State of Philanthropy 2009

On November 5, 2009, Betsy Nelson, Executive Director of the Association of Baltimore Area Grantmakers, delivered the following address as part of Johns Hopkins University’s Community Conversations series. In this tough economy, Nelson provides a scan of the philanthropic field and offers hope for the future.

Thank you for inviting me to speak at JHU’s Community Conversations.  I have been asked to talk today about the philanthropic landscape in 2009.  As I look out at the audience, I dare say that all of you participate in this world, be you a donor, board or staff member of a nonprofit organization, or recipient of services offered by a nonprofit. After all, here we are at the Johns Hopkins University, the largest nonprofit organization in our state!  My goal is to impart a few words that ground you, hopefully not frustrate you too terribly, and finally, inspire you to further engage with nonprofit organizations.  Bottom line is … they need you.

My remarks stem from my experience as an executive director of a small nonprofit organization celebrating its 26th year, from participating on local and national nonprofit boards of directors, including currently being the President of the Board of a Baltimore nonprofit, and from being a keen observer of philanthropic organizations for over 20 years.

I am the ED of the Association of Baltimore Area Grantmakers, a membership organization that aims to maximize the impact of philanthropic giving on community life through a growing network of diverse, informed and effective grantmakers. Our members include representatives of more than 130 private foundations and corporations with strategic, ongoing grantmaking programs.

Let’s talk about the economy.  I wish I could say that I was inexperienced with challenging economies, but in truth, this is my third time down this road.  So, here are some thoughts —I look forward to hearing yours at the close of my remarks.

The downturn in the economy has been challenging for all of us. It is particularly challenging for nonprofit organizations who serve those in need, and the philanthropies who finance their critical activities. This challenge is system wide, and is affecting all types of nonprofit organizations, though clearly some are even more challenged than others.

The recession is impacting a much larger segment of our community.  And, unlike past downturns, this one came faster, affecting people and organizations in more unexpected ways.  The irony, of course, is that as more individuals and families experience financial and associated social difficulties, the charities whose missions are to offer assistance are financially challenged themselves.

Traditional funding sources, such as government contracts and foundation/corporate grants, have decreased. Earning income through fee for service or entrance fees is also more difficult.

So, what has foundation giving looked like in 2009?

I don’t need to give you an investment tutorial —for those that weren’t keen observers of the market prior to this recession, I am sure you are now.  When your 4 year old grandson knows about Squawk Box on CNBC, you know that business news is becoming ubiquitous.

While the S&P is up 60% from March and in the high teens year-to-date, it is still nearly 500 points below where it was nine years ago.  In fact, we have just been through the worst 10 years in stock market history.  Even investment professionals have been traumatized by the decline. Diversified or not, it would be the rare foundation that hasn’t suffered with this recession. And, clearly, we are still in for a rocky run.

Foundations are required to give away an amount equal to approximately 5 percent of their assets each year, so this market decline has real implications for future years.
Nationally, foundation giving is predicted to decline by more than 10 percent in 2009.  I have heard of greater declines locally. There are, however, some foundations that are committed to not decreasing their grants, choosing instead to give more than the mandatory 5%.  Others, mindful of issues of perpetuity, are challenged making this payout.  Looking towards 2010, a recent survey from the Foundation Center predicts that foundation giving will decline even further in 2010.

So, how have foundations adjusted to this new reality?  According to the survey, and actually ringing true from my observations, tightened resources have forced funders to be more strategic, more focused in their grantmaking and operations.  These changes range from governance to grantee relations to investments.

Most members tell me that they have seen an increase in requests, though there has not been a dramatic shift in the number or type of request. Others have said that they are actually getting fewer requests— and we think that may be because the time and staff available to write proposals are in short supply for some organizations.

The decrease in grantmaking this year has been compounded by the fact that many funders are fulfilling previously committed multi-year grants, leaving fewer uncommitted funds for new requests. Supporting key nonprofit partner organizations has been a top priority for many. This assistance may extend beyond traditional grants to include general support and technical assistance.  Limited resources have also caused some funders to focus more on specific issues and geographic areas. I can tell you that conversations around foundation board tables have been intense, with real soul searching about where funds can have the most effect as well as some painful decisions to discontinue supporting long-time grantees.  All funders are looking more carefully at how their grantees manage and plan for difficult times.

Corporate Giving

Given the news this week that Black & Decker will be merging with the Stanley Works, I do need to make a few comments about corporate giving in our community.  Understandably so, people are talking about the loss of one more corporate headquarter in our region.  Many in my world are questioning what this means philanthropically and how it will impact our nonprofits.

Sadly, this isn’t the first time I’ve had this conversation either.  The truth is that we don’t know exactly how this merger will affect Black & Decker’s philanthropy. At this time, details of the merger, including how it will affect charitable giving, have not yet been outlined by the companies

Our region has changed over these many years and notwithstanding the current economic challenges, I strongly believe that our community must embrace what can be rather than lament about what was.  As the more traditional companies still located here fight for survival during the economic recession and growth in an increasingly competitive global market, we must hope that new industries and new players arrive on the scene. Future growth in corporate giving will come from these small companies and giving programs and there remains an opportunity for new leaders to have an impact.

One encouraging fact is that over the years, companies have grown to recognize that the effects of urban poverty, poor education, lack of health care and unemployment have a direct and distinctly negative impact on the bottom line and now understand that they have a role to play in addressing these challenges. It is clear, too, that becoming involved in a community reflects positively on the corporate giver and increases employee loyalty— both hopefully additional motivation to contribute to our community.

Bottom line—what does this all of this mean for nonprofits?

One school of thought is that the economic crisis is an opportunity to strengthen the nonprofit sector, believing that nonprofits will pursue more creative fundraising strategies and less traditional sources of support, such as revenue-generating activities; that they will develop concrete sustainability plans; and perhaps, collaborate more. However, there is also concern that nonprofits are not using the recession as an opportunity to review and rethink their activities.

In previous downturns, I had predicted that we would see nonprofits merging with others, or closing their doors.  Overall, I was proven wrong— by nature, nonprofits are often scrappy organizations, with resiliency that we often underestimate.  That said, I stand before you making the same prediction, though placing more bets on organizations’ shutting down or just barely surviving.

I have come to see how difficult it is for nonprofits to consider new ways of operating or partnering with other organizations.   Not only is it not in their DNA, nonprofits often being founded and led by visionary people who believe they have found a new way to solve social ills, but we also incentivize them to act as solo agents.  In proposals, we ask them to tell us how they are unique and often don’t include enough funds for them to “share” with others.  To bring about different behavior and structures, outside forces may well need to be brought to play.

So, where’s the inspiration in my remarks?

We are now entering the “giving season” when most charities receive the largest portion of their yearly donations from individuals.  If there is a bright note, history tells us that Americans are philanthropic by nature, giving generously even in recessions.

I do see people caring about others, and hope that getting back to basics may actually be one of the more positive learnings from this recession.  People are beginning to recognize the difference between “want” and “need”, and most importantly, are passing on these values to their children.  I am hopeful that these lessons will translate into charitable actions, recognizing that there are more people today who fall into the “need” category.

In response to seeing the basic human needs of Maryland residents increasing daily, more funders are devoting resources to address these needs.  This spring, ABAG published a Guide for Funding Basic Human Needs in a Challenging Economy to inform the funding community about the scale and scope of need among Central Marylanders. The Guide focuses on eight areas critical to maintaining self sufficiency which suffer during an economic downturn. These eight areas reflect a constellation of problems that are interrelated, complex, and often rooted in poverty.  They are:

• Emergency housing and assistance
• Energy assistance and weatherization
• Financial literacy and empowerment
• Food security
• Health care
• Housing foreclosure prevention and mitigation
• Job training and placement; and
• Mental health services

For each issue, the Guide offers a brief overview of the problem, relevant statistics, and a variety of entry points for philanthropic action based on need, documented successes, and best practices.  Resources for further information, including knowledgeable ABAG members, are also identified.

While the Guide focuses on basic human service needs, some of the general findings, particularly in regard to the needs of nonprofit organizations, may be applicable to other issues being affected by the economy. We recognize that organizations dedicated to education, arts, the environment, and other areas important to our society are feeling the effect of the downturn in the economy and also deserve support.

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