Economy's Downturn Unlikely to Cause Big Decline in Foundation Grants, Report Predicts

October 15, 2008

Economy's Downturn Unlikely to Cause Big Decline in Foundation Grants, Report Predicts

Worries that the current economic crisis will severely curtail grant making among American foundations are overblown, according to a special report issued today by the Foundation Center, in New York.

The report cites the center’s prior research showing that foundation giving in inflation-adjusted dollars did not decline after recessions in the 1980s or the 1990s, and that modest grant-making dips following the economic downturn in 2001 did not nearly match the drop in the value of foundation assets.

“There’s a lot of gloom-and-doom talk about how big a hit grant making will take because of the current economic conditions,” says the Foundation Center’s Steven Lawrence, who wrote the report. “ We wanted to show that from what we know, based on experience, is that the impact will likely be much more moderate than many of the predictions.”

The center issued the report, Mr. Lawrence says, in a response to the growing – and, he says, misplaced – concern among charity officials and the misleading reports in the news media.

“We felt that there’s a more nuanced message that we needed to get out that wasn’t coming across in the reporting on the situation,” Mr. Lawrence says.

The report points out that while the value of foundation assets dropped by 16 percent from 2000 to 2002 (after inflation), overall giving declined by only about 4 percent. And, the report says, some of the factors that helped to buoy giving back then are likely to play a role again now.

For example, the report says, donors in the beginning of the decade continued to establish new foundations and to direct substantial gifts and bequests to existing ones.

Also, foundations during the last economic downturn demonstrated a willingness to reach into their endowments to ensure that multi-year commitments made during the late 1990s economic boom were met. Some grant makers even increased the percentage of their assets they spent in a given year to provide needed resources, the report says.

The report does allow that grant making could decline next year if the stock market fails to rebound from its current lows or sinks even further, cutting deeply into the value of foundation assets.

But, says Mr. Lawrence, while the economic turmoil may affect some foundations more profoundly than others, he is optimistic that the overall impact on giving will be relatively moderate.

“You can’t be overly optimistic,” he says, “but when you look at the history and the research, you can feel a little better.”

(To learn more about how nonprofit groups can cope with the troubled economy, see this special section of The Chronicle of Philanthropy’s Web site.)

— Debra E. Blum

Comments

The operative observation here is the qualifying statement “…if the stock market fails to rebound…” The fact is that no one knows what is going to happen.

— Duff Batchelder Oct 17, 11:45 AM #

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Economy's Downturn Unlikely to Cause Big Decline in Foundation Grants, Report Predicts

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