The Power and Precedent of Countercyclical Grantmaking

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Editor’s Note: This article was originally posted by HistPhil here and is re-posted with permission.

What the Funders Who Gave More During the Great Recession Can Teach Philanthropy During the COVID-19 Crisis

The first quarter of 2020 was one of the all-time worst for the global economy. US stock indices closed on March 31 having lost a fifth of their value over three months, and markets around the world posted similarly deep losses. Financial experts have projected a historically bad 10%+ slow-down in US GDP in 2020. The economic pain will be—and already has been—felt particularly keenly by low-income people, many of whose assets and job prospects never fully recovered from the Great Recession of 2008-2009.

Until recently, however, philanthropic endowments had more than recovered from last decade’s economic crisis. US foundation assets had surged past their 2007 high of $682 billion by 2012 ($715 billion), and most experts agree they likely exceeded $1 trillion for the first time in 2017.

But the long bull market is over, and philanthropic assets haven’t been shielded from the COVID-19 economic conflagration. Nonprofit leaders have begun to worry loudly that the shock to foundation endowments will be passed along to grantees.

This is not the first time since the advent of uniform, public grantmaking data that the global economy has ground to a halt. Looking back on grantmaking during the Great Recession is the closest thing the sector has right now to a crystal ball in what feel like perilously unprecedented times.

Most large US foundations cut domestic grant spending during the Great Recession. However, there were important outliers that bucked the trend and spent more in service of their missions, balancing long-term and short-term concerns, even though they intend to exist in perpetuity. It’s worth paying the experience of those foundations some attention now.

Grantmaking Austerity: The Great Recession Led to a Pull Back in Giving

The Great Recession did not impact all foundations equally. Candid estimates that total US foundation giving fell by 2% between 2008 and 2009 before holding steady into 2010 and bouncing back thereafter. However, Candid’s FC1000 dataset—comprised of some of the largest 1,000 foundations in the country—allows for more granular analysis and illustrates how the most influential American grantmakers reacted to the financial crisis.

Benchmarked against 2007 levels and adjusted for inflation[i], domestic funding from FC1000 foundations decreased 5% in 2008 and then 14% in 2009[ii]. It remained down between 10 and 15% until 2014 when it recovered to 2007 levels. That’s six long years of domestic grantmaking austerity from the largest US foundations.

Grantmaking cuts were widespread in this group of foundations. 406 of the FC1000 gave less in 2008 than in 2007, 496 gave less in 2009 than in 2007. The austerity was especially prevalent at the top of the grantmaking pyramid. Of the largest 100 foundations in the dataset, 49 gave less in 2008 than in 2007; 63 and 64 gave less in 2009 and 2010, respectively.

The Great Recession coincided with tectonic shifts in domestic grantmaking from the largest 1,000 US foundations. The austerity adopted by broad swaths of the sector—still fresh in the memories of many grantee leaders—is of particular concern now as the country enters what may be a worse economic crisis than in 2008-09. But some high-profile grantmakers increased their giving during the Great Recession. NCRP spoke to two such philanthropic leaders about what they did then and why.

Bucking the Trend

Neither The California Endowment (TCE) nor the Lumina Foundation are spend-down foundations, and neither is attached to a living mega-donor whose support can replenish their assets periodically. But both TCE and Lumina either maintained or increased their grantmaking during the Great Recession years—TCE gave 23% more in 2009 than in 2007, Lumina gave 98% more. Their grantmaking during the depths of the recession is especially notable when compared with the rest of the largest 100 foundations in the FC1000, whose grantmaking was 11% lower in 2009 than in 2007.

During the Great Recession, both foundations leaned into their respective mission, values, and long-term goals. TCE invested deeply in a large ecosystem of California nonprofit organizations to ensure Californians could access the crucial safety net supports available to them via government programs—nutritional assistance, housing assistance, and other benefits that keep people healthy and whole during a severe economic downturn. Lumina—which had already developed a 20-year goal around increasing post-high school educational attainment—drove resources into policy advocacy that would expand opportunities for Americans to avail themselves of community college education.

It is unusual for the philanthropic sector, but a boon to those eager to understand how foundations respond to economic crises, that both foundations’ recession-years CEOs are still in their positions more than a decade later. NCRP spoke to Dr. Robert K. Ross of TCE and Jamie Merisotis of Lumina in March of 2020 about what it was like to buck the philanthropic trend in 2008 and ’09, and how they’re approaching the ongoing COVID-19 crisis. Here’s what we learned.

  1. Both CEOs and boards balanced the long- and short-term objectives of the foundation when they decided to maintain or even increase grantmaking.

As Merisotis explained, “The board said ‘Lumina has a long-term goal, and with that long-term goal we think the investments we’re making now are too important to worry about just meeting the 5% payout requirement. We believe we want to invest for the long term and that means we need to make those investments now.'”

Ross echoed this view. “Protecting the corpus for future generations is a twenty- to thirty-year issue and responding to the acute needs communities are dealing with today is a now issue. The combination of our values and the abject pain and suffering that vulnerable communities were suffering made the difference in our board room conversations.”

Neither Lumina nor TCE understood the conversation about how to respond to the Great Recession in terms of “preserving the corpus or preserving our grantmaking this year and next.” Instead, the board, CEO, and other foundation leadership recognized their mandate was to balance the long-term objectives of the institution—whether that’s perpetuity or not—with the short-term exigencies of a broad community crisis.

  1. Both CEOs saw opportunities to advance their mission and values amidst the crisis.

“From a moral and storytelling standpoint,” said Ross, “it’s critical for the nonprofit sector generally and for our grantees specifically to know that we’re in this fight with them. They want to know ‘Are you seeing our pain? Are you feeling our pain? Are you with us?’… And the outcomes of that increased funding do have highly leveraged benefits that are a multiplier on return on investment for the dollars we spent.”

Merisotis agreed. “We increased our grantmaking because we wanted to ensure the success of our most important partners who we believed were important to the long-term success of the work. We also wanted to invest in the strategies, like community colleges, that we thought would have the greatest impact on our goal of increasing post-high school attainment because of what we believed that could do to help power our economy and strengthen our democracy.”

Philanthropy, it’s been said, is society’s risk capital. However, many philanthropic leaders and especially foundation investment managers pivoted to loss-mitigation mode during the financial crisis of 2008 and the recession that followed. TCE and Lumina, on the other hand, saw an opportunity to invest in their grantees in ways that furthered their long-term goals.

TCE identified high-leverage opportunities to connect Californians to federal and state benefits programs that would unlock orders of magnitude more financial support for those hit hardest by the recession than TCE’s grantmaking alone could provide. And Lumina recognized that their long-term goal of increasing access to post-secondary education could be a critical part of the country’s economic recovery.

In fact, Lumina’s Recession-years grantmaking led to measurable impact according to Merisotis. The percent of American adults with a post-high school degree or credentials has increased 10% since 2008. Merisotis observed, “Lumina knows it didn’t cause that 10% increase on its own, but Lumina made investments in the right players at the right time so that they prospered especially during the recession.”

  1. Patience and perseverance, not panic, were key.

Ross emphasized the importance of not making any precipitous decisions. “It wasn’t a single board conversation; it spanned at least two or three board meetings, in part because when recessions happen you don’t know how deep and enduring they’re going to be. You have a bad quarter, and there are economic projections, but you really don’t know. You want to let a fiscal quarter or two go by before even thinking about pressing the panic button.”

Merisotis recalls, “I arrived at Lumina in January 2008 as CEO, so the walls of the city were already crumbling around me so to speak just as I was getting into the role. But Lumina had a long-term strategy for our 2025 goal of increasing post-high school educational attainment. Part of that strategy was ensuring the success of the partners we’d been working with since the foundation was established in 2000.”

Crises like COVID-19 and the financial crisis of 2008 often move quickly, and good leaders respond nimbly to emerging threats to their institution. Navigating the tension between rapid response philanthropy and maintaining a steady course toward long-term goals requires thoughtful leadership, but neither is served by a knee-jerk reaction to reduce grantmaking. The COVID crisis in many ways resembles a natural disaster, and it warrants an emergency response from philanthropy, especially support for those most adversely effected in the short term. But the power in Lumina’s and TCE’s response in 2008 and ’09 was in their perseverance. Instead of watching their assets slide and immediately ratcheting back their grantmaking, they waited out the storm and stayed committed to their mission.

Both Lumina’s and TCE’s assets have declined since 2007—from $1.7 billion to $1.3 billion and from $5.7 billion to $3.8 billion respectively.[iii] Notably, however, neither CEO expressed any regret about their strategy during the Great Recession, and both spoke to the positive impact on their long-term goals and grantee relationships. And as noted above by Ross, foundation leaders can choose to take the long view of asset health by balancing the “twenty- or thirty-year issue” of corpus maintenance with the “now issue” of meeting community needs.

Two More Reasons for Optimism

 Lumina and TCE were outliers during the Great Recession. As we’ve seen, more than half of the largest grantmakers in the country decreased their grantmaking during the financial crisis and following recession. But two specific kinds of grantmaking didn’t see the same decrease as the sector overall: giving for social justice strategies and general support giving.

Funding for social justice strategies[iv] remained steady during the Great Recession. Without more qualitative data we can only guess what protected social justice grantmaking from Recession-years austerity. Most social justice grantmaking comes from a dedicated, small group of foundations. Ford and Kellogg, for example, gave 75% and 50% of their total grantmaking for social justice in 2017; while the median foundation gave just 3%. Perhaps during the Recession those foundations were more willing than others to sustain asset losses to avoid disruptions to their grantmaking.

Right-wing foundations meanwhile increased their grantmaking during the Great Recession. In both 2008 and 2010 they gave 6% more than in 2007, though 2% less in 2009. It’s become an article of faith in progressive philanthropy circles that right-wing funders are savvier than the left. We can’t say with certainty what’s behind the increase in conservative grantmaking during the Great Recession, but it’s possible they saw an opportunity and took it. After all, any decent financial adviser would tell you to buy when the market is down. And right-wing funders’ investments seem to have paid off in the longer term.

The Great Recession may also have coincided with a general operating support paradigm shift. The share of aggregate FC1000 domestic grantmaking given as general support has hovered stubbornly around 20% since 2003. Disaggregate the data by foundation type and budget size, however, and a trend appears. The largest 100 independent foundations increased their general support funding during the Great Recession and continued providing more general support after the recession than they had before. From 12% between 2003 and 2007, they ratcheted up their general support to 19% of total grantmaking between 2008 and 2011, and since then general support has never been less than 17% of their total funding.[v]

The effect was larger for general support for social justice strategies, for communities of color, and for poor people. For the largest 100 independent foundations in the FC1000, general support grantmaking for these three equity-oriented strategies and populations doubled as a share of their total grantmaking between 2007 and 2014 and have not returned to pre-recession levels. General support grantmaking not given to support these strategies and populations has declined significantly since its Recession-years high.

Among a cohort of the largest, highest-profile independent foundations, the Great Recession coincided with—if it didn’t cause—what seems like a permanent change in their approach to general support grantmaking. That change was especially pronounced for general support given for marginalized people and structural change strategies, perhaps suggesting that foundations who already prioritized equity-oriented grantmaking before the Great Recession were especially likely to adopt general support grantmaking during the economic downturn.

Looking Ahead

It’s difficult to find words for just how great a threat to our economy, to our democracy, and to human life the ongoing COVID-19 crisis poses. Foundation endowments have already taken enormous losses, and it looks likely those losses will continue until the global economy is no longer in free-fall.

Already, though, some sector leaders are charting a course away from grantmaking austerity and toward a radical new vision for responsive philanthropy. The Mary Reynolds Babcock Foundation of Winston-Salem, NC, announced in March they would immediately send new cash grants to current grantees and automatically extend the terms of current grants, effectively doubling their payout rate for 2020. The Libra Foundation announced in early April they would double their 2020 grantmaking and make all the new funding unrestricted general support with no reporting requirements attached.

On April 2, nine of the largest philanthropic sector support organizations—including the Council on Foundations—penned a joint statement urging foundation leaders to increase their grantmaking in 2020 in spite of drastic stock market losses.

At a larger, structural level, hundreds of foundations have pledged publicly to lift restrictions on current grants, make new grants unrestricted, and contribute to community relief funds among other responsive grantmaking practices. These aspirations would—if adopted by every one of the more than 400 foundation signatories—amount to a paradigm shift for the field that would dwarf what the FC1000 data indicate occurred during the last recession.

We won’t know for at least two years, when comprehensive public data is available, how this rapidly growing movement for responsive grantmaking affects the actual practice of the country’s more than 80,000 foundations. For foundation leaders who understand the impact the COVID-19 pandemic will have on the issue areas they care about—education, economic development, employment, nutrition, and health to name a few—there are models of best practice available. A deep economic recession need not lead by necessity to grantmaking austerity. The power to act as a potent countercyclical force in your communities during an unprecedented crisis is yours if you choose to use it.


[i] Unless otherwise specified, all grantmaking dollars are adjusted for inflation

[ii] Unless otherwise specified, all quantitative analyses are based on NCRP analysis of Candid data

[iii] 2007 and 2017 assets in 2017 dollars

[iv] A spectrum of 501(c)3 and (c)4 grantee activities that includes community organizing, civic engagement, policy advocacy, and other long-term structural change work

[v] Here and throughout this analysis of general support grantmaking over time, percentage of total grantmaking is calculated as a lagging 2-year average

The views and opinions expressed in individual blog posts are those of the author(s) and do not necessarily reflect the official policy or position of the National Center for Family Philanthropy.