The W.K. Kellogg Foundation faces a similar scenario. “Our assets did go down, and we’re taking a hard look at doing more with less,” Mosle says. “Last summer, we went through a voluntary and small involuntary reduction in staff size. Reductions were done at all levels of the foundation; we tried to be equitable about that. Much of this was influenced by the economy, and part was us challenging ourselves to really look toward the future.”

Roth at the Bremer Foundation explains that, administratively and operationally, it would be tough to run much leaner at the foundation, which employs 11 people. “We make between 900 and 1,000 grants a year through a three-state region. We conduct site visits with 99 percent of them, and this doesn’t include the evaluation we do of all those applications we end up turning down,” Roth points out. “We are entering a strategic planning process next year, though,” she continues, “and we will be looking at whether we’re going to be able to continue doing as many site visits.”

Severe State Budget Plight Requires New Thinking
Even as some economists have declared the recession over, more uncertainty lies ahead for nonprofits and grantmakers alike, as they try to get a handle on the impact of the state’s budget plight and impending cuts.

“With nonprofits reporting a steep increase in demand for their services, there will be funding gaps,” says MCF President Bill King, “and, even the generosity and Herculean efforts of individual and foundation donors will not be able to make up the difference.”

Eldred at the Catholic Community Foundation agrees. “What we’d like to do and what we can do are two different things. As the state continues to cut back funding in so many arenas, people are going to turn to the private sector to make up that deficit, and I don’t necessarily see that the money from the private sector is going to increase as the state decreases.”

She goes on to say, “Looking three to five years down the road, some social service agencies may not survive. Will the people they serve find another place to receive the same service? My fear is that there is going to be an increasing number of people who are underserved or not served at all.”

While the Bremer Foundation is not directly interacting with the state and its budgeting process, Roth outlines the needs-assessment role the foundation has adopted in response to the resource shortfall: “We’re looking at demographic and economic projections for the next 20 years. We’ll overlay needs, opportunities and our donor’s intent, then choose the unmet needs that we think we can significantly, positively impact.”

Now more than ever, foundations should not wait in the wings as the state tackles its budget issues, says McKnight Foundation’s Wolford. “As it considers complex budget decisions, the state can benefit from nonpartisan, informed thinking about where or how its scarce resources might be most effectively invested,” she states. “The urgency for thoughtful resource allocation has never been greater. This has been an important advisory role McKnight and our foundation colleagues have played in the past.”

This is echoed by Vargas at The Minneapolis Foundation: “We will continue to foster dialogue and bring the best thinking forward,” she says. “We recognize that Minnesota can’t simply tax or cut our way out of this situation – it’s too dire. It will require innovation and serious rethinking about how we deliver and pay for public services.”

She emphasizes, “Philanthropy can be a great incubator for change, but government can bring it to scale. We hope our voices and ideas will continue to be welcome in the debate about how best to realize Minnesota’s promise in an era of dwindling resources.”

Where Is All the Turmoil Leading?
Reflecting back on the turmoil of the past year, grantmakers will not be on the sidelines as the sector searches for what will be the new reality.

“It is tempting to hope this is cyclical and to just wait a bit longer to see if things return to ‘normal.’ Tempting, but dangerous,” concludes McKnight’s Wolford. “During this profound structural shift when nonprofits are facing increasing demands and reduced revenues – eating away at their own infrastructure – the
sector needs courageous leadership to make tough choices about core mission and competencies. We also need more concerted advocacy,” she says.

Mosle at the Kellogg Foundation says big challenges await. “We have not reached the new normal with the economy; it is still dramatically changing. At the same time, the Obama administration is emphasizing a new level of civic engagement. When they took office, they moved at such a speed that philanthropy was really running to keep up,” she notes. “We have an opportunity to think differently about our core systems – education, health, economics. Our sector can be a powerful voice of innovation and partnering.”

Mosle further explains this evolving role: “When the economy was robust, there were many new entrants into philanthropy – people wanting to create their own thing. Now we’re intentionally building partnerships and experiencing a level of collaboration among foundations that hasn’t happened before. It’s healthy for philanthropy to do more of this. We always ask grantees to collaborate, but how foundations collaborate is an important principle.”

She also contends foundations must expand how they think about public-private partnerships. As an example, the Kellogg Foundation invested $2 million in a “Benefit Bank” model in Michigan, an internet-based, counselor-assisted initiative to streamline and coordinate access for low-income, working people to public benefits such as tax credits, nutritional benefits, free and low-cost health insurance, child care and energy assistance.

“It’s not enough that we make the grant; we need to be critical connectors for the public sector, reaching out to the Department of Health and Human Services, and aggressively seeking new partners,” Mosle explains. “We want to make sure that what we build is more than a project. This is a different way of doing business around the issue of public benefits for poor families here in Michigan.”

Mosle concludes, “As we move forward, it is important for philanthropy to make sure that the innovations, energy and people part of problem solving do not get lost. It’s absolutely critical that we all stay involved. Change will require a different level of commitment, sustainability and ingenuity.”

The Otto Bremer Foundation also stresses creating change through greater engagement with stakeholders. Foundation staff regularly travel to Bremer Bank communities to meet with key stakeholders – school superintendents, police chiefs, nonprofit leaders – and jointly develop an agenda of what’s most important locally. “Then,” says Roth, “Bremer asks, ‘What would be the most important set of things we can do to help?’ We’re really trying to understand how we can rethink or refocus so that we can be the most effective in getting communities what they need.”

Roth is bracing for a rough road ahead, however. “I’m afraid it’s going to get worse before it gets better,” she speculates. “Hopefully we’ll come out of this with an effective and targeted set of services to help people who are in the most difficult situations. But, right now, we don’t really understand how the state budget is going to end up or how the network of state and federally funded services is going to be affected.”

Vargas of The Minneapolis Foundation agrees that we’re not out of the woods yet. But the crisis of the past year has brought opportunities as well as challenges: “If pressed to identify a plus side to this situation, it’s that everyone has been forced to prioritize and collaborate more. It’s been helpful for foundations to focus on our vision for the community and to invest even more intentionally in the specific strategies we believe will best get us there. It is also affirmation of the idea that we are stronger together.”

“As I take a look back at 2009,” reflects MCF’s King, “and consider all the responses and initiatives that grantmakers undertook to navigate through an extremely trying year, I am encouraged. We still face challenging times in the years ahead, but grantmakers know that communities and nonprofits are in critical need of support, and MCF members are telling us that they will actively search for new ways to achieve greater impact and to support nonprofits effectively. I am hopeful that, as we move forward, creativity and innovation will really take hold.”  GF

© Copyright 2010 Minnesota Council on Foundations
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