The following is an examination of how foundations have been responding to the current economic
crisis, based on the early 2009 survey responses of more than 1,200 U.S. foundations. It is part of an
ongoing Foundation Center research series intended to shed light on the impact of the economic
downturn on the nonprofit sector.
Foundations Address the Impact of the Economic Crisis
April 2009
By Steven Lawrence, Senior Director of Research
As the ongoing economic crisis reaches a scale and duration not seen in
the post-war period, foundation behavior during past downturns may
become a less precise predictor of how funders will cope with current
reality. To provide an up-to-date assessment of how foundations are
addressing today’s challenges, the Foundation Center surveyed more than
1,000 of the nation’s largest foundations in early 2009 (see “About the
Survey” for details).
Key Findings
- Close to two-thirds of surveyed
foundations predict reductions
in the number and/or size of
their grants in 2009.
- Most respondents expect to
maintain the number of program
and geographic areas they
currently support.
- Two out of five respondents
expect to dip into their
endowment principal to fund
their 2009 grants budgets.
- Over half of respondents
anticipate engaging in more
non-grantmaking activities in
response to the economic
downturn.
- More than one-third of
community foundation
respondents are engaging in
special initiatives in response to
the economic crisis, compared
to 14 percent of respondents
overall.
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Their responses indicate that nonprofits face a challenging environment
for grantseeking. As reported in the Center’s recent Foundation Growth
and Giving Estimates report, overall foundation giving is expected to
decrease in the range of the high single digits to low double digits in
2009,1 and close to half of surveyed foundations predict reductions in the
number and size of their grants. Nonetheless, foundations are considering
strategies beyond grantmaking to fulfill their missions and using various
resources to minimize the impact of asset losses on giving. A number of
foundations have also incorporated lessons from the last downturn to
help them better cope with the current crisis.
What Should Grantseekers Expect in 2009?
This year and next will be a particularly challenging time for both
organizations seeking new sources of support and for recently established
entities—43 percent of surveyed foundations expect to reduce the overall
number of grantees they fund in 2009 and 46 percent anticipate
decreasing the number of new grantees they will fund. Organizations in
need of capital support will also be particularly hard hit, with over one-third
of foundation respondents (37 percent) reporting that they will
reduce the amount of capital support they provide.
The Foundation Center, 2009. A total of 1,229 foundations responded to this question.
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At the same time, grantees with existing foundation relationships have
already begun receiving smaller awards and rejection notices citing the
impact of the economic crisis. Close to two-thirds of foundation respondents (63 percent) expect to
reduce the number of grants they
will award in 2009 and/or the size
of their grants. A substantial share
also anticipate reducing the number
of multi-year grants (44 percent).
Larger foundations—those giving
$10 million or more—were
somewhat less likely to anticipate
reducing the size of their grants
(38 percent) and the number of
multi-year grants (39 percent).
The one source of possible
optimism for grantees in both
the near and long term is that
the vast majority of respondents
(80 percent) expect to maintain
their current number of program
areas, and 3 percent anticipate
increasing the number of areas they
support. Likewise, all but about
6 percent of respondents expect to
maintain or increase the geographic
areas they target. Consistent with
findings on foundation activities
during the last economic
downturn,2 this suggests that most
foundations will not abandon their grantmaking priorities—from
health to the arts to international
grantmaking—despite the severity
of current economic conditions.
SOURCE: The Foundation Center, 2009. A total of 168 respondents indicated that they have or
will launch special initiatives, make exceptional grants, or offer loans and other program-related
investments (PRIs) in direct response to the economic downturn.
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Are Foundations Directly
Addressing the Impact of
the Economic Crisis?
A total of 168 respondents to the
Foundation Center’s 2009 survey
indicated that they are launching a
special initiative, making
exceptional grants, or offering loans
and other program-related
investments (PRIs) in direct
response to the economic crisis.
While this 14 percent share may
seem relatively small given the scale
of the economic crisis, it’s likely that
many funders are responding in an
equally critical way by seeking to
maintain stable levels of giving—or minimize reductions in
funding—for their grantees. Links
to the public statements of the top
100 foundations by giving and
other selected funders on their economic crisis response are
available at foundationcenter.org/focus/economy.3
Community foundations are
mounting a particularly vigorous
response to the economic downturn.
More than one-third (35 percent) of
community foundation respondents
indicated that they were engaging in
special initiatives to help their
communities cope with the local
fallout from this global crisis, such
as rising unemployment and
homelessness. Larger foundation
respondents—those giving
$10 million or more annually—were more likely to be providing
exceptional support in direct
response to the crisis. Since late
2008, the Foundation Center has
been collecting information on the
grants and PRIs made by foundation
and corporate donors in direct
response to the economic crisis and
making it available via an interactive
map at foundationcenter.org/focus/economy.4
SOURCE: The Foundation Center, 2009. A total of 168 foundations responded to this question.
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While these foundations are
providing essential support to
meet the specific, urgent needs
created by the current economic
crisis, it is not coming without a
cost to other funding areas. Three
out of five (61 percent) of the
respondents that are making
exceptional commitments indicated
that they were reallocating some of
those funds from existing grants
budgets, with almost half citing
reallocations as the exclusive source
of this support.
Among other commonly cited
sources of support for economic
crisis-related giving were
discretionary funds (29 percent)
and new gifts or bequests from
donors (23 percent)—although the
latter was reported primarily by
community foundations. About
17 percent of respondents indicated
that they would dip into their
endowment principal to make
exceptional commitments in
response to the economic crisis,
while just over 10 percent were
tapping their reserve funds.
SOURCE: The Foundation Center, 2009. A total of 678 foundations indicated that they would
be increasing their non-grantmaking activities in response to the economic crisis, representing
54.5 percent of overall survey respondents.
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Beyond Grantmaking,
What Types of Changes
Do Foundations Expect
to Make?
The current economic situation may
have reduced the resources most
foundations have available
to make grants, but that has led
many funders to identify other
strategies for achieving their goals.
In fact, over half of respondents
(54 percent) indicated that, in
response to the economic downturn,
they anticipate engaging more in a
range of non-grantmaking activities.
Fully two-thirds of surveyed
funders said they are seeking to
engage in more collaborations and
partnerships, while about one-third
(36 percent) expect to initiate more
convenings. Other non-grantmaking
strategies cited by at least one out of
five respondents included engaging
in more foundation staff-led
activities, providing more technical
assistance, offering more bridge/emergency financing, and engaging
in more advocacy. In addition, more
than one out of ten respondents indicated that they would be making
more program-related investments
(PRIs).
What Did Foundations
Consider When
Determining Their 2009
Grants Budgets?
Establishing a grants budget
following a year when overall
foundation assets dropped an
estimated 21.9 percent posed unique
challenges for grantmakers.
Regardless of strategies they may
have used to smooth out the impact
of fluctuations in the value of their
assets on giving, no approach could
adequately compensate for the
unprecedented loss of charitable
resources. Yet based on responses to
the latest survey, the Foundation
Center estimates that giving in 2009
will decline by a far lower
percentage—from the high single
digits to the low double digits—than
did assets in the prior year.5 This
suggests that many foundations were
taking a broader range of factors into
account when determining this year’s
grants budgets.
About the Survey
In January 2009, the Foundation Center mailed its
annual “Foundation Giving Forecast Survey” to
approximately 5,000 large and mid-size U.S.
independent, corporate, and community
foundations. The survey included questions on
foundations’ giving and assets in 2008, the
outlook for giving in 2009 and 2010, and how
foundations are responding to the economic
downturn. A total of 1,243 foundations provided
usable responses as of April 2009. By foundation
type, 961 independent foundations, 172
community foundations, and 110 corporate
foundations responded. (For more information,
see Appendix B in Foundation Growth and Giving
Estimates, 2009 Edition.)
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When asked to identify the factors
that influenced decision-making
around their foundations’ 2009
grants budgets, most respondents
cited three as being somewhat or
very influential: board and
leadership decisions (88 percent),
the economic climate and market
conditions (88 percent), and their
foundation’s strategic priorities
(80 percent). Just over half of
respondents (52 percent) also cited
outstanding grant obligations as
being somewhat or very influential
in their decision-making. But in the
absence of any baseline information
to serve as a point for comparison,
it is not clear whether these findings
are similar or different from those
that might have been obtained
following a more typical year of
growth in assets.
What differentiates 2009 is in the
way grantmakers plan to use their
available resources to meet their
grants budgets. As in a typical year,
the vast majority of respondents
(88 percent) plan to use investment
income to meet their grantmaking budget. But what is atypical is that
close to two out of five respondents
(39 percent) expect to dip into their
endowment principal to make
grants. This is especially notable
given that the assets of most of
these funders have already been
greatly diminished by the economic
crisis. Among these respondents,
independent foundations are the
most likely to draw on their
endowments (43 percent), while
community foundations are least
likely to do so (5 percent). Other
sources of support that respondents
expect to use to meet their grants
budgets in 2009 include new gifts
and bequests from donors
(17 percent), discretionary funds
(13 percent), and reserve funds
(9 percent).
SOURCE: The Foundation Center, 2009. A total of 1,239 foundations responded to this question.
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Some foundations smooth out the
impact of fluctuations in the value
of their assets by determining their
grants budgets based on an average
of their asset values over several
prior years. According to the survey,
most foundation respondents
(79 percent) do base their grants budgets primarily on the value of
either their past, current, or
projected assets, with the largest
share of foundations (40 percent)
using the value of their prior fiscal
year’s assets for their calculations.
However, approximately 22 percent
calculate their grants budget based
on a two-to-five-year rolling average
of their asset values, which enables
them to temper years of slower
growth or losses with positive years,
thereby ensuring more stable levels
of giving.
Community foundations were far
more likely to report engaging in
asset averaging (56 percent) than
independent (17 percent) or
corporate (8 percent) foundations.
By size of giving, larger and mid-sized
foundations—those giving
$1 million or more—were slightly
more likely to average assets when
determining grants budgets
(24 percent) than were smaller
foundations (19 percent). Of
course, the extremity of 2008 asset
losses means that, even with
averaging, giving by most foundations would still decline in
2009. Moreover, without a robust
recovery in the market in 2009—which appears unlikely—even
foundations that average assets
will likely have to decrease giving
further in 2010, as they run out
of growth years to average into
their calculations.
SOURCE: SOURCE: The Foundation Center, 2009. A total of 1,239
foundations responded to this question.
1Includes foundations that use a projection of current-year
asset values or other specified asset criteria; or that indicated
their assets were the primary factor they used in determining
their grants budgets, without specifying how they made their
calculations.
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Were Foundations Better
Prepared to Face the
Current Downturn?
The economic downturn that took
place earlier in this decade
(2000–02) followed a period of
unprecedented growth in
foundation resources and left a
number of foundations with large
commitments that had to be
fulfilled with markedly diminished
assets. This experience, combined
with the relatively volatile period of
economic growth that followed, led
a number of foundations to make
changes in the way they operate
that they believe better prepared
them to face the current downturn.
Overall, nearly one-third of
respondents (32 percent) reported
having made changes in the way
they operate as a result of the last
downturn to better prepare them to
address future slowdowns.
Community foundations were most
likely to have reported making a
change (45 percent), followed by
corporate (37 percent) and
independent (30 percent)
foundations. By foundation size,
the largest funders—those giving
$10 million or more—were most
likely to have made a change
(44 percent).
The largest share of these
respondents (29 percent) indicated
that they had made changes in their
investment management. Yet, there
was no single investment strategy
cited by a majority of funders, and
their responses ranged from
diversifying their portfolios to
moving to more conservative
investments to changing investment
advisors. Other funders indicated
that they had moved to calculating
their grants budgets based on a
rolling average of their asset values
over several years (5 percent), and a
few reported having changed their
payout rate (3 percent).
Mapping the Safety Net in Real Time
The Foundation Center is constantly
monitoring and collecting the most recent
data on U.S. foundation and corporate
support in response to the economic crisis.
This information is easily accessed at foundationcenter.org on an interactive map
displaying grants and program-related
investments (PRIs), which is updated weekly
and supplemented by a daily RSS grant feed.
The map details more than $175 million in support to date. To submit
grants data for inclusion, please contact Matthew Ross, manager of special
data projects, at mr@foundationcenter.org.
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On the expenses side, several
foundations reported having reduced
staffing and other administrative
costs as a result of the last downturn
(9 percent), which better prepared
them to face the current crisis. In
terms of grantmaking strategies,
8 percent of respondents indicated
that they had either reduced or
eliminated multi-year grants, while
4 percent noted that they had made
their grantmaking more focused and
strategic.
What Impact Will the
Current Downturn Have on
Foundation Philanthropy in
the Future?
The Foundation Center’s latest
survey provides perspective on how
foundations are expecting to respond
to the economic downturn while still
in the midst of the crisis. Yet their
responses raise more questions for
the future: Will foundations remain
as committed to collaboration and
partnerships after their grants budgets begin to rebound? Will they
continue to engage as extensively in
non-grantmaking activities to
support their missions? Will the
issues raised by this crisis, such as
homelessness and unemployment,
lead to a long-term refocusing of
foundations’ grantmaking priorities?
Foundations will undoubtedly evolve
as a result of having weathered this
crisis, although it remains to be seen
whether practices emerging in the
current economic climate will persist
to some degree once the economy
begins to recover.
1 See Lawrence, S., and R. Mukai, Foundation
Growth and Giving Estimates: Current Outlook,
New York: Foundation Center, 2009.
2 See Lawrence, S., Do Foundation Giving Priorities
Change in Times of Economic Distress?, New York:
Foundation Center, 2008.
3 See also McGill, L.T., and S. Lawrence,
Grantmakers Describe the Impact of the Economic
Crisis on Their Giving, New York: Foundation
Center, 2009.
4 See also Lawrence, S., A First Look at the
Foundation and Corporate Response to the Economic
Crisis, New York: Foundation Center, 2009.
5 Ibid.
Source for all data:
The Foundation Center
For more information about this advisory, contact communications@foundationcenter.org.
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