February 25, 1999 | Read Time: 10 minutes
Big funds distributed $7.7-billion in ’98; endowment growth slows
Giving by the nation’s wealthiest grant makers soared last year, rising by 28 per cent over 1997 levels, a Chronicle survey has found. Among 122 foundations that provided figures to The Chronicle for both 1997 and 1998, total giving increased from about $4.86-billion to $6.24-billion.
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But such rapid growth is unlikely to continue, because the value of those foundations’ endowments increased by only 5 per cent.
Most foundations base the amount they give on the value of their endowments the previous year. Federal law requires that funds disburse at least 5 per cent of the value of their assets, on average, each year.
The 142 foundations in the survey held combined assets of $154.4-billion at the end of last year (not counting four funds that did not report endowment size), and allocated more than $7.7-billion in grants.
The record-breaking stock-market gains of 1997 accounted in large part for the explosion in giving in 1998. Last year’s volatile stock market, however, bodes less well for charities: At least 30 of the biggest grant makers saw decreases in their endowments.
Indeed, only half of the funds plan to increase their giving this year. Among the 50 foundations that provided actual budget figures, grant making is expected to grow by a median of about 9 per cent — meaning that half plan a bigger percentage increase and half a smaller one, or even a decrease.
But looking at grants budgets alone may underestimate the amount of money that will be available to non-profit groups in 1999. Numerous big new foundations are being created, and several small ones are receiving big infusions of assets.
Perhaps the most significant growth has come in the two foundations created by Microsoft’s Bill Gates and his wife, Melinda. Within the past month, the Gateses nearly tripled the assets of the William H. Gates Foundation, in Seattle, and the Gates Learning Foundation, in Redmond, Wash. Together, the funds are now worth $6.6-billion.
While the Gateses’ foundations are growing fast, they have not yet come anywhere close to the size of the nation’s wealthiest grant maker, the Lilly Endowment, in Indianapolis. With 98 per cent of its money invested in the pharmaceutical company established by the fund’s creator, the Lilly Endowment’s assets grew by 21 per cent last year, to about $15.4-billion.
The stock market was not so kind to other big foundations. The W. K. Kellogg Foundation, in Battle Creek, Mich., dropped one ranking to No. 5 among wealthy foundations — due to a slump in the price of Kellogg Company stock, where the majority of the fund’s money is invested. The foundation’s assets, valued at $7.6-billion in August 1997, at the end of its fiscal year, had dropped by $2-billion a year later. But the assets have since rebounded and now total nearly $6.9-billion. Foundation officials still expect giving to decrease in 1999 — from $319-million last year — but they did not provide a dollar amount.
The Carnegie Corporation of New York also saw its assets dip last year, at one point dropping $100-million before rising back up to $1.5-billion by the end of the year. The foundation is now more closely monitoring its endowment. For the first time, Carnegie has hired a vice-president to oversee the management of its assets full time, and the foundation’s board has created a new committee to set investment policies.
The change at Carnegie is just one of several that have been instituted by Vartan Gregorian, who became the foundation’s president in 1997 after having led Brown University and, before that, the New York Public Library.
Carnegie cut back its grant making in 1998 — approving awards of $39-million, or $20-million less than in 1997 — while Mr. Gregorian took the foundation through an intensive review of its programs. This year, Carnegie expects to distribute $60-million under new grant-making priorities that are scheduled to be released this week. Carnegie plans to put more emphasis on education by focusing, for example, on preparing poorly trained schoolteachers and on supporting efforts to restore confidence in public schools. It is also considering an increase in the number of grants it makes to non-profit organizations that are based overseas.
A new leader is also behind significant changes at New York’s Rockefeller Foundation. Gordon Conway, who took over as president 10 months ago, is expected to add even more of a global perspective to the fund’s grant making. Born in Great Britain, Mr. Conway is an agricultural ecologist who has worked in many countries and who once managed the Ford Foundation’s field office in India.
Mr. Conway is overseeing a year-long review of Rockefeller’s grant making and is expected to announce the results in July. Rockefeller will continue to support programs that benefit agriculture, the arts, health, and job creation, says Mr. Conway, but in “a much more global framework.”
Changes may also be on the way at other big foundations that are undergoing shifts in top leadership.
At two of those funds — the Geraldine R. Dodge and William Penn Foundations — new leaders took over in October.
David N. W. Grant, who replaced Scott McVay as executive director of the Dodge Foundation, says that the $307-million fund, located in Morristown, N.J., intends to clarify its mission and work more closely with non-profit groups to evaluate grants. Mr. Grant declined to offer further details, saying that foundation leaders will consider new grant-making priorities at a board meeting in May.
Janet F. Haas, who succeeded Harry E. Cerino as president at William Penn, says that the foundation is taking stock of its work, which has been focused in the Philadelphia area, where it has its headquarters. It has been looking for better ways to deal with regional issues, such as changes in employment patterns.
At the John D. and Catherine T. MacArthur Foundation, in Chicago, Jonathan F. Fanton is scheduled to take the reins from Adele Smith Simmons in September. Mr. Fanton, president of the New School for Social Research, in New York, was appointed in December, a year after the foundation had completed a reorganization of its grant making.
The William and Flora Hewlett Foundation, in Menlo Park, Cal., is hoping to find a replacement for its president, David Pierpont Gardner, by June. Early last year, the $1.9-billion fund started a review of its programs and management, but it has put the process on hold until a new leader is appointed.
Other chief executives who have resigned are Deborah Leff, of the Joyce Foundation, in Chicago; Steven Uranga McKane, of the California Endowment, in Woodland Hills; Michael O’Keefe, of the McKnight Foundation, in Minneapolis; Leonard Smith, of the Skillman Foundation, in Detroit; and Cole Wilbur, of the David and Lucile Packard Foundation, in Los Altos, Cal.
While those foundations may have change in store with the arrival of new leaders, other major foundations are already considering new grant-making programs in 1999. Among them:
* The $10.7-billion Ford Foundation, in New York, is looking for ways to identify and support local non-profit leaders and grassroots activists across the country.
* The Robert Wood Johnson Foundation, in Princeton, N.J., is considering a new program to finance efforts to increase the amount of physical activity that Americans undertake (The Chronicle, December 3).
* The Pew Charitable Trusts, with $4.7-billion in assets, wants to make grants to determine how the Internet is reshaping the nation. For example, the Philadelphia grant maker wants to examine how the Internet could be used in elections and how it could encourage more people to get involved in civic activities.
Pew is looking for new areas to support partly because it plans to end this summer its spending on a grant program that was intended to call attention to the problems facing the Social Security system.
In the past two years, Pew has spent $12.5-million on Americans Discuss Social Security, a public-education project in Washington. Now that Congress is expected to pick up the discussion of Social Security, Pew officials say, the foundation will move on to other issues.
Pew’s president, Rebecca Rimel, says that focusing on a single issue is at the heart of “strategic grant making,” an approach that the foundation became interested in several years ago. Such grant making is based on a foundation’s ability to make a measurable difference in tackling a specific problem.
Strategic grant making is catching on at a growing number of foundations. In part, the approach’s popularity is a reflection of changes in the business world.
“In the 1980s, the tendency in corporate America was toward conglomerates and spreading into unrelated businesses,” says the Kellogg Foundation’s president, William C. Richardson, who serves on the boards of three corporations. Now, he says, “there’s been a tremendous change in attitude. Companies are focusing on the core part of their business and envisioning what could be done in a few years and then setting out to do it. What we’re seeing in the non-profit world, and in foundations in particular, is the same idea.”
The $9.6-billion Packard Foundation, which expects to increase its giving 21 per cent in 1999, to $440-million, has tightened the focus of its education grant-making program. In 1997, Packard — the country’s third-wealthiest foundation — spent $9.1-million on efforts to improve reading, mathematics, and science skills among elementary- and secondary-school students. This year, it is spending $20-million — on reading programs alone — and nothing on math or science.
“It’s a goal-oriented program,” says Cole Wilbur, Packard’s executive director. He says that the reading program is one area where the foundation is trying to answer the question, “What can we do during the next five years that will change something — not this agency, or that agency, but the community, the state, the country, or the world?”
The Skillman Foundation has trimmed its grant-making programs and now focuses on one constituency in one city: children in Detroit. In December, the fund announced that more than 95 per cent of all new grants would go to projects that aid young people in the metropolitan region. In doing so, the $540-million foundation is cutting back its support to groups elsewhere in southeastern Michigan that provide meals to the needy, offer emergency housing, and run programs for the elderly.
“We believe in prevention, and the research certainly shows that dollars invested early in a child’s life will have a greater effect than dollars invested later,” says Skillman’s president, Leonard Smith.
Still, some foundation leaders and philanthropy observers caution against grant makers’ setting too much of the agenda.
“Foundations are bound up in their own categories and initiatives and tend not to pay attention to what people in the neighborhoods want and are seeking support for,” says Bill Schambra, senior vice-president for program at the Lynde and Harry Bradley Foundation, in Milwaukee. “Foundations are becoming ever more narcissistic, and it’s a shame.”
Mr. Schambra also worries that the growing emphasis on results will shut out worthwhile programs that are difficult to evaluate. “If we begin to tailor programs to what is scientifically measurable, that is not a healthy trend,” he says.
To guard against such inflexibility, some foundations set aside money for programs that do not fall within the institution’s grant-making guidelines. Packard, for instance, is dedicating $35-million — or 10 per cent of its grants budget — to finance such proposals.
Another way foundations offer flexibility to charities is by giving them money for their general operating expenses. The $1.1-billion California Wellness Foundation plans to increase the amount it spends on grants for general support — maybe even doubling it, to $10-million, by 2000.
Each year, the F. B. Heron Foundation, in New York, gives about 70 per cent of its grants for general support. In 1999, the $259-million foundation plans to award a total of about $12-million. More foundations, says Sharon King, Heron’s executive director, could be “responsive to non-profit groups that need core support to underpin all the rest that they do.”
Kristen Batch contributed to this article.
