In 2008, on the eve of the worst economic downturn since the Great Depression, America’s foundations were doing better than ever. According to Foundation Center data, between 2003 and 2008, more than 10,000 new foundations were endowed, and total foundation assets grew by more than 40 percent. The boom years were especially good to the top 1 percent of funders, whose giving, and so it follows their assets, grew by 70 percent. Wealthy patrons were practically printing money, and their public spiritedness (and, cynics might say, their thirst for tax relief) redounded to the philanthropic sector’s benefit. In five years, American foundations were the beneficiaries of $164 billion in tax-subsidized gifts.
During the economic calamity that followed – as the housing, labor and stock markets collapsed – foundations weathered the storm better than most. Their assets bottomed out at 17 percent below pre-recession highs, while the stock market lost, by most measures, more than half its value. Most laudably, their total grantmaking only shrank by 2 percent, quickly recovering by 2011 to its 2008 peak. Foundation assets followed close behind, and by 2013 foundations had $116 billion more in the bank than they had in 2007 and $321 billion more than in 2003.[1]
Meanwhile, the public these foundations serve was suffering. U.S. Census data show the national unemployment rate doubled between 2008 and 2010 alone,[2] private home equity was cut in half,[3] and the number of Americans living at or near the poverty line grew by 13 million.[4] National indicators portrayed an economy shuddering to a halt, but the headlines only told part of the story. Across the country people who were already living on the margins of the economy in 2008 – the persistently poor, segregated communities of color, recent immigrants and others – bore the brunt of the economic storm. The decimation of housing wealth, the explosion of unemployment, the persistent depression of wages – each of these economic trends was harder on those who entered the recession worse off than their white, wealthy neighbors. And each of these trends’ effects lingered longer for the poor, extending and deepening the recession’s impacts among those least able to bear them.
In the decade that included the worst global economic crisis in 70 years, America’s philanthropic sector ballooned. Foundation assets grew by 70 percent; the charitable American upper classes channeled almost half a trillion dollars to their coffers.[5] And America’s marginalized communities saw what little wealth and stability they had hollowed out.
One might expect foundations, whose charitable dollars escape taxation by virtue of serving the public good, to have increased their support for underserved communities during and after the Great Recession. Given the structural barriers to advancement for the poor, for people of color, for immigrants and for other marginalized Americans, one might also expect the philanthropic sector to have increased their investments in long-term change strategies such as public policy change, advocacy and community organizing.
NCRP analyzed 11 years of Foundation Center data on foundation grantmaking spanning 2003 to 2013; 11 years that included the Great Recession and the early stirrings of now-prominent movements for social justice nationwide. We found that in the decade that ended in 2013, foundation support for America’s marginalized communities grew just 5 percent as a share of all grantmaking. Support for long-term change strategies proven most effective at improving the lives of the poor did not increase at all. Among the nation’s largest 1,000 grantmakers, less than half the impressive growth in grantmaking between 2003 and 2013 was directed to underserved communities, and just 1 out of every 10 of those new dollars was for long-term systemic change strategies.[6]
All this raises the question: Where did the increase in foundation grantmaking – over $6 billion – go if not to benefit the poor, communities of color, immigrants, women and girls, and other underserved communities? Where did that $6 billion go if not to strategies that affect long-term change?
There are bright spots, however. A small cadre of foundations remained committed to investing in communities that need it most and in strategies that will lead to systemic change, and their support has meant hundreds of millions of dollars more for the nonprofit grantees who fight each day for a more just, inclusive and equitable society. A handful of new arrivals to the world of large foundations has demonstrated great potential to lead the sector on grantmaking for systemic change. And U.S. foundations have dramatically expanded their international footprint with a focus on underserved communities abroad.
In spite of these promising trends among a subset of funders, the broader philanthropic sector has shirked its responsibility to invest in communities most in need at a time when those investments were most urgently required. Philanthropic funding for the people who need it most has lagged behind booming assets, and foundations have continued to avoid strategies that have the greatest potential to change the status quo.
How long will foundations enjoy their generous tax benefits in a political environment increasingly hostile to entrenched inequality and elite complacency? How long will the philanthropic sector watch from the sidelines as progressive social movements combat reactionary forces to reshape American society for the better?
How can foundations change course in the next decade to ensure they guard the public trust with which they’ve been entrusted?
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1 NCRP analysis of Foundation Center data.
2 Bureau of Labor Statistics, “Labor Force Statistics from the Current Population Survey, http://data. bls.gov/timeseries/LNS14000000.
3 Bureau of Economic Analysis, “Table 5.2.5: Gross and Net Domestic Investment by Major Type,” http://www.bea.goviTableiTablecfm?reqid=9&step=3&isuri=1&904=2004&903=139&906= q&905=2015&910= x&911=0#reqid=9&step=3&isuri=1&904=2004&903=139&906=q&905= 2015&910=x&911=0.
4 U.S. Census, “Table 6. People Below 125 Percent Poverty Level and the Near Poor: 1959-2015,” http://www2.census.gov/programs-surveys/cpstablestime-series/historical-poverty-people/hstpov6.xls.
5 NCRP analysis of Foundation Center data.
6 NCRP analysis of Foundation Center’s FC1000 dataset. The data set is based on Foundation Center’s grants sample database, which includes all grants of $10,000 or more awarded by the FC1000 – a set of 1,000 of the largest U.S. foundations by giving. For community foundations, discretionary grants are included as are donor-advised grants when provided by the foundation. Grants to U.S.-based private and community foundations are excluded to avoid double-counting grant dollars awarded. Grants to individuals are not included in the sample.
Text updated 12/6/16 to correct an error that mistakenly noted that foundation support for marginalized communities grew 15 percent as a share of all grantmaking. The correct amount is 5 percent.