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Foundations Not Likely to Change Funding Priorities Despite Economic Distress

(Nov. 17, 2008) U.S. foundations are not going to suddenly or drastically change their funding priorities in the present economic downturn, judging from historical trends.

Faced with questions as to whether foundation funding for programs in the arts, the environment and global causes would be cut in order to address social services needs, the Foundation Center released an advisory on the funding behavior of the 1,000 largest foundations in the United States during the economic downturn of 2001 to 2003. They found that the last downturn primarily affected the overall level of foundation giving, rather than funders’ broad grant making priorities.

The research advisory, “Do Foundation Giving Priorities Change in Times of Economic Distress?” reports that foundations have a steady commitment to mission and grant making priorities, even during times of economic distress.

Historically foundations have been responsive to pressing needs, such as post-hurricane relief efforts for the Gulf Coast, without substantially changing their funding of their core focus areas. “In lieu of cutting back support for existing funding priorities, foundations may use discretionary or emergency funds to make these commitments, or even tap their endowments,” notes the Foundation Center.

Outlook for Foundation Giving Into 2009

Steven Lawrence, senior director of research at the Foundation Center, explains in an October 2008 research advisory that the Center still expects foundation giving to grow ahead of inflation in 2008.

Foundation assets grew faster than inflation between 2003 and 2007, which enabled grant makers to replenish their endowments after the downturn of the early 2000s, Lawrence explains. For foundations that determine their annual grants budgets based on a rolling average of their asset values, this growth should help to mediate the impact of possible asset losses in 2008 on their giving in 2009. Some foundations will also benefit from new gifts and bequests, and the sector as a whole will benefit from the continued establishment of new and sometimes quite large foundations.

What does this mean for 2009? Should the stock market recover some of its losses by year's end, the various factors cited above may help overall foundation giving to remain roughly unchanged next year. This would be the best-case scenario, Lawrence explains. “However, if the market fails to rebound from its current low or sinks further, the asset losses may be so pronounced and touch so many foundations that an overall decrease in funding becomes inevitable.”

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