Will Larger Payouts Be the New Norm? This Pledge Offers a Test

More than 30 progressive philanthropies pledged to increase their grant-making budgets for two straight years in an effort to buttress struggling nonprofits that have been contending with federal funding losses since the start of the Trump administration. It could result in hundreds of millions of dollars in additional funding for nonprofits.

Crafted by a coalition of 10 philanthropy organizations and housed at Change Philanthropy, a group that promotes social justice, the Level Up pledge, which was announced Friday, calls for funders to increase their grant making by 20 percent, or to pay out at least 8 percent of assets for at least two years. 

“It is not a pie-in-the-sky goal,” said Aaron Dorfman, executive director of the National Committee for Responsive Philanthropy, one of the groups that developed the pledge at the Unity Summit of progressive philanthropy groups held in November. “We wanted the percentage to be something meaningful and challenging but also really something that any funder could in fact achieve if they set their mind to it.”

The pledge asks signatories to devote the extra grant dollars to organizations that represent people who have historically been excluded from major philanthropic funding, including groups that support Black, Asian, and Indigenous people, people with disabilities, people who are LGBTQ, and immigrants.

The pledge also requires grant makers to provide the group with their IRS tax filings to confirm they have complied in each of the first two years

Big Names Sign Up

Level up is the first campaign to be sponsored by the coalition of 10 groups,  including affinity groups like ABFE, which is a network of Black foundation leaders, Asian/Pacific Islanders in Philanthropy, and Change Philanthropy, which got its start as a coalition of affinity groups. Also included are organizations that support changes in grant making practice, including NCRP and Grantmakers for Effective Organizations.

The 33 signers of the pledge include national grant makers, such as the Freedom Together and MacArthur foundations, collaborative funds including Borealis Philanthropy and Solidaire, and family foundations including the Butler Family Fund.

While the campaign members have not tabulated exactly how much in new philanthropic funding will materialize from the current signers of the pledge, they estimate it will unlock at least $200 million during each year of the campaign.

To maintain their tax exempt status, private foundations must devote at least 5 percent of their assets to charitable activities each year. But in 2024 just over half of endowed foundations met or exceeded that mark, according to a survey of 765 grant makers conducted by Grantmakers for Effective Organizations. And only 12 percent paid out more than 7 percent annually.

One of Many Attempts to Boost Funding

Since the 2024 presidential campaign was in full swing, and it became clear that the causes treasured by progressive groups would be under attack by a Trump White House, there have been a proliferation of attempts to flood nonprofits with cash. But it is not clear to what extent foundations are actually opening the spillways. 

The 175 signers of the 2024 All By April campaign pledged to frontload their election-related grants to maximize their effect before the November elections. The Block and Build coalition’s 375 members have committed to increase their support of anti-authoritarian work. And about 50 organizations pledged to increase grants to groups supporting trans people as part of the Grantmakers United for Trans Communities, or GUTC, pledge

There have also been broader philanthropy pledges circulated since January, including the Meet the Moment pledge which urged grant makers to increase their grants as well as adopt certain “trust based” approaches to philanthropy. More than 730 grant makers signed on to the “Unite in Advance” campaign to promote solidarity as civil society organizations faced attacks from the administration. About 100 funders signed a separate letter pledging to stand united as the administration began to focus more squarely on progressive philanthropies after the killing of conservative provocateur and activist Charlie Kirk.

What separates the Level Up campaign from those efforts is that the current pledge names specific spending targets and then will attempt to hold foundations accountable for their commitments.

Few Sign Up

Despite the number of groups that have been involved in developing this pledge, it has had relatively few takers. 

That may reflect the pledge’s lofty goals, said Jodeen Olguín-Tayler, who is leading the campaign for Change Philanthropy. Other pledges, she said, could practically be signed by a foundation’s communications staff because they didn’t necessarily require big changes in practice. But the Level Up pledge is an attempt to sharply alter norms.

A new payout baseline of far greater than 5 percent requires a lot of thought and buy-in from trustees, she said. But meeting the payout requirement and being tracked by the members of the coalition should not instill fear in foundation leaders who sign the pledge. Rather, the accountability piece of the pledge is a way to check in on progress and share ideas about how funding decisions can be made, said Olguín-Tayler.

Adding accountability to the pledge “is not about generating hit pieces on philanthropic institutions,” she said. “It is about building a community of learning, accountability, and support to transform the sector.

Some Increase Payout on Their Own

Because of the Trump administration’s recent aggressive stance against nonprofits and foundations, including the creation of a federal law enforcement task force to identify and prosecute funders that support policies out of favor in the White House, many grant makers may be trying to avoid public knowledge of their work. Dorfman believes grant makers may be giving more but are doing so quietly.

“Some foundations have told me that they are increasing their giving and they meet the terms of this pledge, but they’re going to decline for now to sign on out of fear of reprisals,” he said.

Other foundations might just be doing the work on their own and don’t necessarily see a need to sign the pledge. The Scherman Foundation did not sign the Level Up pledge, for example, but increased its payout of its own accord over the summer, 

In July, the foundation committed to increasing its payout from 6 percent to 10 percent, resulting in $5 million additional cash for grantees. By the following month, $4 million of that had already landed in the accounts of its grantees. The foundation has committed to maintain the payout increase through next year, which could yield a similar size bonus in grant dollars.

The reason, said Mike Pratt, the foundation’s president, is that there is no certainty about how the foundation’s endowment will perform based on future market fluctuations. But it is clear, he said, that the nonprofits focused on movement building and organizing that the foundation supports are in a state of crisis and need help immediately.

Too often, Pratt said, discussions about payout revolve around a “false binary” between strictly adhering to the federally required 5 percent and “clutching your pearls” about a payout rate that is too high and will demolish a grant maker’s endowment. 

“There’s a lot of room between those two extremes,” he said. “We’re exploring that middle ground.”