Spring 2002

In Leaner Times, Philanthropy, Government and Nonprofits Must Work Together

by Bill King, president, Minnesota Council on Foundations

The economic recession is hitting all sectors of Minnesota hard, and none more so than our nonprofit sector. The state’s nonprofits work tirelessly with limited resources to strengthen and improve our communities in countless ways, and those precious resources are starting to dwindle. Nonprofits have begun experiencing declines in donations from individuals, and looming on the horizon are potential decreases in government funding and in charitable grants from foundations and corporations. These reductions come as nonprofits are seeing more demand for medical assistance, dislocated worker programs, unemployment insurance and other vital support programs. These uncertain times call not for hand wringing or finger pointing, but for Minnesota’s government, nonprofits, foundations and businesses to work together to find new and innovative ways to continue meeting the needs of our communities.

Minnesota’s foundations and corporations have a well-deserved reputation for being among the most generous in the nation in funding the critical work of nonprofits. So it is perhaps not surprising that when nonprofits are faced with cutbacks in vital government support, it has become common practice for some people to expect foundations and corporations to pick up the slack. But this can never happen, for several key reasons.

The primary reason is simple mathematics. The 2002-2003 budget for Minnesota’s Department of Human Services alone is $6.19 billion. Compare that to the $181 million in human service grants awarded by Minnesota’s foundations and corporations in 1999 (according to the Minnesota Council on Foundations’ latest figures), which amounts to less than 3 percent of the DHS budget. If grantmakers were to make up for even a small reduction in the DHS budget, they would have to stop funding many — if not all — of the critical programs that now rely on their grant dollars to serve our community’s most vulnerable citizens, to house the homeless, stock food shelves and more. You could do similar numerical comparisons for the funding of health, education, arts and culture, and other areas.

What’s more, with the current recession it will be a challenge for many Minnesota grantmakers to just stay even with their charitable funding over the next few years --let alone make up for any government cuts. Many foundations are experiencing reductions in their investment assets, which are the source for their grant dollars, and many corporations are experiencing declines in their profits, which are the source for most of their charitable giving. In the Council’s recent poll of its foundation and corporate members, two-thirds expected a decline in their grant dollars in 2002.

Foundations were never designed to fill in the gaps left by government funding. Just as government has its distinct and appropriate role in society, so do foundations. Most foundations are created to last in perpetuity, so that their charitable resources are available not just today but for future generations — to help ensure that there will always be financial support for the essential elements of a vibrant society. The strength of foundations and corporate grantmakers comes not in the size of their grant dollars but in their ability to act with more innovation and flexibility than government agencies typically can, which is one reason why their work can effectively complement government efforts.

Minnesota’s philanthropic sector has worked with the state government in the past to address difficult challenges. In the mid-1990s, for example, the state’s foundations and corporations joined together with government, nonprofits and faith-based organizations to create the Minnesota Futures Fund, which provided grants to help nonprofits adjust to new welfare reform initiatives. The fund's success came not from its size — it distributed a relatively small $2 million — but from its ability to bring together key segments of our state to focus their energies, talents — and dollars — on a single issue critical to our shared future.

Such a spirit of cooperation and innovation is required once again. On behalf of our more than 150 foundation and corporate grantmaking members, the Minnesota Council on Foundations is committed to working with our state’s government agencies, nonprofits and communities to explore strategies for meeting the challenges we all face in these leaner times. Government must continue to make adequate investments in our communities, foundations and corporations must continue to leverage those investments with their own support, and nonprofits must continue to serve communities as effectively and efficiently as possible. And together we must draw upon Minnesota’s longstanding tradition of innovation and community service to continue maintaining and improving the health and vitality of our state with more limited resources, while ensuring that our most vulnerable citizens don’t bear the burden. GF

© Copyright 2002 Minnesota Council on Foundations
Reproduction in any form without the written permission of the publisher is prohibited.

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