News
Philanthropy

Citing devastating coronavirus impact, five US foundations plan to increase payouts to strapped nonprofits by $1.7bn

In a novel strategy, at least three of the foundations will borrow money to finance giving

Ford Foundation President Darren Walker attends a reception at the Charles H. Wright Museum in Detroit Steve Perez/Detroit News via AP

Five highly influential American charitable foundations announced today that they would increase their payouts to nonprofit organisations by more than $1.7bn over the next two years to counter the devastating economic effects of the coronavirus pandemic.

These storied donors—the Ford Foundation, the John D. and Catherine T. MacArthur Foundation, the Doris Duke Charitable Foundation, the W.K. Kellogg Foundation and the Andrew W. Mellon Foundation—said that the commitment represents new funding beyond the budgets previously approved by each of their boards. Each foundation will set priorities for the distribution of these additional funds based on its own grant-making guidelines: the foundations support causes including social justice, higher education, the arts and culture and environmental solutions.

The Ford has committed up to $1bn; the Kellogg, $300m; the Mellon, $200m; the MacArthur, $125m; and the Doris Duke, $100m.

In a radical departure from the fiscal restraint that is customary for foundations during periods of economic strain, three of the five—the Ford, the Doris Duke and the MacArthur—have decided to borrow money to cover the increase in what they distribute, issuing long-term bonds, leaders of the foundations said in a video call with news organisations this morning. The Mellon and the Kellogg foundations are still deliberating their funding strategies, although their boards have already approved the extra payouts.

The Ford Foundation, for example, which is borrowing $1bn, will be issuing AAA-rated social bonds that will be marketed by all the major financial firms, said Darren Walker, the foundation’s president. (Such debt instruments are used to finance projects that result in a positive social outcome.) He emphasised that grant-making would not be reduced to service debt.

“Covid-19 presents an existential threat to nonprofits, and we must respond in creative and innovative ways,” Walker said in a joint statement issued by the foundations. “The pandemic has brought into sharp relief the results of decades of growing inequality. The virus is only compounding that inequality, taking a disproportionate toll on the poor, people of colour, immigrants, people with disabilities, and others who were already marginalised before the crisis hit.”

“Our goal for the additional funds is to help shore up, strengthen and deepen the resilience of key organisations that are advancing the fight against inequality and injustice at a time when the need is greatest,” he said.

The foundations noted that nonprofits in the US employ more than 10% of the nation’s private work force of around 12.3 million people. Yet a Nonprofit Finance Fund survey from 2018 indicates that nearly 75% of nonprofits lack six months of cash reserves, they added.

Currently nonprofits are reeling from the impact of cancelled artistic seasons, postponed revenue-generating events, reduced corporate sponsorship and budget shortfalls for contributing state and city governments, the foundations noted. In a recent CAF America survey, they pointed out, 73% of nonprofits said they had already witnessed a decline in contributions and expected their revenue to drop by more than 20% over the next year even as the pandemic increases the need for their services.

The foundation leaders agreed that the current crisis for arts organisations and other nonprofits is urgent and unprecedented—far more significant, for example, than the impact of the 9/11 terrorist attacks or the 2008-09 recession—and that urgent concerted action is vital to recovery. In the video call, John Palfrey, president of the John D. and Catherine T. MacArthur Foundation, compared the current moment to the 1918 Spanish flu pandemic, the bread lines and “whiff of authoritarianism” of 1933, and the 1968 civil rights protests and riots—with the associated promise of social change—rolled into one. “We, out of that mix, I think, have an extraordinary possibility to create a new future,” he said.

“Together, we are experiencing the extraordinary pain of a pandemic, an economic depression, and relentless violence and racial threats against African Americans,” said Elizabeth Alexander, president of the Andrew W. Mellon Foundation, which is the nation’s biggest funder of arts, culture and the humanities. “The transformative and provocative power of artists, cultural institutions, and humanities scholars will prove even more essential to our country's future vitality.”