rest to maintain their grantmaking, which, given their diminished endowments, means spending more than the legally required 5 percent of assets that many follow. The Philanthropic Initiative, a Boston-based agency that advises donors, reports that three-quarters of its clients plan to maintain their current level of grantmaking. Another 20 percent, including a big-money donor who lost money in the Bernard Madoff scandal, are cutting back. Yet even in an economic crisis, 5 percent are increasing their grants.
"There's a big kind of wait-and-see attitude before anybody makes any rash decisions to increase or decrease their charitable giving," said TPI vice president James Coutre. "We also see a desire across the industry of everybody feeling the need to step up and give more. Some people are acting on it. There are quite a number of people who are still deer in the headlights."
To Kelly Bates, executive director of Access Strategies, Eos is a "role model." But Access, a Cambridge-based family foundation devoted to empowering disenfranchised communities, won't be increasing its grantmaking this year. "Gosh, I wish we were," Bates said. "We are doing everything we can to hold the line."
The issue caused a dust-up between the Council on Foundations and the Boston-based Nonprofit Quarterly.
In an October letter on the economic crisis, the council did not mention increased grantmaking as an option.
"We're in this storm. Let us maintain and then increase if we can down the road," said council spokeswoman Monica Wroblewski. "That was the approach." The quarterly's editors offered an alternative version that put increased grantmaking at the top of the list.
Buzz Schmidt, founder and chief executive of Guidestar, which reports on nonprofits and foundations, called for increased grantmaking in an article posted on the quarterly's website late last year, urging foundations to rethink their commitment to preserving their endowments in perpetuity.
"Solving a problem today is less expensive than solving it tomorrow," he said.
"Warehousing your money for the future makes sense only if there are no more problems to solve today and society is not going to create more philanthropic capacity in the future." 