Spending What Use to Be Thought of as “Untouchable” Funds
Is this a beginning to a different strategy for some granting/funding nonprofits? Not sure, but it does beg the question.
In response to recent federal funding cuts impacting nonprofits, over 70 foundations have pledged to increase their grantmaking efforts. This initiative, known as the "Meet the Moment" campaign, is led by the Trust-Based Philanthropy Project, with support from Grantmakers for Effective Organizations and the National Center for Family Philanthropy. The campaign aims to provide immediate financial relief to nonprofits affected by the federal cuts and to promote a shift towards more flexible, trust-based funding practices, such as offering unrestricted grants and simplifying application and reporting processes.
This strategic pivot involves foundations spending more from their endowments than the legally required minimum distribution, typically set at 5% of their assets annually. By tapping into their principal, these organizations aim to address current crises more effectively, acknowledging that the value of their endowments lies not just in preservation but in their potential to drive meaningful change.
The scale of resources available underscores the potential impact of this shift. As of 2023, the total assets of private foundations in the U.S. were estimated at approximately $1.48 trillion. Additionally, donor-advised funds (DAFs) held around $251.52 billion in charitable assets. Higher education institutions also manage substantial endowments; for example, in fiscal year 2023, 688 institutions reported a combined total of $839.1 billion in endowment assets.
Despite these considerable assets, foundation grantmaking has traditionally been conservative, adhering to the minimum distribution requirements. Critics argue that in times of crisis, such as economic downturns or public health emergencies, this cautious approach may limit the ability of nonprofits to respond effectively. The "Meet the Moment" campaign and similar initiatives represent a conscious effort to recalibrate the balance between preserving endowment principal and addressing immediate societal needs.
This evolving approach reflects a broader trend in philanthropy: a willingness to adapt traditional practices to better serve communities in need. By prioritizing current impact over perpetual endowment growth, foundations acknowledge that their true purpose is to effect positive change, especially during critical times. This shift not only enhances the effectiveness of philanthropic efforts but also aligns more closely with the urgent realities faced by the communities they aim to support.
Having savings or a rainy-day fund or an endowment is more than appropriate… in fact recommended. But the size has to be proportional to the needs of the community not only over time, but in the current moment.
